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Businesses Facebook The Almighty Buck

SEC Calls For Review of Facebook IPO 267

Posted by Soulskill
from the somebody's-in-trouble dept.
beaverdownunder writes "After losing another 8.9% of its IPO value in its third day of trading, SEC Chairman Mary Schapiro has called for a review of the circumstances surrounding Facebook's IPO on the NASDAQ late last week. Unable to sell Facebook short, investors have instead taken to short-selling funds that owned pre-IPO shares as revelations come out that the underwriters involved revised their Facebook profit forecasts downward in the days before the offering without similarly revising the opening share price. Meanwhile, Thomson Reuters Starmine has come out with a post-party Facebook estimate of a meager 10.8 per cent annual growth rate, valuing the stock at a paltry $US9.59 a share, a 72 per cent discount on its IPO price, signaling that the battered stock may not have found the bottom yet."
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SEC Calls For Review of Facebook IPO

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    • by mirix (1649853) on Wednesday May 23, 2012 @12:37AM (#40083877)

      Of course he's selling some of his shares. That's pretty well the whole point of this operation, letting the senior people cash out.

      It's not like they need cash to put into R&D or anything.

      • by Animats (122034) on Wednesday May 23, 2012 @12:48AM (#40083925) Homepage

        That's pretty well the whole point of this operation, letting the senior people cash out.

        Right. The insiders sold $9 billion in stock. Facebook, Inc, only raised $7 billion. Accel Partners sold about 25% of their Facebook stock. DST Group (Russia) sold 37% of theirs.

        Facebook is probably worth around $10 a share. Even that assumes 10% growth for the next 10 years, which is rather good. It's entirely possible that Facebook may not be a big deal as social moves to mobile.

        • by rhook (943951)

          $10/share? That is at least 10x the true value. I predict that in the next year or so their stock price is going to tank like so many did during the dotcom crash.

          • Re: (Score:2, Informative)

            by Anonymous Coward

            derp. at 38 it was worth 100x forward p/e, that's more than Amazon.

            At apples p/e it's more like 4$/share.

            The pundits say it's a strong buy if it gets to 28, but just about everyone says, don't buy until they file an earnings report. Flashcrash among all the tech stocks leading up to the IPO was hilarious and heartbreaking.

            • by jythie (914043)
              Which because of how they handled the IPO, they are not actually required to file an earnings report. They can keep all their information private yet still reap the 'public' offering.
          • by 3dr (169908)

            I've been wondering what a fair value is -- *assuming* that FB is worth investing in at all, which is dubious at this point. But, for the sake of argument, let's say it is.

            At IPO, the $38 was 107 times their annual earning, so that's roughly $0.35/share value, not counting their assets, IP, etc. Last I calculated, Apple had a P/E of 17, which is surprisingly low for a "hot tech property", but Apple has the earnings to fully support their valuation. During the past 3 years, FB has increased their revenues by

        • by jo42 (227475)

          A Facebook share, much like Facebook itself, isn't worth a wet fart. Douchebag-berg knows this and is cashing out.

    • by cjcela (1539859) on Wednesday May 23, 2012 @01:32AM (#40084143)
      Of course he did. That was the whole point of this IPO: they wanted to cash out before it burst. The money to be made out of it was already made by the original owners, at expense of the investors. There was not a single reason to believe FB was priced fairly and not overvalued, and no clear indication on how FB could make enough money in the future to justify a 100B valuation. After the market experiences in the last 15 years, I cannot believe how many bought into the hype of this.
      • by dadioflex (854298) on Wednesday May 23, 2012 @02:22AM (#40084437)
        Arguably the money will be made at the expense of the brokers like Morgan Stanley who stepped in to prop up the share at launch and bought up billions of dollars worth.

        The mistake they made was over-estimating demand and releasing too many shares. A smaller float could well have become a feeding frenzy - not that I think it's worth thirty bucks a share, or whatever it sinks to today either.
        • by Alex Belits (437) * on Wednesday May 23, 2012 @04:06AM (#40084793) Homepage

          feeding frenzy

          !!!RARE!!! The original Facebook share! Never sold since IPO! Own a part of Internet history! $300 or better offer!
          (check other items in my Ebay store)

        • by Anonymous Coward on Wednesday May 23, 2012 @05:19AM (#40085125)

          Actually, due to the way that the IPO deal was framed, Morgan Stanley didn't lose any money in propping up the share price. See http://en.wikipedia.org/wiki/Greenshoe [wikipedia.org]. That's a bit hard to follow, but basically, Morgan Stanley started the IPO by selling more Facebook shares to the public than they bought from Facebook. This leaves Morgan Stanley with a net short position that they have to cover. If the price of the stock goes below the issue price, they cover it by buying back the excess shares they sold, which also happens to prop up the post-issue price. If the price goes above the issue price, they cover it by exercising an option granting them the right to buy those shares from Facebook at the issue price, effectively increasing the size of the issue.

          That said, while Morgan Stanley may not have directly lost money here, they just plain fucked up this IPO and it may hurt their IPO underwriting business.

          • by Specter (11099) on Wednesday May 23, 2012 @08:43AM (#40086801) Journal

            "they just plain [expletive deleted] up this IPO and it may hurt their IPO underwriting business."

            Maybe, maybe not. You could argue that they priced the IPO pretty much optimally, for FB that is. The fact that the shares tanked on day 1 means they didn't leave any money on the table and FB got the most they could have possibly hoped for in the offering. The IPO investors got screwed but if they didn't see this train wreck coming then perhaps they should be looking for a less intellectually demanding line of work.

    • Re: (Score:2, Troll)

      by gmhowell (26755)

      It seems that neither you nor the other posters get it. Or have had a girlfriend or spouse. He just got married. You have any idea how much it costs to keep them around?

      And if you really want your mind blown, wait till you see how much a divorce costs. OTOH, whereas an overpriced wedding ceremony is overpriced, a divorce is worth every penny.

  • FUBAR (Score:4, Informative)

    by geoffrobinson (109879) on Wednesday May 23, 2012 @12:21AM (#40083791) Homepage

    "Investors were still shaking their heads over the botched opening trading of Facebook when Reuters reported late Monday that the consumer internet analyst at lead underwriter Morgan Stanley cut his revenue forecasts for Facebook in the days before the offering.

    JPMorgan Chase and Goldman Sachs, which were also underwriters on the deal, each revised its estimates during the road show as well, according to sources familiar with the situation."

    From what I've been reading and listening to that information didn't come out to everyone. That's just awful and this IPO seems like a big mess.

    On the plus side, the market hasn't been going crazy so it seems that the new tech bubble may not be all that bad.

    • by Anonymous Coward on Wednesday May 23, 2012 @12:24AM (#40083805)

      I'm sick and tired of these banks screwing over the little guy.

      JPMorgan Chase, Goldman Sachs, these companies truly represent the epitome of corporate greed and corruption in america.

      • by Anonymous Coward on Wednesday May 23, 2012 @12:36AM (#40083871)

        Why would any sane person buy into an IPO of a company with a PE valuation of 100:1? I do not even feel sorry for these suckers/gamblers.

        • by Yvanhoe (564877) on Wednesday May 23, 2012 @05:21AM (#40085131) Journal
          I still feel angry that Facebook managed to get 100 billions of funds this way. Their stock price can go down the drain, this money is there, in their bank account. This is the annual budget of Poland. These funds will now be put at work in order to screw us over.

          I think that this day was a very bad day for our freedoms and privacy.

          Zuckberg will stay a billionaire, even in the most gloomy scenario he will still be a multi-millionaire, I don't see any possible scenario as less than a success for him.
      • by Anonymous Coward on Wednesday May 23, 2012 @12:37AM (#40083875)
        That's why you should vote for Mitt Romney. If only we had less banking regulation, then the Wall Street bankers would finally get a fair shake.
        • by DarkOx (621550) on Wednesday May 23, 2012 @06:13AM (#40085329) Journal

          Yes they would get theirs and no Romney won't do it, neither will Obama. We need a real outsider. Had we not done the bailouts and let AIG go down, they would have most likely taken Goldman, and second tier investment banks wit them. JPM would most likely have survived but it would have been pushed out of the F50 for certain.

          We would all be better off in the long run. The great thing about capitalism is its supposed to off mobility; for that to happen the wealthy must be allowed to fail. What we have today is not capitalism its closer to feudalism.

        • by roman_mir (125474) on Wednesday May 23, 2012 @06:23AM (#40085375) Homepage Journal

          Abolishing government from regulating the market would heal the economy.

          The problem with IPOs is that the idea of what it is was perverted by government regulations. Without government regulations small companies, new companies would be able to go IPO without having to go through all the hoops that government sets in front of the companies - there wouldn't be a need for a company to reach a point where it is already making money in the first place. There wouldn't be a need to wait until the company is overvalued without any real upside.

          What's the upside in buying FB stock in this IPO? There is no upside, FB is overvalued, just like many other companies before it. The upside is eaten by the banks - underwriters, but this is the problem CREATED by the government.

          A company cannot go IPO without a lengthy and a very expensive legal process and this is the problem. If companies weren't prevented from going IPO in the very early stages, then their stock could be bought by small, by tiny investors and there would've been actual possibility for growth.

          The government comes in and sets all these nonsense rules that are supposedly there to prevent risk to investors, and in doing so the government destroys the very reason to invest into companies. Taking risk IS what investors have to do, in some cases they would lose money and in some cases they would make money and in a few cases they'd lose all the invested money and in a few cases they would make it really big.

          It would be totally up to investors to decide where to take the risk, companies wouldn't have to exist for years before going IPO, the VERY REASON to go IPO would actually become a healthy one again - going IPO with the government rules and regulations means that it is just a way for early investors and founders to cash out.

          Going IPO was MADE by the government into a way to cash out of the company! Going IPO shouldn't be about allowing early investors and founders to cash out, it should be about growing the company - providing the company with the necessary funding to allow it to grow.

          Going IPO should be about the market deciding whether it wants the company to have the resources needed to attempt and build that business, not about having a company with no risk to investors and thus basically insuring the exact opposite. Because of government rules and regulations IPOs have NO upside to the small investors, it all goes to the underwriters and early founders.

          It makes no sense at all, and the public is made so absolutely categorically blind to the fact that it is the government rules and regulations that destroyed the ability of small investors to take risks in investing and manage their own risk, hedge their bets and actually have a real possibility to invest into a company with real upsides.

          A little investor with just hundreds or thousands of dollars is NOT allowed to participate in a company's success from early stages of formation.

          You want more regulations? Really, you so believe that what is needed here is more regulations? You believe that the current amount of regulations surrounding IPO makes your investment opportunities better? Less risky? Safer?

          The government removes the only one risk: the risk that you can actually buy good investments with plenty of upside and participate in building a successful business.

          The government protects you from one thing: from making money.

          • by Aceticon (140883) on Wednesday May 23, 2012 @10:39AM (#40088779)

            I find any ideological opposition to regulation curious.

            Are you aware that the current crash came after a period of deregulation of the financial industry comparable only to what happened before 1923?

            I recommend that you to read a book called "This Time is Different: Eight Centuries of Financial Folly" - you'll find not only that the current crisis is nothing new, but also that all the greatest banking crisis happened following phases of banking deregulation, just like this one. In fact the credit bubble that resulted in the current crisis started when the Glass-Steagal regulation was repealed.

            Think of banking regulation like the economic equivalent of regulating an industry that deals in explosives - the side effects of a fireworks factory exploding right in the middle of a residential neighbourhood are so bad that the industry has severe restrictions about where and how they setup their business.

            In your no-regulation world, how would you avoid that a fireworks factory is setup right next to your house (or maybe a nice nuclear waste treatment plant)?

      • by Aaron B Lingwood (1288412) on Wednesday May 23, 2012 @03:08AM (#40084591)

        I'm sick and tired of these banks screwing over the little guy.

        I am curious how many 'little guys' actually managed to secure shares in the offering. I would say nil.

        The underwriters decide who will receive shares in an IPO and this is done via an application/bid process meaning that friends and large clients of the bank are given priority. It would be a little suspect if all these shares were not issued to funds and the extremely wealthy.

        In short, don't fret. This is the 1% fucking with the 1%. I approve of this.

        JPMorgan Chase, Goldman Sachs, these companies truly represent the epitome of corporate greed and corruption in america.

        Nobody will disagree with you here.

        • by Conspire (102879)
          Oh there were definitely some little guys buying......I mean that idiot moronic sock puppet Jim Cramer was screaming "buy as much as you can". There were surely lots of little guys moaning. I'm sure there are even some who are still buying so that they can "average" their buy price and take less of a hit. These buyers deserve the hit, when you ignore fundamentals and a plan and buy pure air, you don't really deserve the money do you?
    • Re:FUBAR (Score:5, Insightful)

      by Liambp (1565081) on Wednesday May 23, 2012 @02:28AM (#40084445)

      You say that the information didn't come out to every one but nevertheless there was plenty written over the last few weeks saying that Facebook was overvalued. There was no shortage of warning signs so it is hard to feel sympathy for those who lost money on this. Caveat Emptor and all that.

    • Only an idiot would buy the stock at that price. I wouldn't buy it at any price. Even if it was $1/share.
    • by Conspire (102879)
      Just wait till shorts are available on FB, just wait until option chain becomes available. The stock is doomed......unless MZ pulls a rabbit out of the hat.
  • by Anonymous Coward on Wednesday May 23, 2012 @12:26AM (#40083813)

    if the stock price goes below certain level, will facebook close its doors?. it will be a gift for humanity if they disappear forever.

    • by micheas (231635) on Wednesday May 23, 2012 @01:30AM (#40084121) Homepage Journal

      Probably, but that price is probably about 0.002.

      If the bankers did their job, an IPO should fall below it's IPO price at some point. The IPO (and secondary offerings, and warrants, and employee stock options) are the only time that the company makes money from the sale of shares.

      A company that goes public rarely puts out any news that would cause the company to go up in value for 90 days after the stock goes public. Therefore if the stock goes up significantly from the IPO price in the 90 days after the IPO it is almost definitely because of a wink shake agreement between management and the bankers to bleed money out of the company to investors at the expense of the long term health of the company.

      No matter what happens to the stock price, facebook put $8,000,000,000 in its bank account. If the price had been lowered to 16 Facebook would only have raised $4,000,000,000 and would be in a much worse position financially, despite the fact that everyone would be going on about how great the stock was doing.

      IPO's that pop like in the dot com days are the sign that the company is actively being looted, and probably won't make it as a public company very long.

      The question of whether or not you think Facebook is a good investment or not is whether or not you think that they are going to successfully use their cash to figure out how to make money off of their mobile users.

      • by Conspire (102879)

        The question of whether or not you think Facebook is a good investment or not is whether or not you think that they are going to successfully use their cash to figure out how to make money off of their mobile users.

        And to this I say, they will make nothing close to Google and Apple and probably the top 3 handset manufacturers in mobile. If this is what you think all that matters on FB valuation, then they are worth nothing. On mobile they will be squashed.

    • by gmuslera (3436) *
      Don't think so. But won't be surprised if get saved by some donation of a "neutral" party, with no connection with the things that caused those actions to fail, that will enable to keep running the company, after a few changes on policies. Facebook's user base is an asset that should not be lost, just need to be driven in the right direction.
    • if the stock price goes below certain level, will facebook close its doors?

      The shareholders could vote to liquidate, sell assets or cease trading. However, Mark Zuckerberg owns greater than 50% of voting shares.

      If the stock price goes below a certain level, a possible reaction by Facebook Inc's largest shareholders might be to bail and we could see a second round of shares offered as they try to cash in. This could allow for a takeover which likely wouldn't be good for end users. I would love to see the end-users snap up the shares (and voting rights) forming the world's largest c

  • As the adverts all say, "the value of investments can go down as well as up". The stock market is gambling pure and simple, so punters (investers) should not be surprised if they sometimes lose. Following the initial floating of the shares, the price will naturally settle to their current true value - sometimes this will be up and sometimes it will be down. The people who bought the shares at their opening value obviously thought they were worth it, otherwise they should not have bought them at that price. They took a gamble and lost!

    • by whoever57 (658626) on Wednesday May 23, 2012 @01:01AM (#40083987) Journal

      The people who bought the shares at their opening value obviously thought they were worth it, otherwise they should not have bought them at that price. They took a gamble and lost!

      The stock market is like a casino where the odds favor the customers. Overall, investors on the stock market make money, however, some investors will lose money.

      In this case, however, the decks were stacked against the small guy. Some people had inside information that Facebook's financials were not likely to be as good as the rosy projections that were made public. That stinks and, until a lot of bankers and analysts go to jail for such actions, it won't stop (a tiny number of people are prosecuted, most pay a fine that is broadly the same as their gains, so no real loss and an even smaller number of people go to jail -- but the number is too small to make individuals think there is a realistic chance of them going to jail for inside trading).

      • by m.dillon (147925) on Wednesday May 23, 2012 @01:28AM (#40084111) Homepage

        Generally speaking (and ignoring FB which I've already commented on)... but generally speaking this is NOT true. The small guy actually has the advantage in this market, which makes it ironic that the small guys have mostly abandoned it.

        The big guys have been fighting amongst themselves since the crash and it has created lots of opportunities for smaller retail investors to find really excellent entry points. Simply put, the reduced liquidity in the market gives the advantage over to the smaller players whos trades don't move stocks while the bigger ones get stuck fighting each other.

        It used to be that 'dumb money'... a euphemism for the 'retail investor', gave the markets enough liquidity to allow the bigger players to enter and exit positions without excessively moving stock prices. These days with the big boys playing against each other and reduced liquidity it's more a matter of one big boy outwitting another because their trades move the underlying stocks too much. The small guys can take advantage of the much more obviously oversold conditions to buy, and overbought conditions to sell. The big guys can't.

        The problem that a lot of retail investors have is that they don't actually know how to invest... they think they are investing when they are actually just day-trading. They pile into dangerous spaces that have already built up momentum to the upside instead of buying when they were low. For example, smaller players are STILL piling into the muni/govt bond markets even as we speak despite the huge risks involved as the Fed QE2 ends. Most retail investors sell during the inevitable pullbacks in these spaces (instead of selling during the rise), or buy well after a security has risen (instead of when it was closer to the bottom and still falling). They believe the crap that is fed to them by the media, believe the hype, believe the stories written by 13 year olds or guys with fancy titles and obvious conflicts of interest, and don't bother reading the financials of the companies they invest in or even listen in on the conference calls.

        It doesn't take all that much work to actually invest properly, it just takes a bit of patience and a minimum of a medium term view (instead of a short-term reactionary view). The best investors in this market aren't the idiots who day-trade, it's the people who might do one or two small trades a week, maximum, slowly working long-term positions and collecting dividends while the big boys rattle the market back and force and provide the great entry and exit points.

        The deck just isn't stacked against us, people only believe it is.

        -Matt

  • by cratermoon (765155) on Wednesday May 23, 2012 @12:32AM (#40083851) Homepage
    I was telling a friend just yesterday I thought Facebook would be a good buy at $17/share. Thomson Reuters Starmine's price makes my recommendation look like irrational exuberance.
  • by registrations_suck (1075251) on Wednesday May 23, 2012 @12:38AM (#40083879)
    Anyone buying Facebook deserves to lose money.

    That said, a stock is like anything else. people will pay what they think it is worth. If they don't think it is worth it, they should not pay!

    I could bid $100/share for FB right now and I would find lots of people willing to sell it to me at that price. If I feel it is worth that much, I shouldn't complain later when I find out someone would have sold it to me for only $10/share.

    It's a lot like salary. If I accept an offer to work for $100K/year, I do so believing that is a fair value for what I offer, and I should feel good about it. If I later find out that my neighbor in the next cube offer, who has the same qualifications and start date that I do, managed to negotiate for $200K/year, I shouldn't complain. I'm still getting what I agreed to, and what I agreed was a fair price.

    Bottom line - lots of people are just bitching because they didn't get rich quick, for doing nothing, like they thought they would. Too bad for them.

    • by vux984 (928602)

      I shouldn't complain. I'm still getting what I agreed to, and what I agreed was a fair price.

      Why not? You were evidently wrong, and you have likely re-evaluated what you think it is worth, and now realize that you have colossally under valued yourself.

      Bottom line - lots of people are just bitching because they didn't get rich quick, for doing nothing, like they thought they would. Too bad for them.

      Well yes. There is that too.

  • by Anonymous Coward on Wednesday May 23, 2012 @12:42AM (#40083905)

    They need to take a look at the Instagram deal:
    http://www.bbc.co.uk/news/technology-17658264

    The deal was Facebook buys Instagram for mostly FB shares. The pair of them talked about the deal being worth $1 billion, and it was nuts. Buying an app with so few user for $1 billion made no sense. The real game here was that Instagram would PRETEND that it really was a $1billion deal and thus the shares were worth that much.

    It's a trick similar to a mock auction, where a third party accomplice pretends the things being sold are of high value while knowing they are low value to create an inflated perception of value. There's been a lot of these dog IPOs lately. SEC seems to be turning a blind eye to them, and letting investors get ripped off. IMHO SEC will just whitewash this one too.

  • That was the motivation, now it's coming back to bite them.
  • by Dahamma (304068) on Wednesday May 23, 2012 @12:44AM (#40083913)

    I posted this on a previous article Friday after about *5* minutes of "research". If someone investing large amounts of their own money can't do this same trivial research, they deserve what they get.

    Summary: Facebook was valued about 3-4x multiple of what Google was at its IPO with similar financials, and that *without* the literal explosion of revenue income that Google was experiencing at the time. It should have been priced closer to $15-20 (at the most!), with a *very* conservative forecast for growth (ie. expecting it to triple in a year like Google without the growth to justify it is investing in fantasyland!)

    ====

    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...

  • But it's always bad when someone gets hurt.
    • But it's always bad when someone gets hurt.

      . . . it depends on who is in the car . . .

      • by jamstar7 (694492)

        But it's always bad when someone gets hurt.

        . . . it depends on who is in the car . . .

        My ex-wife and her lawyer? Pass the popcorn!!

        • by gmhowell (26755)

          But it's always bad when someone gets hurt.

          . . . it depends on who is in the car . . .

          My ex-wife and her lawyer? Pass the popcorn!!

          /aol

  • by m.dillon (147925) on Wednesday May 23, 2012 @12:50AM (#40083939) Homepage

    Actually, MS came out with a statement indicating that the all IPO members (both retail and institutional investors) received updated guidance during the roadshow via a revision to the S1, and that the pricing of the IPO included that guidance. The analyst opinion was simply reflective of the revised guidance.

    You'd have to be pretty stupid to assume that analysts wouldn't revise their opinions based on the change in guidance.

    Well, you'd have to be pretty stupid to participate in the IPO in the first place, let alone invest in the stock. The thing was overpriced, the talking heads said it was overpriced, a simple high school math calculation would tell you it was overpriced, most people KNEW it was overpriced... and bought it anyway hoping for another 'sure bet' circa the internet frenzy leading up to the internet crash circa ~2000.

    In some respects this is a good thing, it brings a much needed dose of reality to fuzzy-brained armchair investors.

    If you want to complain about something you can complain about the NASDAQ screwing up the opening and not providing trade confirmations for 3+ hours to investors whos money was locked up and who could only watch the price start to drop without knowing whether they even owned shares, or being able to sell.

    -Matt

    • by m.dillon (147925)

      Correction, the updated guidance (that the analyst based his revised opinion on) occurred several weeks ago... so investors have even LESS of a reason to complain. This wasn't news. And, again, just because an analyst reduces their opinion based on reduced guidance doesn't change the fact that it was still just an opinion, one based on information that had already been widely disseminated weeks earlier.

      So... I don't particularly like MS and I don't particularly think they did a good job, but good luck try

  • Should the government bail out poor Facebook investors . . . ?

  • by Mannfred (2543170) <mannfred@gmail.com> on Wednesday May 23, 2012 @01:01AM (#40083985)
    To be fair, in the days and weeks ahead of the IPO I can't remember anyone thinking USD 38.0 was a reasonable price for this stock - it was obviously overvalued in relation to the company's revenues and arguably overvalued in relation to its growth potential. Everyone I know knew this, so I can't imagine people purchasing the stock at the opening price except for greedy speculators who hoped they could make a quick buck on the FB bubble before it popped. Regardless of what Jim Cramer et al will say in the coming days it's very difficult to feel bad for anyone who lost money betting on this overvalued IPO.
  • It's funny that when an IPO is priced too low, everyone first complains that it's the merchant banks doing favours for their already-wealthy customers (who naturally got the biggest IPO packages). Early investors (pre-IPO) may complain about the company failing to fully monetise. Then, when the founders take flight after selling their own shares at great profit, shareholders complain about deals done for management at the expense of the company's future.

    Conversely, when an IPO is priced too high, everyone

  • Facebroke.. (Score:5, Interesting)

    by bdwoolman (561635) on Wednesday May 23, 2012 @01:12AM (#40084031) Homepage

    My feeling is social sites are like restaurants. They have a fashion clock. Players in the F&B biz sell a popular restaurant after 18 months. They know that it will come off the boil. The in crowd will move on. They have to... in order to stay in... Myspace anyone?

    Facebook will be history in five years. It is a walled garden. Relief is just a click away... a click away. All it offers is a kind of critical mass. And the market knows it.

    And shows it.

    • Bingo. Facebook is a reasonably good service, but all it doesn't take much to launch a competitor. Sooner or later another site will become the next Facebook and Facebook will become the next MySpace. Personally I think the biggest threat comes from mobile, all it would take is for a few of the mobile providers to get together and launch a service aimed at teenagers (who are not as invested in FaceBook) and in a few years FB is the old-persons network.

      FaceBooks only saving grace is that the mobile providers

      • by tipo159 (1151047)

        Bingo. Facebook is a reasonably good service, but all it doesn't take much to launch a competitor.

        How's that working for Google Plus?

        I think that Facebook is poorly done. Most of their attempts to "improve" it make it worse (in my opinion). Knowing how iOS apps work and seeing the delays that I have seen running the Facebook iPhone app, it appears to be poorly coded. I would love to stop using Facebook, but it is the primary way that I am able to stay in touch with a lot of the people that I know. Facebook's advantage is that there are so many people on Facebook.

    • Re:Facebroke.. (Score:4, Informative)

      by DerekLyons (302214) <(fairwater) (at) (gmail.com)> on Wednesday May 23, 2012 @01:38AM (#40084179) Homepage

      My feeling is social sites are like restaurants. They have a fashion clock. Players in the F&B biz sell a popular restaurant after 18 months. They know that it will come off the boil. The in crowd will move on.

      That's true for the percentage of restaurants that require the 'in' crowd to be profitable.* That's not true of all restaurants. That's not true of *most* restaurants.
       

      Facebook will be history in five years.

      Slashdot has been saying that ever since Facebook debuted - eight years ago.
       
      *Generally because they're over tightly tied to a theme or a trend. They literally can't with the times without cannibalizing themselves. Most don't need to, and sail along for years or decades if they survive the first year or so.

  • I'm sure there was a great margin of get-rich-quick hype around this.
  • by mseeger (40923) on Wednesday May 23, 2012 @01:21AM (#40084075)

    "This week investors will be able to buy shares of Facebook stock for the first time ever. It's great â" now you can lose all your money in the same place you lost all your time." -Jimmy Fallon

    • by gweihir (88907)

      Yes, quite. And you can display the same stupidity in investing your money that you did before in spending your time. My guess is that in 4-5 years nobody will face about Facebook anymore. That is why they had to do the IPO now and sell as high as possible. Which they have done. And they are now really, really rich and the "investors" (a.k.a. "userful idiots") will have to pay for that.

      Fair FB stock value? My guess is around 1-2 USD max., but that may already be overvalued.

  • I think the FB price might have broad implications - with the value now falling and there being little on the horizon to suggest it will not keep falling this could send a strong signal that FB isn't the cool place to hang out any more. Users and advertisers could well start looking elsewhere. FB have, imho, been a bit reckless.

    • Re: (Score:3, Insightful)

      by 5um0F1 (695976)
      but the goal for Zuck was to cash in and get out. Has he done that? If so mission accomplished. we all know its always been about him....
      • by gl4ss (559668)

        nope, he just cashed in. he didn't get out. he still owns fb, literally. only now he has a lot more cash along with it and controls the 7 billion or so raised directly to fb the corp. too.

        that's the joke about the IPO! _NOT_ the earnings vs. total stock value. _NOT_ the company future.

        just the fact that all you got in the IPO was play paper someone else decides what's it worth or what you can do with it. zuck still holds majority of the company, even if you bought _all_ available shares you wouldn't contro

        • Yeah, it is like some people just willingly traded US dollars for Reichmarks in 1943 or something.
  • by Anonymous Coward on Wednesday May 23, 2012 @01:53AM (#40084271)

    How could you, in about 80 comments now, miss the great Zuckerberg quote: "Dumbfucks, they trust me!"?

  • by caywen (942955) on Wednesday May 23, 2012 @03:44AM (#40084703)

    When people bought GOOG, they thought, "this is the next Microsoft, I'd better get in now."

    When people bought FB, they thought, "this is what a bunch of other people probably think is the next GOOG. It's not, but I can't be the greatest fool."

  • a meager 10.8 per cent annual growth rate

    Somebody here doesn't understand what exponential mean.
    Fun fact : those "meager" 10.8% would multiply your money by 2 in less than 7 years, and by 28400 in 100 years.

    • by chad_r (79875)

      Fun fact : those "meager" 10.8% would multiply your money by 2 in less than 7 years, and by 28400 in 100 years.

      Funner fact: With 900 million active users at a 13.4% [simplyzesty.com] growth rate, there will be 230 trillion users in 100 years.

  • Apparently no one learned anything from the last tech bubble. A tech stock with a debatable potential for further growth has an IPO and tanks. And people are surprised? Most companies of that value have either tangible products or services with a long track record. Facebook arguably presents cool as being a product. You might as well have valued a company that makes bell bottom jeans in the mid 70s as a multibillion dollar company. It's already showing it's age and in 5 or 10 years will be where Myspace is
  • That's right, there is only one person that should be ultimately held accountable for the mess. The same person that ensured he had full control via voting rights, the same person that had to sign off on the revenue forecasts, the valuation, and the IPO process.

    And, what this person signed off on is, in a nutshell, to pay back previous investors with new investors' expense. This is traditionally called a ponzi scheme. The number pumping, book cooking is the same as Enron, Worldcom, and a plethora of Chin

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