When will Facebook go public?
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Larry Gude
Strung Out
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If anybody thought that they may have been coo coo for cocoa puffs to begin with. I'm surprised the DJIA has held up as well as it has today (and spent most of the morning in positive territory) in light of the Spanish bank downgrades. The Asian markets got hammered overnight.
If anything, the tepid interest in FB at this price level dragged the American equity markets down (particularly Nasdaq).
The price has recovered and is now above $40. The underwriters came in in force at $38 to support the price and make sure it didn't fall below the offering price - there was huge bid volume at exactly $38.
I don't ask for the credentials or medical health certificates from those who write all the financial stories..I just read 'em sometimes. I have noticed that some of those clowns will look for signs of hope in the darndest places sometimes....
Kinda fizzled for all the hype. And now I've seen several financial types say "yeah..who expected otherwise? FB is an empty bag..where's the value?"
That's what I thought too..it reminded me of the old dotcom days more than anything. All fluff..no product..no substance.
That's what I thought too..it reminded me of the old dotcom days more than anything. All fluff..no product..no substance.
Tilted
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Facebook shares have broken issue, trading down to about $33 this morning. From the underwriter's perspective, this is a disaster. But I'm actually a bit happy about it (though I don't think I would be if I owned FB shares 
). For once, the insiders aren't getting free money just for being among the insiders (i.e. that had access at the IPO price). They weren't able to convert their (perhaps well earned) status and advantages into instant profit on the backs of the average joe investor.
As for Facebook and the original shareholders that sold in this IPO, it seems that they did very well - they were able to squeeze out as much value as was possible (and, seemingly, more than they should have been able to).
Those things said, I'm quite surprised that the underwriters didn't come out in force this morning to defend the IPO price ($38). Is it possible that they used up all of their ammunition defending it on Friday? I find that hard to believe - they had a good sized over-allotment to work with.
Facebook, the business, is certainly not an empty bag. Unlike some IPO's, it was actually making money before it went public. The valuation here was just huge - seemingly greater than what the market is willing to accept. At $38, we were looking at the company trading at something like 100 times trailing earnings. That's pretty darn steep. The company has a lot of growing to do to justify that valuation - and the business is not without significant headwinds. If the float had been much smaller, perhaps the lack of availability of the stock would have combined with the hype (and fondness for the company among many users) to support this kind of huge valuation. But they put a ####-ton of ownership interest out there from the beginning, enough to overcome the hype and leave enough would-be investors paying attention to the enormity of the valuation.
It should be noted as well that the float is going to increase significantly in 3 months and then again in 6 months. If the stock is struggling right now, there's good reason to be worried about how well it can hold up when there's so much more theoretical supply (though some of those early investors whose stock will be freed up for sale might, having already made a good chunk of change in the IPO, be willing to hold on to it for a longer term hoping to see its value grow as the companies earnings do - and a lot of the shares belong to Mr. Zuckerberg and others that aren't likely to sell any time soon).
Who knows, five years from now this valuation might look like a steal and people might be kicking themselves for not getting in early. But, that's far from a certainty, especially considering that Mr. Zuckerberg has been pretty clear that making tons of money is not his short term goal for the company. I'd be willing to take the chance for the right valuation. The question is, what is it? The market is clearly saying that $38 (i.e. $100+ Billion) is too rich. That doesn't mean the market thinks Facebook is an empty shell though. It's likely to become one of the top 3 or 4 tech businesses in the world. I'd include it with Apple, Microsoft, Google and perhaps Amazon as likely to be the 5 most important going forward.
). For once, the insiders aren't getting free money just for being among the insiders (i.e. that had access at the IPO price). They weren't able to convert their (perhaps well earned) status and advantages into instant profit on the backs of the average joe investor.As for Facebook and the original shareholders that sold in this IPO, it seems that they did very well - they were able to squeeze out as much value as was possible (and, seemingly, more than they should have been able to).
Those things said, I'm quite surprised that the underwriters didn't come out in force this morning to defend the IPO price ($38). Is it possible that they used up all of their ammunition defending it on Friday? I find that hard to believe - they had a good sized over-allotment to work with.
Facebook, the business, is certainly not an empty bag. Unlike some IPO's, it was actually making money before it went public. The valuation here was just huge - seemingly greater than what the market is willing to accept. At $38, we were looking at the company trading at something like 100 times trailing earnings. That's pretty darn steep. The company has a lot of growing to do to justify that valuation - and the business is not without significant headwinds. If the float had been much smaller, perhaps the lack of availability of the stock would have combined with the hype (and fondness for the company among many users) to support this kind of huge valuation. But they put a ####-ton of ownership interest out there from the beginning, enough to overcome the hype and leave enough would-be investors paying attention to the enormity of the valuation.
It should be noted as well that the float is going to increase significantly in 3 months and then again in 6 months. If the stock is struggling right now, there's good reason to be worried about how well it can hold up when there's so much more theoretical supply (though some of those early investors whose stock will be freed up for sale might, having already made a good chunk of change in the IPO, be willing to hold on to it for a longer term hoping to see its value grow as the companies earnings do - and a lot of the shares belong to Mr. Zuckerberg and others that aren't likely to sell any time soon).
Who knows, five years from now this valuation might look like a steal and people might be kicking themselves for not getting in early. But, that's far from a certainty, especially considering that Mr. Zuckerberg has been pretty clear that making tons of money is not his short term goal for the company. I'd be willing to take the chance for the right valuation. The question is, what is it? The market is clearly saying that $38 (i.e. $100+ Billion) is too rich. That doesn't mean the market thinks Facebook is an empty shell though. It's likely to become one of the top 3 or 4 tech businesses in the world. I'd include it with Apple, Microsoft, Google and perhaps Amazon as likely to be the 5 most important going forward.
Why I called it an empty bag.
I (and many of the pundits that weighed in) might be wrong, but I just don't see the value now and I don't see it getting better either.
Larry Gude
Strung Out
Some industry folks are starting to talk about $9 being a more realistic price.
yup..and its turning ugly fast. My hunches are hunches only..but I had a hunch that the housing crash was pending back in 2007 when I desparately needed cash for my business. As painfull as it was to turn my back on mounds of property equity and not borrow against it...I've been blessed that I didn't yield to the temptation.
I'll stick with my hunches. I had a hunch that FB was an "empty bag".
Fury Over Facebook IPO Grows, Lawsuits Mount | Breakout - Yahoo! Finance
Katelin
one day the dark will end
I agree. Where does his revenue come from? Selling crops on Farmville?
It will be interesting in the next few business days as the details of the law suit unfolds.
Larry Gude
Strung Out
Tilted
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Okay, so by 'empty bag' you were referring to the stock being overvalued at a particular price or price level, not to the company itself being an empty bag? If that was your meaning then, as strange as that choice of words seems to me, I wouldn't disagree with the assessment. Any company, no matter how strong or successful it is, would be overvalued at some price level.
You threw me off (your intended meaning) when you said it had no product, no substance. That made it sound like you were referring to the company itself being an empty bag. Facebook does have product and substance - the great majority of companies in the world would love to be generating $4 Billion in annual revenue and a Billion Dollars in annual profit, especially this early on in their evolution. Heck, Facebook already makes more profit than Amazon does (and, on another note, Amazon stock is even more expensive relative to earnings than Facebook stock is - it goes for something like 170 times trailing earnings).
Facebook is trading at a very high multiple now, no doubt - even with being 16% off the IPO price. The question is what multiple would, all things considered (e.g. potential headwinds and tailwinds, potential external disruptions, potential revenue opportunities, potential management performance, potential growth or decline in usage), be appropriate? Let's put some specificity to your hunches - what do you think is a fair price for Facebook right now? More importantly, what do you think it will be trading at 6 months from now and 2 years from now?
Which industry folks would they be? I'd be genuinely interested in hearing their reasoning. I think $9 is ridiculous and that there'd need to be some pretty dramatic developments for the price to get that low. I wasn't a buyer at $40 and I've still not been a buyer at $32, but I'd most likely be a buyer if it fell below $20. The potential long-term upside would seem pretty cheap at that level, though a positive return would, of course, not be guaranteed. At any rate, I'd bet that a number of large investors, funds, or companies would be very interested in buying large stakes in Facebook if they could get it near that cheap (i.e. $9 / share, which would represent a value for the enterprise of around $25 Billion). At that price, I can think of a couple of companies that would probably be willing to write a check for the entire enterprise (though Mr. Zuckerberg likely wouldn't be willing to sell).
Facebook isn't necessarily going to be the next Google, or Microsoft, or Apple - but it has the potential to be. And that potential is worth something, even if the price paid represents considerable risk. You generally can't get in for cheap after it's clear that most of the risk has fallen by the wayside.
Lots of discussion ongoing..and lots of it calling 9 or 10 bucks the realistic value of a share. 
Wall Street struggles to find Facebook's worth | Reuters
Wall Street struggles to find Facebook's worth | Reuters
Tilted
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Well, some of the revenue does come from Farmville - from people buying Farm Cash. But most of the revenue comes from the same place that Google and Fox News get most of their revenue from: Advertising. Fortunes have been built on advertising revenue, it can be a lucrative business model.As for the lawsuits, I think the major question that is as yet unanswered is whether the accusations against Morgan Stanley are legitimate - were they painting a much different, newly revised, less optimistic picture for some of their (presumably bigger) clients while they were telling others something different? I'm also curious, though I've not heard much to this effect alleged, whether Morgan Stanley made a decision to no longer defend the IPO price on Monday morning thinking that they could come in and buy at a lower price and actually make money from the greenshoe allotment (i.e. by covering shorts that they got to sell at $38). That seems unlikely, perhaps even impossible, to me, but I haven't been able to sort out what happened Monday morning. The underwriters were out in force - with a lot of firepower - at the end of the day on Friday to make sure the price didn't fall below $38 / share. Then, on Monday morning, it seemed they were no where to be found. I could have understood if they made a bit of an effort first thing Monday morning and then had to give up because they were overwhelmed by a flood of selling - because they finally ran out of firepower. But, it seems they didn't even make a token effort - they had given up on holding the line.
As for the suit against Facebook, I'm highly skeptical of it. As best I can tell, they did what they were supposed to and disclosed their concerns about the weakness of mobile advertising ahead of the IPO. It's not their fault that investors bought blindly without fairly considering everything that Facebook had reported, or that investors got burned assuming that emotion would drive a wild valuation long enough for them to flip their shares and make some quick money. I've said it before and I'll say it again, if someone doesn't have enough time to research individual stocks (and then follow developments with regard to them), they should not be buying individual stocks. You don't buy investment houses because they seem cool or someone mentioned that such investment are all the rage - you buy them based on checking them out, kicking the tires, trying to figure out - in real terms - what they're worth. At the very least, you go inside and have a look around.
Now, Nasdaq is where the major screw up was. It shouldn't have tried to take orders (and cancelations) right up until the beginning of trading. With the kind of volume involved, that was a recipe for disaster - trying to make all of the right matches, with so many new bids, asks, and cancellations coming in each second (and thus changing the matches that were already made), right up until the last second before trading started, was a mistake. They should have cut off orders 10 minutes before trading started. Some people would have been upset, but the system might have had a chance to work rather than creating a total cluster####. I didn't have any orders (for FB) in that morning, but if I had - and if I found myself in the same situation that so many others did (i.e. with no confirmations, for hours or even days, whether they had bought or sold and at what price), I 'd have been quite upset myself. If you don't know what's happened - don't know what you have or don't have - how are you supposed to figure out what to do next? Nasdaq screwed the pooch on this one. I'm not sure how they'd ever make everyone whole - figuring out what that would even mean would seem near impossible.
Tilted
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Lots of discussion ongoing..and lots of it calling 9 or 10 bucks the realistic value of a share.
Wall Street struggles to find Facebook's worth | Reuters
If all analysts had a clue what they were doing, I suppose we'd only need a few of them. No chance Facebook stock goes to $9 a share anytime soon. No chance (assuming nothing new and dramatic happens, of course - we can't really accurately account for the impact of, e.g., Mr. Zuckerberg passing away tomorrow or the entire internet being compromised for some unforeseen reason).
Not too long ago I saw an analyst with a price target for AAPL that was well under $200 - coco for cocoa puffs exists in the world.
I remember being amazed at the degree to which so many people missed the real story after Apple released its Q4 FY 2011 results. It was right there in front of us - as obvious as it could be - and yet, many people missed it and soured on the stock. How can people be so oblivious? I don't know, but they often are. I suppose I should be happy about it, it allowed me to make a considerable amount of money (on what I thought was a pretty safe trade), but it dumbfounded me nonetheless. (I just hope they make a similar mistake after the upcoming earnings release.) And the phenomena is most certainly not limited to Apple or other tech stocks - sometimes, hearing what people say about a particular stock (to include so-called analysts), I have to wonder if they've ever even looked at the company's filings or listened to its conference calls. Regardless of what someone does (or purports to do), they can be incompetent - disturbingly so sometimes.People really need to do their own research - devise and examine their own theses with regard to what individual stocks are worth - if they're interested in investing in them. They should not take a friend's, an analyst's, a broker's, or my word for it when it comes to prudent stock decisions.
E
EmptyTimCup
Guest
Facebook is an empty BAG - they sell ad space, which maybe popular right now ...... IMHO now that FB is Public, people will see the inner workings, and they will bleed more advertisers ... GM has already drooped out
51% of ALL FB users Never Click an Advert.
ok maybe that means 400 mill still do, but are they purchasing products
FB has created a whole lotta nothing but "ouch"...
Citi unit lost $20 million in Facebook IPO: source | Reuters
Citi unit lost $20 million in Facebook IPO: source | Reuters