When will Facebook go public?

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Gilligan said:
Lots of discussion ongoing..and lots of it calling 9 or 10 bucks the realistic value of a share. :coffee:

Wall Street struggles to find Facebook's worth | Reuters
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I've still only found one analyst with a price target that low (Starmine), and that target price is an aberration. All of the other targets that I've found are between $30 and $49, and 8 of the 9 reported covering analysts have it rated as a hold or buy (i.e. at the then current level of about $32).

Other than Starmine, do you know of another firm or analyst saying the value of FB is $10? Or does "lots of" mean there's one that has said that and different articles make reference to it? I'm not suggesting that the rest of the analysts are right with their targets - it wouldn't shock me if this stock traded lower, maybe $25 or possibly even $20. But you can usually find one or a few people that throw out a much-too-low or much-too-high price target on a stock.

I'd ask again, where do you think FB will be 6 months from now and 2 years from now? And for my benefit, as I'm still trying to decide for myself what a fair value for FB would be, it would be great if you would share your reasoning - your thesis - for why you think that's where it will be. That's not a gotcha, that's a sincere inquiry - it's why I started this thread to begin with. I don't use Facebook, so I'm looking to others to offer feedback - not metrics and insight I can read in SEC filings, but senses people have from real world experience.
 
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EmptyTimCup said:
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
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Are you suggesting that it's an empty bag because its primary source of revenue is selling ad space - as if that's not a viable business model? That's how many businesses make money, and have for a long, long time: Fox News, NY Times, NBC, etc. The television industry was built around selling advertising. Google has made tons of money selling advertising. Meaningfully all of Google's revenues come from advertising (last I looked, 96% - and some of the rest came from providing advertising services if not from selling advertising itself). And Facebook is developing another source of revenue - platform payments - a source that's growing rapidly and now accounts for about 18% of its revenue.

As for the 51% stat, that doesn't surprise me - I might have expected it to be even higher. But as you said, half of (now more than) 900 million people is a lot of people. Further, Facebook doesn't necessarily need people to click on ads in order to get paid for them just as Fox News doesn't need you to click on their TV ads in order to get paid for them. Facebook sells both performance paid ads and impressions paid ads - they get paid for the latter based on how many times they are displayed.

I've said it before and I'll say it again: I can identify a number of meaningful headwinds for Facebook. I see reason to be concerned about its future as a business. But I also see a lot of potential opportunities and think that it is uniquely positioned to leverage opportunities that others probably can't. At any rate, this is a real business already - it makes a considerable amount of money. Selling advertising is not some crazy, fly-by-night, method of making money. It's well proven over many decades - both before the internet age and since.
 
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Gilligan said:
FB has created a whole lotta nothing but "ouch"...


Citi unit lost $20 million in Facebook IPO: source | Reuters
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Just to be clear and for those that might not realize it, that doesn't relate to the value of Facebook - those aren't trading losses. That has to do with the failure of the Nasdaq system to process orders. Citi isn't saying that it lost $20 million on Facebook stock - i.e., because the stock lost value (a whole lot more than that was lost by people that bought and sold FB :lol:) - such trading losses wouldn't even be worth reporting. Traders and investors lose and gain more than that on particular stocks on a daily basis.

Those losses relate to Citi (and other institutions) having to cover clients' trades - or attempted trades. Citi is on the hook for trades (by they're clients) that should have went through but didn't (or weren't confirmed in a reasonable amount of time). Nasdaq has asked large firms for estimates of what they lost as a result of this problem. It intends to reimburse them for some of the losses. There's a cap on how much liability Nasdaq has for this kind of thing, but it has indicated that it plans to reimburse firms beyond that cap. That's probably a smart move for PR reasons, but Nasdaq is still going to have taken a big hit to its reputation as a result of this mess up.
 
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Btw, Facebook is trading below $29.50 now. I'm still trying to narrow the range between where I'd definitely buy and definitely not buy - that being the case, I'm having to keep my powder dry for now.
 
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I'm gonna through this out there, though I wouldn't recommend that people trade options (I don't myself). I think they can make sense in some situations as insurance on existing positions or as cheap spec plays, but I think there's a lot of potential for people to be taken advantage of by the professionals that really see what's going on and trade options for a living. That said...

If people really think FB might be going to $9 - that there's a meaningful chance that will happen - the market is offering them ways to make big returns on relatively small bets. The ask on a September 2012 put option with a strike price of $15 is now $0.25. A put option is the right to sell someone the underlying stock at the strike price on or before the expiration date. So, for 25 cents, you could buy the right to sell someone FB stock for $15 before September 2012 (it's actually a specific date in September, I don't recall which day is used).

What that means is this: You pay 25 cents per share (e.g. 1000 put options cost you $250). That's your total exposure - the most you can lose (aside from the transaction fees). If the stock never dips below $15 before September 2102, you're out that initial expense. But if the stock dips below $15 at any point between now and September, you can buy it for the market price and sell it to the person from whom you bought the put option for $15. In other words, if the stock drops below $14.75 (it doesn't need to end up there in September, it just needs to drop that low at some point in the meantime) you end up making money (minus transaction fees). Everything below that $14.75 is profit - if it drops to $9, you can make $5.75 / share (e.g. $5,750 on those 1000 put options that cost you $250).

I suppose the takeaway is that the market - the people that put their money where their mouths are - thinks there's very little chance that Facebook will drop that low anytime soon. If someone thinks there's even a 1 in 20 chance that FB will hit $9 over the next few months, this is a great bet - and you don't even need it to go that low in order to make money, you'd make some money (just not as much - only about 3 times your initial investment) if it went to $14.

There are similar put options for a $10 strike price, $11 strike price, $20 strike price, etc. There are also put options that expire in June 2012, January 2014, etc. The current ask on a September 2012 put option with a strike price of $20 is $0.85 - that put option makes money if FB falls to $19 and a lot of money if it falls to $9 or even $15. For 85 cents per share, you could make $10 per share should the stock drop to $9.

Anyway, again, I'm not suggesting that people get involved in the options market. But if someone really thinks this stock is going into the dumper, there's room for them to make a lot of money with relatively small risk (i.e. a smallish amount of money being risked). The market certainly gets things wrong sometimes, but it isn't too concerned about Facebook falling that low.
 
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S&P has reportedly lowered its price target for FB to $27 (IIRC, it was previously $30), which is about where it is trading right now.

And Morgan Stanley's CEO has finally made some comments about the Facebook IPO. It appears that the essence of his comments is that Morgan Stanley did nothing wrong.

Morgan Stanley Speaks on Facebook IPO - CNBC Video

Morgan Stanley CEO Told Employees Firm Worked '100% Within The Rules' In Facebook IPO

NEW YORK -(Dow Jones)- Morgan Stanley (MS) Chairman and Chief Executive James Gorman defended the securities firm's role in Facebook Inc.'s (FB) tumultuous initial public offering, telling employees internally that the firm worked "100% within the rules" and calling the steep decline in Facebook's stock "disappointing."

Gorman, in a weekly strategy meeting Tuesday, which was later webcast to employees, said "speculation of nefarious activity" surrounding the social networking company's IPO is untrue. Contrary to some reports, he said, he wasn't "aware of any dissent" among the underwriting firms regarding Facebook's IPO price of $38 a share.
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An interesting note:

In the discussion, Gorman went so far as to recount a phone call he received from Facebook's chief operating officer, Sheryl Sandberg, last Friday evening. Gorman said Sandberg praised the company and offered Morgan Stanley a professional reference for its work on the deal.
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For those that don't recognize the name, Mrs. Sandberg oversaw ad sales for Google and is generally credited with helping make that company the profitable business that it now is. She was brought on at Facebook a few years ago to, as I see it, kinda be the adult in the room and figure out how to make Facebook a profitable business.
 
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czygvtwkr

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At $40 a share FB had something like half of the valuation of Google with only 1/10th the revenue.... this tells me that even at $10 a share is expensive when compared to Google.
 
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Has Facebook put in a bottom? It's been creeping up for the last week plus and is trading at about $28.50 in the premarket this morning. It was as low as about $25.50 last week.

I really need to know, someone please tell me. :tap:
 
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czygvtwkr said:
At $40 a share FB had something like half of the valuation of Google with only 1/10th the revenue.... this tells me that even at $10 a share is expensive when compared to Google.
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Only if you assume the companies are at the same stage in their respective developments, which they aren't. You don't buy a stock like FB (now) or Google (when it went public) because you think the price is good based on their current earnings, you buy them because you think the price is good based on their potential future earnings. Google was more expensive right after it went public than Facebook is now. It closed at $100 on its first day of trading (and went mostly up from there) which represented a market cap of about $27 Billion, about 140 times its trailing 12 months earnings of $191 Million. That investment didn't turn out too bad for those that made it, Google is up more than 450% in the less than 8 years since then.

Facebook may or may not be as successful as Google was in growing revenues and earnings in the years following its IPO. But the point remains, speculation / great growth potential plays aren't valued the same way as those plays that have already realized (most of) their great growth potential. If they were, many of the great investment opportunities in our history would have been missed. Early-life IPOs are almost always going to be expensive based on their current earnings. People don't buy them thinking they've already reached their potential as businesses, they buy them because they think they might grow into something much larger / more profitable. 
 
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czygvtwkr

Guest
Tilted said:
Only if you assume the companies are at the same stage in their respective developments, which they aren't. You don't buy a stock like FB (now) or Google (when it went public) because you think the price is good based on their current earnings, you buy them because you think the price is good based on their potential future earnings. Google was more expensive right after it went public than Facebook is now. It closed at $100 on its first day of trading (and went mostly up from there) which represented a market cap of about $27 Billion, about 140 times its trailing 12 months earnings of $191 Million. That investment didn't turn out too bad for those that made it, Google is up more than 450% in the less than 8 years since then.

Facebook may or may not be as successful as Google was in growing revenues and earnings in the years following its IPO. But the point remains, speculation / great growth potential plays aren't valued the same way as those plays that have already realized (most of) their great growth potential. If they were, many of the great investment opportunities in our history would have been missed. Early-life IPOs are almost always going to be expensive based on their current earnings. People don't buy them thinking they've already reached their potential as businesses, they buy them because they think they might grow into something much larger / more profitable. 
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Thats the thing though, Facebook was not an early life IPO. As far as everyone knows Facebook is a social networking site, people are getting over the whole social networking. Sure social networking is going to stick arround but its no longer "the next big thing" and at the time of the IPO facebook was and still is a one trick pony. Their big revenue was from ads, and right before IPO it leaks out that most people either block the ads or simply have never clicked on an ad on facebook. Googles big revenue is also ads, however you dont have to go to google.com to see the ads, they run ads on basically every website on the internet. Also Google was making money of a fairly new concept, where as facebook to make money needs to take buisness away from google.

Google was basically a preteen at its IPO date, where Facebook had just graduated high school.
 
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czygvtwkr said:
Thats the thing though, Facebook was not an early life IPO. As far as everyone knows Facebook is a social networking site, people are getting over the whole social networking. Sure social networking is going to stick arround but its no longer "the next big thing" and at the time of the IPO facebook was and still is a one trick pony. Their big revenue was from ads, and right before IPO it leaks out that most people either block the ads or simply have never clicked on an ad on facebook. Googles big revenue is also ads, however you dont have to go to google.com to see the ads, they run ads on basically every website on the internet. Also Google was making money of a fairly new concept, where as facebook to make money needs to take buisness away from google.

Google was basically a preteen at its IPO date, where Facebook had just graduated high school.
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Facebook is at about the same stage of its development as Google was when it went public (as a business, not necessarily as a social phenomenon, but the former is what I was referring to). But it's surely at an earlier stage than Google is at now.

And Facebook isn't nearly as much a one trick pony as Google is. Google gets essentially all of its revenues from advertising. Facebook is already getting about 1/5th of its revenues from other sources - most notably from platform payments, which are growing at a fast pace. Facebook is really in the early stages of trying to monetize its involvement in users' lives, and there's lots of potential for it to do so to a greater degree and with greater effect. It's barely begun to monetize outside of North America and Europe, and in some of those places (e.g. India) it's quickly becoming as popular as it is here.

Again, I don't pretend to know how well Facebook will execute going forward. But it isn't priced based on what it earns now or is sure to earn in the future, it's priced based on what it might earn in the future (weighted for how likely it is that it will be able to achieve that). It's still a bit of a spec stock, not a value stock. The nature of Facebook's relationships with its users is quite different than that of Google, and therein lies some significant differences when it comes to how well the respective companies might be able to generate revenue going forward - particularly as we get further into the age of mobile computer devices when so much content consumption and basic computing functionality will come through those devices.
 
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Facebook will report earnings this afternoon for the first time since it went public. I'm curious who will be on the conference call, hopefully both Mark Zuckerberg and COO Sheryl Sandberg will.

The stock price of Zynga, which also went public recently, is getting hammered after it reported disappointing results yesterday. That's also pulled Facebook down a little today, it's trading just above $28 now.
 
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EmptyTimCup

Guest
Facebook shares hit new lows

Facebook shares swung to a new all time low at about $24, against their $38 issue price, after the company's first earnings report as a public company showed a continued slowdown in revenue growth and flat profits.
The social network reported $1.18bn in revenues for the quarter, in line with estimates analysts had set after Facebook issued warnings that its mobile usage was growing faster than mobile advertising.
Facebook shares hit as ad growth slows - FT.com
 
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