Facebook Shares Retreat Below IPO Price 471
First time accepted submitter gtirloni writes "Just days after wrapping up the biggest initial public offering in Silicon Valley history, shares of Facebook slumped 6% and tumbled below their issue price on Monday, a troubling signal for the newly-public social network. Facebook broke below its $38-a-share issue IPO price in the wake of a highly-anticipated offering that raised more than $16 billion, the second-largest domestic IPO after Visa's 2008 debut. Shares of Facebook were recently off 6.44% to $35.72."
Actually 12% And Some Other Notes (Score:5, Informative)
Re:Actually 12% And Some Other Notes (Score:5, Informative)
The hilarious part of this is that some of the investment firms are trying to get compensation from Nasdaq as well regarding lost profits from issues with the IPO - http://www.nasdaq.com/article/update-nasdaq-confronts-liability-on-traders-losses-in-facebook-ipo-20120521-00766 [nasdaq.com]
Banks were propping up the price on Friday... (Score:5, Informative)
It says they priced the IPO PERFECTLY... (Score:5, Informative)
If the stock moves significantly up after the IPO, this means that the company did not sell enough stock.
Instead, if the price remains flat, or even goes down, this says that the IPO was priced perfectly: all the revenue from the IPO goes to the company and/or the insiders selling the shares, rather than the IPO bank backer's insiders who got the inside track on the "hot IPO"
We should have all IPOs be like this IPO.
Re:Troubling signal, why? (Score:5, Informative)
How expensive is marketing information per lead these days?
From my experience from about a year ago Facebook wants to charge about US$0.25 per click for a US high school aged audience, US$0.30 per click for a US college aged audience and US$0.35 per click for a US 25-45 year old audience.
Re:Troubling signal, why? (Score:5, Informative)
Because at the very least, you'll be likely to beat inflation with your investments. Money put under the mattress loses value as the value of a dollar goes down, and savings accounts don't pay much either.
Re:Troubling signal, why? (Score:4, Informative)
There are probably a lot of bands that have uploaded their albums, for example. Facebook would be quite within their rights to put these on iTunes or Amazon. It wouldn't take many people buying them to push them over the $18 mark. The same with photographs - they've already sold some of these to Starbucks for advertising, they're probably in a good position to compete with the likes of iStockPhoto.
They can't sell what they don't have the rights to sell. Photos uploaded to Facebook can contain photos of other people's likeness - who may not even be users of Facebook. Commercial use of someone's likeness without their permission is not legal. For music, the music industry has bought and paid for quite a few laws. Per-copy sold, the songwriters still get royalties via ASCAP/BMI. If recorded by a label, the record label owns the rights to the recording itself - if band members uploading it, it might be fair use - but they don't have the authority to grant Facebook the wide license they claim.
And no - that wouldn't drive up album prices. They wouldn't be the exclusive distributor of the music. The band/label would still be able to sell. That might drive prices down, but not up in your scenario. In fact, Amazon/iTunes might not accept the duplicate albums from the alternate source, due to already having an agreement with the band/label. So Facebook would have to come up with its own music service to compete at all.
Do the analysts even understand what a website is? (Score:4, Informative)
Re:Troubling signal, why? (Score:3, Informative)
They would go down further if it wasn't for underwriters propping it up, that's the troubling part.
yeah... well, why is that troubling? it's only troubling if you bought into the stock and thought you'd do some mad bubble money fast.
even if you bought all the shares, you wouldn't control shit at fb, so it's not troubling from that perspective either(for fb itself anyways).
what you did if you bought into the IPO was give FB some investment money(that it didn't really need) in exchange for some funny papers(or bits more likely) that you can try to sell to someone else later. in common sense scenario much later, if they manage to invest that money you gave to them wisely(zucks yacht, whatever).
Re:Troubling signal, why? (Score:5, Informative)
I read an article that gave numbers for the three investment banks (taken from facebook's disclosures).
The numbers totalled $11.6 billion, out of the $16B facebook raised. So, the investment banks bought most of the shares. Some of that is probably for their investors.
I wonder how much the banks will lose from propping up the price.. FB is down 12% today, which means the banks' stock lost over a billion dollars in value. That wipes out everything they made in fees (a few hundred million, IIRC).
Re:Troubling signal, why? (Score:5, Informative)
Not if your shares were among the ones being sold as part of the IPO.
AFAIK, In most IPOs, the shares sold are generally "treasury" shares (shares owned by the company) or institutional shares (owned by venture capitalists and pension funds that invested pre-IPO) so that the proceeds go to the company and the early round investors. Of course some early insiders/founders may own significant blocks of preferred shares that become part of the IPO process by being converted to unrestricted shares and sold to increase "float" (the number of outstanding shares), w/o diluting share value, but for most IPOs, you can usually count those employees and directors on your fingers.
For most typcial employees, they might sell your vested shares as soon as normal trading opens and that might be very near the IPO price (or pinned to the IPO price depending on the generosity of the brokers that coordinate inside sales for the company and their ablity to make market and block trade), but they are generally not part of the actual IPO subscription allocation process.
Re:Troubling signal, why? (Score:5, Informative)
Can you describe exactly, how Fox News was "trying to prop up the stock"? What actions were they taking?
I noticed that before the IPO, both on Fox New and their Business channel, that many if not most of their analysts were saying that FB was over valued on this IPO....that they just didn't earn enough to justify that IPO price.
I try to scan and watch most all the major news channels, to get as clear a picture I can on the news with the different spins different networks put on it....but with respect to the FB IPO...they didn't seem to be trying to prop anything up, if anything I was hearing them say the opposite.
the actual numbers (Score:5, Informative)
I'm amazed at how many writers in the press, and on /., seem to think that Facebook Inc. was the sole seller in the IPO, and furthermore that they sold all of their shares. Unbelievable cluelessness.
As a public service, here are the numbers:
2,559,318,652 total FB shares (100%)
421,233,615 shares (16.5%) were sold in IPO
180,000,000 shares (7%) were sold by Facebook Inc (43% of IPO)
241,233,615 shares (9.4%) were sold by investors/founders (57% of IPO)
In the earlier filings, the investors/founders were going to sell fewer of their shares. But at the last minute, on May 16, they increased their take by more than 53%, dumping another 83,818,263 shares because the risk profile is waaaay too high for any smart money.
Writers who say "Facebook raised $16B in this IPO" are either disingenuous, or clueless. Facebook Inc raised less than $7B. The other $9B went into the pockets of the pre-IPO investors/founders.
This IPO was clearly overpriced, for the benefit of investors & founders who want to get out while they still can. The numbers don't lie.
The people who will get most screwed by this are Facebook employees, and pre-IPO private-share-exchange buyers, who have a 6-month or more "lockout" period before they can sell FB shares to whomever wants to catch a falling knife.
Re:Troubling signal, why? (Score:5, Informative)
Re:Troubling signal, why? (Score:4, Informative)
This ought to explain enough of it. [wikipedia.org]
You ever watch COPS and see the guys' faces blurred out? That's because they didn't approve their likeness being displayed. Behind the scenes, studio employees are running around with waivers hoping to get them signed. If their face isn't recognizable, like a tiny face in a huge crowd, then the rule doesn't apply.
Re:Troubling signal, why? (Score:4, Informative)
Hey, don't lump JPM in with the rest of the bailouts. They were doing just dandy when the government asked them to take the money so that it wouldn't become a scarlet letter on the other banks.
I'm all for hating the banks, let's just hate the right banks.
Re:Troubling signal, why? (Score:5, Informative)
Re:Troubling signal, why? (Score:5, Informative)
Facebook never deletes photos. Upload a photo, save the URL for the photo and delete the image. Go back months later and pull up the URL, the photo is still there.
Re:Troubling signal, why? (Score:5, Informative)
It isn't a wild-ass guess by any means. A P/E of 30 is considered to be high in this industry. Anything over that usually marks the stock as a poor buy. The Facebook offer price had a P/E of about a hundred, making it a really, really poor buy unless the stock got pushed up by irrational buying. So a high price for that stock (P/E of 30) would be about a third of the offer price, or about twelve or thirteen bucks per share, and a P/E in the high single digits would generally be considered a strong buy, at or around three bucks per share. To call this stock ridiculously overpriced is something of an extreme understatement.
Now to be fair, the P/E doesn't tell the whole story—some might argue that the forward P/E is a better metric—but I haven't bothered to calculate the forward P/E because the regular P/E is such utter insanity that further study of the stock is pretty much moot.
Re:Banks are welfare leaches. (Score:4, Informative)
Goldman Sachs, Morgan Stanley, JP Morgan, Citi are at the top of the list of banks making use of Federal Reserve loan facilities. If they are and were so healthy why are they at the top of the list of heavy users?
Um, because you don't really understand those facilities. It's not long term loans because they need it, it's short-term loans because it provides liquidity into the market, and lets those federally-insured banks be far more effecient.
I'll just point out that the Federal Reserve was created for exactly the purpose of transferring risk to taxpayers by exactly the banks who made most use of it.
Source? The point was and is to provide liquidity by the only entity sufficiently large enough (and able-to-print-money-if-they-need-to-enough) to do it. Liquidity makes markets efficient which saves everyone money. It is furthermore, a tool to enable monetary policy in various ways, and to help regulate the banks (if they want such lending, for example). And it is not a major risk for taxpayers, because it's entirely collateralized (with a relatively high standard). (Meaning, if the borrowing bank went bankrupt, the Fed would have first say over that collateral, in order to recoup any money the bank was unable to pay back.)
Oh and JP Morgan did everyone a favour for taking Bear Stearns over a $2 a share, financed again by the Federal Reserve? Oh please.
Yes. At the time, they were taking on a ton of unknown risk. They didn't want to do it, but agreed to because there was plenty of potential reward, they had a very very strong balance sheet themselves, and the Fed backstopped their losses to some extent (but certainly not entirely). No one else could have done it, which was made apparent when Lehman went down because the Fed couldn't convince anyone to take them on, and that's when the economy took the biggest hit. Also, they ended up agreeing to $10 a share, just saying.
Re:Troubling signal, why? (Score:3, Informative)
Personally that's still too high of a PE ratio for my investment style.