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Facebook Shares Retreat Below IPO Price 471

Posted by samzenpus
from the back-to-reality dept.
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."
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Facebook Shares Retreat Below IPO Price

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  • by partofme (2643183) on Monday May 21, 2012 @10:55AM (#40065507)
    I can't really understand why you're saying that share price going down on IPO is a troubling signal. During normal operation, sure, but on IPO? It just means that the company didn't undervalue themselves and sell their shares at too low prices.

    If I were a shareholder before the IPO and the per share price would had doubled, that would mean half of my potential profit and ownership lost. It's not rocket science. Remember that Facebook fixed their shares price like 8 times to get it to correct level - I'm sure there was tons of people at Facebook trying to evaluate the right price during the last months.

    So all in all, it's better for shareholders and Facebook that the price went down instead of up. Otherwise it doesn't really matter. Especially since they already raised that $16 billion on Friday.

    So what's the troubling part? I cannot understand.
    • by SimonTheSoundMan (1012395) on Monday May 21, 2012 @11:02AM (#40065591) Homepage

      They would go down further if it wasn't for underwriters propping it up, that's the troubling part.

      • by Anonymous Coward on Monday May 21, 2012 @11:15AM (#40065751)

        So, the continued game of 'smoke and mirrors' persists on Wall Street.

        Tell me again why I should join a game that is inextricably rigged against me, the small-money investor looking for long-term growth?

        As an FYI, I don't invest at all.

        • by Anonymous Coward on Monday May 21, 2012 @11:24AM (#40065865)

          Tell me again why I should join a game that is inextricably rigged against me, the small-money investor looking for long-term growth?

          So we can have all your money, instead of just having most of it. Duh.

          Sincerely Yours,
          Goldman Sachs, et. al.

        • by omnichad (1198475) on Monday May 21, 2012 @11:30AM (#40065941) Homepage

          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.

          • Actually, in Ukraine savings accounts pay 25% APR, and 15% on USD and EUR accounts.
          • by Anonymous Brave Guy (457657) on Monday May 21, 2012 @02:00PM (#40067945)

            Because at the very least, you'll be likely to beat inflation with your investments.

            Is that even true any more? You can certainly cherry pick market indices and year ranges where they outperform any mainstream interest-bearing savings account, but if you hit any of the black swan periods you're going to suffer badly. Short of some sort of dubious bubble, which isn't inconceivable, it could be a decade or more before anyone who had invested before the recent crash gets back to the same level they would have been at without that crash. That's assuming that the markets do pick up some time in the near future, they sustain an above average growth rate until they've made up any remaining shortfall from the down years, and nothing else happens to cut everything in half again. I live in Europe, so I'm not convinced at all that we're out of the woods yet.

            All of that is considering investing in a general market tracker of some sort. Obviously you can potentially do much better if you invest in the right stocks individually, but plenty of professionals who do that still don't beat throwing a dart at the FT listings page. It's a fool's game for small investors who aren't willing to spend a great deal of time learning about both the mechanics of financial markets and the specific investments they're considering making.

            If you want to keep your money worth the same amount in real terms over the long run, are you better off just buying gold these days?

          • by BeaverCleaver (673164) on Monday May 21, 2012 @05:58PM (#40070851)

            My superannuation (Australian government-mandated retirement fund a bit like a 401k in the USA) consistently has _less_ money in it than I deposit, mostly due to fees charged by the [obscenely profitable] banks who run these funds and choose where to invest the money.*

            Every Australian employer has to send 9% of each employee's wage to one of these funds. The employee can [usually] choose the fund, but they can't just choose to stick it in a term-deposit, or under the mattress.

            Under the mattress currently shows a lower loss than allowing Macquarie Bank et al to gamble with this money.

            Again, what seemed like a good idea (mandatory retirement savings for all working Australians) has turned into free money being handed to the banks to gamble with.

            I repeat, not only does superannuation not keep up with inflation, it actually goes BACKWARDS. Stuffing the money in a mattress would be a far superior investment, but alas I'm not allowed to do that.

            Fuck superannuation. Any Aussies have a better solution? How hard is it to set up so-called "self-managed super"?

            *It's not their money, and the investor (me) can't claim it until I retire (like 40 years from now) so it's effectively a blank cheque for these arseholes to invest in any flavour-of-the-month IPO with absolutely no repercussions when they lose all (my) money.

        • by SimonTheSoundMan (1012395) on Monday May 21, 2012 @11:30AM (#40065945) Homepage

          As a retail investor you'll never get a broker to sell to you on an IPO day. They have to pocket their own money, then sell to their own trusted clients. You might have a chance to buy shares when the people on Wall Street have sucked all the money out of the shares, like what happened to AOL and Yahoo.

          Anyone got any numbers on how much the underwriters were moving around? They came in and took control within the first hour. Volume was massive especially in the last few hours when they forced it to flatline near $38.

          • by bouldin (828821) on Monday May 21, 2012 @11:49AM (#40066201)

            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).

        • by MaWeiTao (908546) on Monday May 21, 2012 @11:53AM (#40066287)

          You seem to believe that the stock market is a zero-sum game. While I agree that there are plenty of people gaming the system it doesn't mean you lose if you're not one of them. If you know what you're doing you can make money, you simply wont make quite as much as those guys.

          • by Joce640k (829181)

            They'll take all the short term gains, you'll be left holding the long-term ones. They'll make as much in one day as you do in six months.

        • by X0563511 (793323) on Monday May 21, 2012 @12:14PM (#40066563) Homepage Journal

          me, the small-money investor

          As an FYI, I don't invest at all.

          Wait, what?

      • Re: (Score:3, Informative)

        by gl4ss (559668)

        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 l

    • by polar red (215081) on Monday May 21, 2012 @11:03AM (#40065603)

      didn't undervalue themselves

      16 billion is about $18 per user. that's ridiculous.

      • Re: (Score:3, Interesting)

        by BMOC (2478408)
        How expensive is marketing information per lead these days?
        • by Anonymous Coward on Monday May 21, 2012 @11:24AM (#40065869)

          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.

        • by Zaphod The 42nd (1205578) on Monday May 21, 2012 @12:38PM (#40066865)
          Facebook gets about $3-5 per person, per year. Which really isn't that much. Google makes much, much more per user, but still nothing crazy.

          Revenue per user [wallstcheatsheet.com]

          I have no clue where the profit is gonna come from to back this up, and I don't think anybody else does either. Facebook's IPO is over 100x their last year's income, which is pretty scary.

          The worst part of this is how facebook's quality is going to go massively downhill now as they try to monetize it and squeeze more profit from ads, which in turn will drive users away, requiring them to make more and more money per user, which... Yeah. bad.
      • by polar red (215081) on Monday May 21, 2012 @11:06AM (#40065647)

        that's ridiculous.

        but only the people willing to pay that much are ridiculous. Nice job Marc. I would like to pull off the same stunt.

        • by robthebloke (1308483) on Monday May 21, 2012 @11:42AM (#40066093)

          but only the people willing to pay that much are ridiculous.

          link worth reading [telegraph.co.uk]

          Company filings after the market closed on Friday night however revealed the extent to which the banks who led Facebook’s initial public offering - in which $16bn of shares were sold to new investors - were forced to move in to the market and buy shares in order to keep the price above the $38 level. Morgan Stanley, Facebook’s lead financial adviser, ended the day with 162m shares, worth $6.16bn. Other banks including JP Morgan and Goldman Sachs also bought shares, ending the day with $3.2bn and $2.4bn holdings respectively.

          So 3 banks have purchased $11.76 bn of the $16bn total facebook stock available to prevent the share price tanking. Need I remind you of their past successes:

          JP Morgan: $25 Billion bailout from US tax payers.
          Morgan Stanley: $10 Billion bailout from US tax payers.
          Goldman Sachs: $10 Billion bailout from US tax payers.

          All those banks have repaid the bailout loans (from what I can figure out?), but it looks as though they are each going to make a fairly big loss on this IPO. That's not exactly a good sign that things have changed for the better imho....

          • Re: (Score:3, Insightful)

            by V-similitude (2186590)

            Oh come on. People need to stop citing "bail out" money paid to these banks (well, JPM/GS at least, I'm not so sure about MS). JPM didn't want the money, they didn't need the money, the government forced them to take the money primarily to make it not look so terrible for the banks who did need the help. The strong banks, JPM/GS/etc. (at the time anyway), paid it back as soon as they were allowed to, with interest. Not to mention, in JPM's case, they actually bailed out the taxpayers to some degree, by agre

            • 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?

              http://projects.propublica.org/tables/treasury-facilities-loans [propublica.org]

              The simple truth is they did need the money and would have failed as spectacularly as Bear Stearns and Lehman without it. I'll just point out that the Federal Reserve was created for exactly the purpose of transferring risk to taxpayers

              • by V-similitude (2186590) on Monday May 21, 2012 @03:51PM (#40069371)

                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: (Score:3, Insightful)

              by natophonic (103088)

              Ho ho ho! I'm thinking Goldman Sachs ability to repay in such a timely manner might have a little something to do with the $182B bailout to AIG, seeing as GS was AIG's biggest customer of its credit default swaps, and those AIG stakeholders were made entirely whole, whereas as of earlier this month, AIG still owes about $45B [investors.com] to the US taxpayers.

          • by slimjim8094 (941042) <slashdot3NO@SPAMjustconnected.net> on Monday May 21, 2012 @12:33PM (#40066781)

            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.

      • by TheRaven64 (641858) on Monday May 21, 2012 @11:12AM (#40065709) Journal
        Not necessarily. Facebook owns a nonexclusive, sublicenseable, commercial license to anything that their users have uploaded. 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.
        • by Anonymous Coward on Monday May 21, 2012 @11:25AM (#40065879)

          The user retains the right to unilaterally revoke that license if they delete their account, though.

        • by Zironic (1112127) on Monday May 21, 2012 @11:31AM (#40065955)

          If they tried to do that, EU would probably destroy them, literally by liquidating the company. They'd run afoul of so many European laws that just listing them would take the better part of a lawyers career.

        • by omnichad (1198475) on Monday May 21, 2012 @11:37AM (#40066023) Homepage

          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.

        • by mypalmike (454265)

          Crappy unknown bands and crappy low-res iphone photos is where the money is. I'm investing in flea markets next.

      • by rb12345 (1170423) on Monday May 21, 2012 @11:32AM (#40065971)

        didn't undervalue themselves

        16 billion is about $18 per user. that's ridiculous.

        It's an improvement on about $30 per Instagram user...

        • by Cederic (9623)

          Thing is, it's not $16bn, it's $104bn - not all of the company was floated.

          So each user is valued at over $120, which makes Instagram look cheap in comparison.

          Sadly I suspect $3/user would be a closer true value, and would allow far friendlier user policies too that might help boost site usage. But I'm not a Facebook user..

      • by number11 (129686) on Monday May 21, 2012 @11:39AM (#40066053)

        16 billion is about $18 per user. that's ridiculous.

        So would that make it $54 for me, given that I have (at least, there might be a few that I've forgotten) three different accounts?

        No wonder the price is sliding. I wouldn't pay $54 for me.

    • These reporters are just being sensationalist, manufacturing stories to get page views off this big IPO.

      Truth is as you say. I think it shows a great sense for rational valuation if after the first day the stock stayed within 10% of its opening either way. Much more shows dangerous wild speculation by traders, or the company completely blew their valuation estimates.

    • by cpu6502 (1960974) on Monday May 21, 2012 @11:08AM (#40065665)

      >>If I were a shareholder before the IPO and the per share price would had doubled, that would mean half of my potential profit and ownership lost

      I don't understand. If I was a Facebook employee (for example) and the shares the company gave me jumped from $38 to $76, wouldn't that be good for me?

      • Not if your shares were among the ones being sold as part of the IPO.

        • by slew (2918) on Monday May 21, 2012 @11:58AM (#40066357)

          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.

      • by HornWumpus (783565) on Monday May 21, 2012 @11:18AM (#40065799)

        Only if you were vested. Otherwise the only price that will matter to you is the price the day you have the legal right to sell the stock.

        Personally I love this. The ones taking it in the shorts are the underwriters and the insiders who thought they had a guaranteed payday by virtue of using connections to get in early. Turns out, in this case there were no bigger fools to pass it on to. Pump and dump didn't work for once.

        Let me be the first to say 'Ha, Ha' to the 1%ers (this time). Nice job redistributing the wealth Mr. Zukerberg.

    • by jellomizer (103300) on Monday May 21, 2012 @11:08AM (#40065675)

      However people were hoping to see Bubble like growth. We think back of the good times during the 1990's where a Web Developer who just used Front Page would get a low 6 figure salary. Getting paid in Stock Options seemed like a good deal. Then we had the Pop where a lot of these jobs were outsourced. Stocks dropped, where a lot of these company who did nothing went out of business, and the ones that were over valued dropped a lot.

      The companies that took on more modest growth, when times went bad went to a modest declined, they didn't have to layoff thousands of workers, they operated in their means. If Facebook doesn't plummet or shoot crazy up, then it was priced fairly and both sides got a good deal.

      • by TubeSteak (669689)

        If Facebook doesn't plummet or shoot crazy up, then it was priced fairly and both sides got a good deal.

        You think Goldman Sachs and Morgan Stanley were in this for a good deal?
        They wanted the share price to at least double the first day so that they'd make a killing.
        Those guys are probably shitting themselves at how weak the demand is for facebook stock.
        This IPO was supposed to make their year.

    • by OzPeter (195038) on Monday May 21, 2012 @11:10AM (#40065689)

      I can't really understand why you're saying that share price going down on IPO is a troubling signal.

      I know what everyone is saying about how the $38 share price was perfectly picked as the correct valuation of the company, but (and I am not a financial expert) what does this mean to the people who bought in on Friday? With no major share price movement they are left with a bunch of stock certificates and all their money in the hands of FB. How does this become a worthwhile investment for them? They can't expect to get money back through increased share price, so they are going to have to rely on a dividend for returns. Is there any expectation that there will be a decent dividend?
       
      I'm more inclined to believe what a pundit wrote a couple of weeks ago (and I have to paraphrase here) that up until the IPO FB had already sucked out as much money as possible from the system and that there was really nowhere to go after the IPO.

      • I know what everyone is saying about how the $38 share price was perfectly picked as the correct valuation of the company, but (and I am not a financial expert) what does this mean to the people who bought in on Friday? With no major share price movement they are left with a bunch of stock certificates and all their money in the hands of FB. How does this become a worthwhile investment for them? They can't expect to get money back through increased share price, so they are going to have to rely on a dividend for returns. Is there any expectation that there will be a decent dividend?

        My guess is that long term investors would look towards companies that have been on the stock market more than a single day.

        Short term speculators can buy and sell the same shares 50 times a minute if they want. Who cares what it does in a day. That's like eons for those people.

        FB stock IPO wasn't for the masses.

    • by fuzzyfuzzyfungus (1223518) on Monday May 21, 2012 @11:11AM (#40065699) Journal
      It appears to be an article of faith among the professional chatterers of the market-news media that THE NUMBERS MUST GO UP!!!!. If interrogated directly, of course, they will concede that 'the market' sometimes requires that the numbers go down, as folly and weakness are eliminated; but day-to-day this saddens them.

      Just look at the body of media drivel generated by the recent deflation of the American housing bubble: having a place to live became more affordable than it had been in decades and every last talking head and politician available began screaming about the 'housing crisis'...

      There probably are genuinely analytical analysts(who know enough to keep their mouths shut and make real money); but the ones bloviating in public appear to be little more than cheerleaders at a sort of stock market pep rally.
    • by Jeremiah Cornelius (137) on Monday May 21, 2012 @11:13AM (#40065729) Homepage Journal

      The Suckerborg lives up to its name!

      This is for suckers who want to roll boxcars, not the technical trader.

      "We had some clients call and once we step them through the numbers, they sober up," he said. "The valuation is 100 times earnings in a stock market that is trading at 12." [reuters.com]

      The price has been artificially inflated through buying by Morgan Stanley - one of the underwriters.

      They have been trying to sustain this since Friday, but are running out of steam.

      See Cryptogon on this:
      "I did watch a realtime price ticker once they finally opened it. Wow. What a show.

      It came out of the gate at around $42 and people just sold the living shit out of it. These were the whale clients at firms who had access to blocks of shares before it was trading, dumping into the crowd.

      We knew the issue price was $38, so I watched very carefully as it got down there for the first time. As the price dropped to exactly $38, it held there, absorbing, I don't know, millions or tens of millions of shares.

      'Squid on the bid,' I actually laughed out loud.

      Day traders quickly figured out that someone with infinite ammo was defending $38, so the little guys decided to party like it was 1999, taking it long for a couple of bucks, shorting it back down, where the axe would open fire again and not stop until the herd learned that there was only one way to go from $38 on the first day, and it wasn't down.

      If you have tick data for FB from Friday, it would be worth replaying that on your time/sales screen to watch what happened around that $38 level. Get yourself a big bucket o' popcorn ready because the 'unseen hand of the market' put on a good one for those who knew what they were looking at."

      http://cryptogon.com/?p=29242 [cryptogon.com]

      See the video replay of High-Frequency-Trading manipulation of the 38 USD. They call it a "Tractor Beam" Ha!
      http://www.youtube.com/watch?v=KrkH_WQxxEA [youtube.com]

      • by localman57 (1340533) on Monday May 21, 2012 @12:58PM (#40067211)

        http://cryptogon.com/?p=29242 [cryptogon.com]

        See the video replay of High-Frequency-Trading manipulation of the 38 USD. They call it a "Tractor Beam" Ha! http://www.youtube.com/watch?v=KrkH_WQxxEA [youtube.com]

        This video is worth watching for the lesson it presents. The lesson is not about Facebook, or IPOs, or anything as specific as that. It's a detailed analysis of what's happening to the stock price as computers manipulate millions of shares of the stock. This guy can talk for 8 minutes (and it's an interesting talk) about something that took about 3 seconds to occur. If you ever had doubts that the long term, buy and hold investor is a sucker in today's markets, this is a video to watch.

  • by eldavojohn (898314) * <eldavojohn AT gmail DOT com> on Monday May 21, 2012 @10:55AM (#40065509) Journal
    Looks like it actually got down to -12% within an hour of opening [google.com]. From the sounds of it, NASDAQ royally screwed up this IPO [cbsnews.com] and there's probably unexecuted orders lying around which is likely going to result in some very hilarious realized losses [reuters.com]. Look, if Goldman Sachs is securing hundreds of millions of dollars in shares ahead of time and cashing out during a tech IPO [bloomberg.com], you as an individual are probably already too late the party. Of course, that's investment advice from an anonymous idiot on Slashdot but it looks like they will be one of the few parties laughing all the way to the bank (as usual).
  • Not surprising (Score:5, Interesting)

    by Rik Sweeney (471717) on Monday May 21, 2012 @10:56AM (#40065525) Homepage

    At this point, Facebook has nowhere to go but down.

  • So, which is it? (Score:4, Insightful)

    by A10Mechanic (1056868) on Monday May 21, 2012 @11:02AM (#40065583)
    Is it the normal IPO rebound effect, like a rubber band snapping back, or is it like the realization of millions of investors trying to put a valuation on a company that has no tangible assets? Or is there another conclusion?
  • It would be trading at under $8 per share.

    I would not be at all surprised to see it in that vicinity in the next 6 months.

    • by toruonu (1696670) on Monday May 21, 2012 @11:12AM (#40065713)

      I'm going to be betting on it the moment facebook option trading opens up and I can short the life out of it. I'd have loved to short at $40+ that it was trading at on Friday as I was pretty sure it's going to go down. Most IPO's underprice themselves slightly and there's euphoria in the just-after-IPO trading that usually sees a good 20-50% upside and a good downswing in the same day of the IPO. This never happened (it opened at $42, hit $45 in a few minutes and was $38-40 range bound the rest of the day meaning that the IPO was priced pretty much at the maximum that investors are willing to go at. Therefore any hope for upwards movement now comes from positive surprises and better than expected earnings. However considering the valuation at 100x trailing 12m earnings the valuation already assumes exponential earnings growth. Therefore as someone already put it ... only way is down. Once options come online I'm going to short at $30/$35 range for 6-9 months depending on the option price and I'm fairly certain I'm going to make a ton as I doubt FB can run 2-3 consecutive quarters with exponential earnings growth and once that doesn't happen the valuation will go through a heavy correction (likely to around 20-40x earnings) which is likely to mean a 40-60% downwards shift to around $20 territory. Might not happen with one earnings result or two, but I doubt they'll keep the euphoria for more than that. But for FB itself and the investors that cashed out with the IPO it was perfectly priced :P

  • by Severus Snape (2376318) on Monday May 21, 2012 @11:04AM (#40065609)
    This stops the chance of another dot-com bubble forming. Facebook was overvalued, if they can very quickly show how they can create an increase in revenue they'll be fine and continue to strive though.
  • by MarkvW (1037596) on Monday May 21, 2012 @11:05AM (#40065627)

    Does anybody realistically believe that Facebook will EVER pay its investors a meaningful dividend? HELL NO!

    Facebook is just a game of stock market musical chairs which foolish investors will dance around until it is replaced by the next big thing.

    Good luck, day traders!

    • by swillden (191260) <shawn-ds@willden.org> on Monday May 21, 2012 @02:01PM (#40067947) Homepage Journal

      Does anybody realistically believe that Facebook will EVER pay its investors a meaningful dividend? HELL NO!

      The classical theory of stock valuation is that the current value of a stock is the net present value of its future dividend stream, but there are plenty of companies out there that don't pay dividends, and don't ever plan to pay dividends and they're not worthless. There are plenty of investment properties which are bought and sold on the price change, not for any dividend or rent stream. Much real estate investment is like that: It's perfectly reasonable to buy a piece of property because you expect its value to appreciate, not because you anticipate any direct revenue from it.

      Determining a value for stocks that don't pay a dividend isn't even much different from those that do. In both cases you look at the book value plus estimates of future profits. In the case of dividend-paying companies, those future profits are expected to be paid out to shareholders. In the case of non-dividend companies, they increase book value.

      Note that I'm not arguing that Facebook isn't overpriced. I think it is. Significantly. But not because they're not going to pay dividends.

  • by Golgafrinchan (777313) on Monday May 21, 2012 @11:05AM (#40065631)
    This result was expected based on what happened on Friday. It was reported that the underwriting investment banks were propping up Facebook's share price on Friday to keep it above the IPO price of $38, so as to help their clients avoid losing money on the first day. Now that we're past day 1, the banks have stopped buying shares at the apparently overvalued price, which makes sense -- after all, if the banks are buying at $38, then they stand to lose money when they sell at a lower price in the future. In other words, Facebook should've already been trading at something less than $38 on Friday, but it wasn't because the banks wouldn't let it.
  • by nweaver (113078) on Monday May 21, 2012 @11:08AM (#40065673) Homepage

    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.

    • by rhsanborn (773855)
      It also means the Facebook staff who were partially paid in stock are now watching their personal valuations go down, which lowers morale and can induce a flight to new ventures.
  • Eye opener, one of: (Score:5, Interesting)

    by dragisha (788) <dragisha&m3w,org> on Monday May 21, 2012 @11:13AM (#40065721)

    Enlightening article: http://atimes.com/atimes/Global_Economy/NE22Dj03.html [atimes.com]

    A Facebook page is a pre-arranged display window whose purpose is to block our gaze from the real person behind it.

    That is Facebook's curse.

    It attracts hundreds of millions of users by providing them with a platform for narcissism and the means to lie about themselves more persuasively, but it hopes to make money by learning what it is that they really like, the better to show them advertisements.

    'nuff said :)

  • Poke? (Score:5, Funny)

    by FlopEJoe (784551) on Monday May 21, 2012 @11:16AM (#40065781)
    Maybe someone should poke it.
  • by shoppa (464619) on Monday May 21, 2012 @11:37AM (#40066033)
    Do the analysts even understand that websites sell advertising and data mining on their users, a very different business model than people buying software from Microsoft?

    “We believe in the potential of the Facebook platform. However, even on the traditional PC/Mac platform, advertising remains nascent,” Richard Greenfield, an analyst at BTIG, wrote in a research note.

  • the actual numbers (Score:5, Informative)

    by optimism (2183618) on Monday May 21, 2012 @12:15PM (#40066573)

    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.

    • by mounthood (993037)

      Underwriters are misunderstood too: IPO stock is already bought by the underwriters. Facebook inc. and the investors/founders get paid the pre-IPO valuation by the underwriters, who then sell the stock to the public. Chronic undervaluation of IPOs is a function of the underwriters assuming the market risk, and the Facebook IPO being highly valued is bad for the underwriters. No matter what the stock does, Zuckerberg et. al. make the same amount on the IPO stock, although the market price does affect the val

  • by SmallFurryCreature (593017) on Monday May 21, 2012 @01:39PM (#40067679) Journal

    As others have calculated, the valuation of Facebook if divided by the number of users is pretty damn high, especially since it isn't actually selling anything to their users. Rather it sells its users. To people who are used to buy in very large bulks to the tune of maybe a fraction of a cent per user.

    You might THINK TV advertising is big and moves a lot of money, and you be right. It is BIG but so is the industry. TV's are everywhere and everywhere they sell Coca-Cola, yes even in places where people are dying of thirst. It is one of the funniest things you ever encounter, well, if your sense of humor is sick, that you can go within walking distance of people dying and being dead beside the road and see advertising for luxury products. That is why advertising is big, IT IS EVERYWHERE. It operates how on tiny amounts, just is massive bulk.

    And Facebook, as alien as the thought might be to its fans, does NOT have bulk. Or rather, the one thing it has bulk off, nobody wants. LOTS OF SMALL GROUPS. The problem with advertising on the internet is that it is to specialist. There is an internet forum out there for furry, star trek, romney voting black hindu linebackers... but who on earth has a product to sell to them?

    Facebook users are not a meaningful demographic. Precisely BECAUSE facebook knows so much about you, you loose value as a product for advertisers. If you are not their target, they don't want you. So from its not all that many users (compared to say viewers world-wide of a bond movie, or a Soccer championship, or the Olympics) only a very small subset is of interest to any particular advertiser. TV is much easier, they don't know who the fuck is watching their commercial but they know it is a lot so it is like shooting fish in a barrel with a needle, or something like that, they understand the metrics know how to play it.

    Don't believe me? Fine, try this. DISCUSS, ANY single facebook advertising campaign that you talked about at work with a co-worker. Any? Even one? Okay... now name a DOZEN tv ads that you talked about with a co-worker. See?

    BUT the people in Wall Street are desperate, they need SOMETHING to speculate in. Many were buying Facebook stock in the hope of the price immidiately going up and selling it as soon as possible. They were not investing, they were not looking at Facebook as a long term business, they just wanted to cash in quick on stock selling low and going up. And it didn't. Mostly because there were no long term investors so a lot of the buyers had no choice but to sell because they had bought with borrowed money.

    But what else to speculate in? Real investing, putting your money down in a business in the hope it slowly grows over many years and then pays you back, that takes to fucking long and anyway, invest in what? Nobody is doing anything anymore, it is almost like all theother assholes with cast are just waiting to speculate or something!!!

    So they saw Facebook, thought, this is going to go up because if they didn't, they would have nothing and so made up the scenario's in which Facebook would go up and they could all get rich quick and someone else would do the real investing in whatever Facebooks business plan happens to be.

    This is what happens when you let gamblers run your economy.

"Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats." -- Howard Aiken

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