Facebook IPO Stumbles Out of the Gate 423
Facebook's much-hyped IPO kicked off today, but an anonymous reader points out that things didn't go quite as smoothly as investors hoped. "Public trading didn't get underway until about 11:30 a.m. ET, half an hour after it was supposed to. The delay was likely caused by the huge amount of interest in the stock – especially by retail investors. In the first few minutes of trading, Facebook shares were only up between 5 and 10 per cent and by noon were essentially back down to the IPO price of $38. Many observers had expected the stock to double in price by the end of the day, if not sooner." The NY Times has a data visualization showing how Facebook's IPO compares to other tech IPOs throughout the years, and how the first day of trading treated all of those companies. Meanwhile, the debate is lively over whether the social networking giant will be a good investment. "The banks helping take Facebook public want us to value this 8-year-old upstart at as much as $104 billion, more than Disney or Kraft Foods, though those companies earn three and four times more. That top valuation is also more than 100 times Facebook's earnings last year, versus 13 times for the average company. At such a high price, it will take years for this so-called earnings multiple to fall to a more reasonable level, and that's assuming the company can maintain its torrid earnings growth."
Re:It's stupid to compare to Facebook's profit (Score:3, Informative)
Re:It's stupid to compare to Facebook's profit (Score:5, Informative)
Re:It's stupid to compare to Facebook's profit (Score:1, Informative)
10% Negative? That's a CRASH! (Score:5, Informative)
Facebook IPO Crashes Nearly 10% After $42.05 Opening Price - and the Underwriters had to STEP IN [wsj.com], to prevent a free-fall in decline. That is - no matter what you'd spin it - a market manipulation.
Bubble, meet needle!
Re:It's stupid to compare to Facebook's profit (Score:1, Informative)
- New account? Yes!
- Only commented on this article? Yes!
Probably a shill/marketer? Yep.
Re:It's stupid to compare to Facebook's profit (Score:1, Informative)
Re:It's stupid to compare to Facebook's profit (Score:5, Informative)
Seems to have been quite great for Google, which spent its first six years (1998-2004) without making anything and just running things on venture capital.
Actually not quite true, in the year+ before Google's IPO they were making money hand over fist, far more than they had thought they would be, and so they were hiding it:
By 2003, AdWords Select was serving hundreds of thousands of advertisers and making so much money that Google was deliberating hiding its success from the press and from competitors. But it was only a launching pad for the next brilliancy.
source [nybooks.com]
Re:It's stupid to compare to Facebook's profit (Score:5, Informative)
I am not sure which is more disappointing. The parent post or the people who voted this insightful.
Google and Facebook are hitting the Holy Grail of marketing. They do not advertise to generic demographics. Instead they are able to market to the individual. The more information they can find out about you, the more effective their advertising.Instead of marketers blindy throwing out products to 25-34 year old females, they will be able to disect the market in finer terms and use their money wisely. The more effective the advertising, the more money they can charge. So while you laugh at the idea, Google's founders could lose a billion in their couch cushions.
Re:It's stupid to compare to Facebook's profit (Score:5, Informative)
1) Brand new user
2) Posts a multi-paragraph post within a minute of the story going live
3) Glowing review of Facebook that goes against every conventional wisdom
4) Gets basic facts wrong about finance
5) Gets basic facts wrong about business etiquette
Woo. More astroturf.
To be a bit more on-topic: the facebook valuation is insane. A 100 times current earnings? It'll be years before Facebook can justify that kind of price, and that's assuming that it will keep growing as it has - which is an insane proposition, considering that there aren't that many more people who CAN join Facebook.
Re:It's stupid to compare to Facebook's profit (Score:5, Informative)
And then there are the people who hate him because he really is a shitty human being long before the social network was made.
Re:10% Negative? That's a CRASH! (Score:5, Informative)
What makes media happy and what makes the company successful are not always the same thing.
-GiH
Re:It's stupid to compare to Facebook's profit (Score:5, Informative)
That's not true. This information is all public and easy to look up...
Google had $3.2B in revenue in 2004, and their IPO made them worth about $24B. Their net income the quarter preceding the IPO was $80M, and diluted EPS was $0.30.
Facebook had $3.7B in revenue in 2011, and their IPO made them worth over $100B. Net income last quarter was $137M, and EPS was $0.09.
Revenue and income are clearly in the same ballpark, but valuation and EPS sure aren't. Seems to me FB is in fact way overvalued right now...
And even more interesting to note is Google's revenue and income took off like a hockey stick in the quarters following their IPO (and thus so did the stock). I just don't see Facebook's revenue doing the same. There may soon be a lot of disappointed investors who naively assumed FB stock would be going the same route as GOOG just because it's a "trendy company" rather than actually looking at the financials...
Re:10% Negative? That's a CRASH! (Score:4, Informative)
Insiders aren't even allowed to sell (usually) on IPO day unless their sale was worked into the subscription. Even long after they have to announce their sale a few weeks ahead of time before being allowed to sell. (VC guys would be the definition of insiders).
Ultimately, the only people that make money on a baddly priced IPO are the folks that get in on the initial IPO subscription (outside buyers). That's not good for the company, and it dose nothing for the owners and initial capital investors.
Re:It's stupid to compare to Facebook's profit (Score:5, Informative)
Once upon a time, a large portion of web sites had Geocities buttons on them, and forums listed AIM names.
Re:10% Negative? That's a CRASH! (Score:5, Informative)
Actually.. oddly enough that would mean that facebook priced its IPO perfectly.
From the news I heard, the underwriters had to step in today to assure the stock didn't go below the IPO price. The pricing of the IPO was not as "perfect" as you assert.
Re:It's stupid to compare to Facebook's profit (Score:5, Informative)
There may soon be a lot of disappointed investors who naively assumed FB stock would be going the same route as GOOG just because it's a "trendy company" rather than actually looking at the financials...
Those aren't investors, those are gamblers. A fool and his money...
Re:It's stupid to compare to Facebook's profit (Score:4, Informative)
If I understand correctly, US law requires companies with more than 500 investors to *publish their finances*, but they don't have to have public shares.
Re:What a moronic conclusion (Score:5, Informative)
You can see time they've stepped in. During that flat line you can see they've stepped in 5 or 6 times in just 20 minutes.
Re:10% Negative? That's a CRASH! (Score:5, Informative)