Facebook Could Spawn Thousands of Milionaires 434
Hugh Pickens writes "Retuers reports that the world's No. 1 online social network is preparing for a blockbuster initial public offering that could create thousands of millionaires as Facebook employees past and present begin hatching plans on how to spend their anticipated new wealth. 'There's been discussions of sort of bucket list ideas that people are putting together of things they always wanted to do and now we'll be able to do it,' says one former employee who expects his shares to be worth $50 million and is planning to book a trip to space with Virgin Galactic that would cost $200,000 or more. 'It's been a childhood dream.' Another group of Facebook workers has begun laying the groundwork for its own jungle expedition to excavate a relatively untouched site of Mayan ruins in Mexico that sounds like Raiders of the Lost Ark. But for many of Facebook's staffers, the IPO will provide the means to pay off school loans and buy a house or new car and many homeowners and real-estate agents are eagerly anticipating a surge of new buyers that could push prime real estate to new heights. 'If a Facebook guy buys a house and wants to remodel it, maybe the contractor will buy another car,' says Buff Giurlani. 'Maybe the realtor will put a car in. There's a trickle-down effect.'"
Yeah right. (Score:5, Insightful)
This is exactly what everyone needs, a bunch of people believing they are going to be rich soon.
Re:Yeah right. (Score:5, Insightful)
No bubble here. (Score:5, Informative)
Noo. Up up and away. Yes the company is worth 100 billion, more. Just step right up and get your share certificates, hot from the press.
Nooo bubbles here. Social 1.0 isn't a fad or a bubble at all. Bet your grandchildren on it.
P. T. Barnum would be proud.
Note: Facebook is valued at a P/E of ~125. 12 is about average.
Re:No bubble here. (Score:5, Informative)
Note: Facebook is valued at a P/E of ~125. 12 is about average.
That's the average for an established company. IPOs and other companies with strong growth potentials often have much higher P/E ratios. For example, Google's P/E was well over 100 when they went public, and now it is down to 21 as they are a much more mature company. That said, distinguishing between companies with strong growth potential and irrational exuberance is extremely difficult. I think Facebook falls in the latter camp, although certainly not with enough confidence to put my money where my mouth is.
Re:No bubble here. (Score:5, Informative)
That's the average for an established company. IPOs and other companies with strong growth potentials often have much higher P/E ratios.
The problem with that statement is it assumes all IPOs are "new" companies. Facebook is (in my book) mature. They've reached saturation, they've driven their main competitors out of the market, and they have an established revenue stream (which isn't particularly impressive).
Re:No bubble here. (Score:5, Insightful)
Precisely why investors should steer clear...
Re:No bubble here. (Score:5, Funny)
What are you talking about saturation? They're still growing like crazy. In the past four years their userbase has grown from 20M to 800M users. At that rate, over the next four years they will grow to 32 Billion users! The profit potential in that is something the world has never seen! In fact, with those users in hand, their revenue might match Apple's 2010 numbers -- but why mention has-beens such as Apple and Google, when clearly Facebook is the stock set to move after its 2012 IPO!
Re: (Score:3)
Remember MySpace? The same kind of reasoning was used on it.
Re:No bubble here. (Score:5, Insightful)
You make the mistake of thinking users are their customers. They don't need to grow their userbase to grow their customerbase. Customerbase is what is relevant here.
Re: (Score:3)
Re:No bubble here. (Score:5, Insightful)
The users of FB are the _product_ and not customers. The customers are the advertisers.
Now I think it is unlikely that the number of users is going to increase significantly. Certainly not by say 100%.
So is the amount of advertising revenue going to increase by 100% - I doubt it.
I suggest you apply the term toxic to this beast - you will lose, its well over valued.
Re: (Score:3)
Customers are their product. They're not going to get much more product. That's even worse than not being able to find new customers.
Re:No bubble here. (Score:5, Insightful)
Re: (Score:3)
No kidding. I know more and more people who are leaving facebook because ... well, it gets boring.
It's just clearly not what people want in the long term.
Re:Yeah right. (Score:5, Insightful)
Nonsense. This article only serves as a warning for everyone to prepare 'new' prices for when it actually does IPO. Read the article...these people speak of trickle-down economics, but they're really salivating at the prospect of luring an idiot into their store with waaaay too much money and apparently very little common sense. Long-lost relatives and forgotten friends will come running with their hats in their hands, doing what they can to get some of that money.
A fool and his money, soon parted. And you've got the cream of the crop of thieves reporting in here...let's see...real-estate agents...car salesmen....home contractors....all we're missing are some dead-end charities and a handful of political operatives, and that money will be gone.
Fun on two levels: 1.) there's only one IPO, not a dozen of them in quick succession (don't expect the good times to last) 2.) I still question what Facebook's worth will be in 3 years.
Re:Yeah right. (Score:5, Funny)
Sarcasm is truly lost on anything related to stock market, or US economy in general.
Re:Yeah right. (Score:5, Insightful)
I still question what Facebook's worth will be in 3 years.
For anyone thinking Facebook will necessarily still be significant in three years, I have one word to say:
MySpace
Sure, maybe Facebook will remain a massive success and control most of the social-media market. Then again, maybe it won't be anything more than an old, burnt-out, irrelevant website inhabited mainly by bands that haven't been successful in years (if ever) and teenagers.
Re:Yeah right. (Score:5, Insightful)
It's a pump and dump. Although out in the open, in the press, with reputable banks doing it, so people are misled.
Re:Yeah right. (Score:5, Insightful)
1. Read the terms of the document giving you the shares to see when they vest;
2. Figure out where you'll get the money to buy the shares so you can sell them (sometimes you can do a cashless exchange but you have to know
a. who will arrange this for you, and
b. how much money it's going to cost you to have someone make the exchange
3. Realize that there are insider lock out periods after the IPO and before and after every quarterly report (any employee with options is an insider)
4. Profit? ?
Trickle down? (Score:5, Insightful)
As opposed to the spending that would have been done had the money not been looted from the workers to begin with. If we're serious about getting out of the recession, perhaps we ought to do something radical like beef up worker protections and protections for small businesses.
As for FB, my bet is still that it goes the way of MySpace before too long.
Re:Trickle down? (Score:5, Funny)
As for FB, my bet is still that it goes the way of MySpace before too long.
Especially when the staff is off playing Raiders of the Lost Ark in the Yucatan.
Re: (Score:3, Funny)
What money? (Score:5, Informative)
There are ways to make money apart from someone else handing you a paycheck.
Re:What money? (Score:5, Insightful)
Wall Street investors don't make money, they take it. You think those dollars are just appearing out of nowhere? If you "make" a million bucks off an IPO, it's because you sold your shares to a sucker who paid more than they're worth. Or maybe your a fund manager, and you just take a few percent off every American's retirement fund every year, as payment for your "skill" at investment (even though you're all but certain to underperform the index in the long run).
Buying and holding a stock for dividends or growth are legit. Venture capital and angel investments are legit. But this IPO pump-n-dump crap is a scam. It's theft. Ditto mutual fund fees and high frequency trading. The robber barons at Wall Street are just siphoning off tiny bits of everyone else's savings every day. It's nice and slow, so you won't notice, but in aggregate it's enough money for them to live like gods.
Re: (Score:3)
"People have been shown to have a higher emotional reaction to a negative event than to a similarly positive event (-50K vs +50K)."
Perhaps, but that doesn't mean that it's an irrational emotional reaction: investments are supposed to go up, not down. That's what they're for.
Re: (Score:3)
Nice rant. You have to catch the wave. (Score:3)
Sure there are good fund managers. The question is how does one find them among the dross? Some are lucky, some are lucky for a decade only to be completely blindsided when the environment changes.
We're at a turning point just now. The next big investment vehicle is not going to be the same as the last couple of decades but a lot of fund managers will just run on with inertia, over the cliff.
Re:What money? (Score:5, Insightful)
and so ipo has become the endgame for investors to get out rather than to get _investment_ money into the company.
realistically they don't seem to need an ipo, in the sense that there's nothing they could buy with that 100 billion that would further their business and they don't need the money to keep in operation.
Re: (Score:3)
Reread my post. I said nothing of the kind. Where exactly do you think those funds to buy IPO shares come from? And moreover who do you think it is that typically snaps up most of those shares?
As far as the workers at FB go, I'd be shocked if when all is said and done if the shares actually represent a fair appraisal of their work and the risk they took working for an outfit that could have gone belly up before they saw any money from an IPO.
I didn't get any money from the Fed (Score:5, Interesting)
Of course, I remain unconvinced FB can sufficiently monetize all those users to make the IPO a good deal for the average innvestor. But the point of the OP was that the workers were somehow being stolen from when they are already holding FB stock and will be enriched come IPO day. Just makes no sense.
Re:I didn't get any money from the Fed (Score:5, Interesting)
I'm an individual retail investor, and I've done quite well in the market, thanks. In fact, it's lifted my middle class family well into the "one percent" (net worth).
If you are indeed an individual retail investor, you most certainly had to use margin loans to buy stocks -- otherwise you would never be able to afford them. And while from your personal point of view Fed did not give you "free money", as your collateral stocks were tied up, from the market's point of view there was a situation when someone had a cake (stocks are still on the market, part of company's market cap) and ate it, too (you bought more stocks without selling other ones).
If you later sold some stock and paid back the loan, you still ended up with the difference (because stock price grew, dividends were paid, and dollar was devalued), so overall effect was money being injected into economy without any additional product being produced (neither company with "old" nor "new" stock, did anything different as a result of those manipulations). This dilutes the currency (for everyone) while enriching someone (you, your brokerage and your brokerage's bank). In a typical tragedy of the commons fashion, the benefits gained individually are far less than harm taken collectively.
Re:I didn't get any money from the Fed (Score:5, Informative)
Or he saved up money. I'm a small investor, and it's extremely rare for me to have any margin loans. Most of the time I'm 12-25% cash, so I can buy on dips. How did I get the money? I saved, spending only a fraction of what I make every year. Even if I was borrowing on margin it wouldn't be safe to borrow more than an additional 10-15%, otherwise I'd risk losing everything on a margin call.
There's plenty of criticisms to make on the stock market (it's basically legalized gambling, especially when investing for price increases rather than dividends), but this one is completely invalid.
Re: (Score:3)
Or he saved up money. I'm a small investor, and it's extremely rare for me to have any margin loans. Most of the time I'm 12-25% cash, so I can buy on dips. How did I get the money? I saved, spending only a fraction of what I make every year. Even if I was borrowing on margin it wouldn't be safe to borrow more than an additional 10-15%, otherwise I'd risk losing everything on a margin call.
Then you didn't benefit from your (somewhat) direct participation in stock market at all. Unless you derive enjoyment from the process of trading, you would be better off stuffing your money into an index fund and never touching them again. Not that it would fundamentally change the nature of what those money would be doing, as funds employ same tactics, but it would be much less trouble and no brokerage fees personally for you, and same outcome for everyone else.
Re:I didn't get any money from the Fed (Score:5, Interesting)
No, I benefit by out performing the market significantly. This year I'm up 8.5% (market is roughly flat, going by the S&P 500). Last year I did 48%, the market did 13%. I've outperformed by more than 5% for the past 5 years (when I took control over my own stocks), although outperforming in 2008 was done by just getting my money the hell out.
Margin has uses, but if you're borrowing at all times, you're a fucking idiot. All good strategies have cash reserves so you can buy on dips and do cost averaging or react to new opportunities. Borrowing at all times prevents that. Margin should only be used short term when you're committing that cash reserves. And even then you should do so carefully and not max out your borrowing. My personal rule is that I need to be able to absorb a 50% loss without hitting the margin call threshold, I won't borrow more than that. And I think I've had any margin for only about 1 week this year on a short term arbitrage play.
Re:I didn't get any money from the Fed (Score:5, Insightful)
Bullshit. The additional product was what the company sold, which increased its profits, which increased its valuation.
What additional product? Companies whose stock he had bought, or used as a collateral didn't get a single cent from it. The only way anything ended up doing any additional production is if someone else who sold him stocks through some chain of trades ended up buying actually new investment somewhere else. But those money, as I have explained before, are ones injected into the system with a loan. A direct loan to the company that got "real" investment out of this would be far more efficient, so the rest of money just dissipated between investors, brokerages and banks.
Re:I didn't get any money from the Fed (Score:4, Informative)
There's no way that you, on a middle class income, accumulated the $15 million necessary to break into the top 1% of net worth.
You mean somewhere around $9 million [joshuakennon.com]. And IMHO someone who's been investing most (not merely 10-20%) of their middle class income for many decades can indeed hit that.
Re:I don't think that word means what you think (Score:4, Informative)
GP wrote:
In fact, it's lifted my middle class family well into the "one percent" (net worth).
So it's not about income, it's about total assets available. In 2010, you needed roughly 9 million dollars to be in 1%.
Even from income perspective, your take is wrong. Just because median household income is $67k, doesn't mean that anyone above it is not middle class. $150k per person (which can translate to $300k per household) is rare but possible for a salaried employee, and is still middle class.
Re: (Score:3)
"This causes inflation, and unless everyone else's salary is immediately changed to compensate, money indeed end up being stolen from everyone in the long term."
Precisely. That time factor is why government and banks are not nearly as bothered by inflation as everyone else: when they get and spend the money, it is at current market value. It isn't until later, when it is in the hands of others, that inflation devalues it.
I think that is one of the primary reasons why government and banks have been clinging so tightly to Keynesian economics, even though Keynesian policy has time and again (for many decades now) been proven to damage the economy.
Re:What money? (Score:5, Interesting)
In fact, some of the failures of followers of Keynes' theories (or principles Keynes later adopted) have been rather spectacular: the claim by Irving that the economy was doing wonderfully, the very day before the crash of '29, their utter failure to predict what the economy was like immediately after WWII (they were 180 degrees wrong), their claims that what we now call "stagflation" was impossible (until it actually happened in the 70s), its failure to predict any problems at all around the 2001 recession or the 2008 crash (both times saying "Come on in! The market's fine!")
I mean, it's almost laughable. It's time we got rid of government officials who insist on following provably failed economic policies, and get somebody in there with some actual sense.
Re:What money? (Score:4, Funny)
Somebody confuses an IPO with quantitative easing is well grounded in economics?
Re:Trickle down? (Score:5, Interesting)
"As for FB, my bet is still that it goes the way of MySpace before too long."
I'm hoping for something more mature, but the internet has this way of recycling ideas...
"There was a kind of ghostly teenage DNA at work in the Sprawl,
something that carried the coded precepts of various short-lived
sub cults and replicated them at odd intervals."
Re:Trickle down? (Score:5, Informative)
Re:Trickle down? (Score:4, Insightful)
Re: (Score:3)
Of course, the "millions in stock" won't be worth much after everyone quits.
Re: (Score:3)
I'd be lying if I suggested that it was something other than wishful thinking. I would have thought that it would have already collapsed given the blatant disrespect that FB has for the users.
Re: (Score:3)
Facebook is not worthless but it's overpriced. (Look and their price/earning ratio.)
Re:Trickle down? (Score:5, Insightful)
Love him or hate him, Zuckerberg is the closest thing to a Steve Jobs or Bill Gates or Larry Ellison right now
What a load of BULLSHIT. DoucheBagBerg is the cause of the biggest invasion of privacy and shallowness of society to-date. In no way has he, or facebook, contributed any technology or any forward progress in the computer industry whatsoever.
Thousands of millionares? (Score:5, Funny)
No, that is not how it works (Score:5, Insightful)
Instead, IF this were to even happen, and I thought trickle down economics died when Reagan's body finally followed his brain, then what would REALLY happen is that the 1% become 0.9%.
Average income, ever heard of it? Well, average income is the total of all income divivded by the number of people with an income. The more people have a high income, the more people need to make a low income to compensate.
If you got 10 people and they average an income of 1000 then the total is 10.000. But if one of them makes 10.000, then the average is still a 1000 as long as the others make zero.
Now, do a fun lookup. Research the average wage in the US and look up how much say a Bill Gates make. Then realize how many people are begging on the street so Bill Gate can be so rich.
That is how the whole 1% vs 99% works. And more people becoming millionaires doesn't do anything but make far more people poor.
Before someone says "not fixed pie" (Score:3)
That is how the whole 1% vs 99% works. And more people becoming millionaires doesn't do anything but make far more people poor.
When opportunity is largely taken away by virtue of things like offshoring and the general contempt of regular, nonbusiness-owning people through things like contracted labor, you are correct.
The damage is done through their influence, not their wealth though. Any perceived expansion of the pie is negated by the influence that converts a dynamic pie into a near-fixed pie.
Re: (Score:3, Insightful)
Nobody is begging on the street so Bill Gates can be so rich. It's not zero-sum.
Re: (Score:3)
Instead, IF this were to even happen, and I thought trickle down economics died when Reagan's body finally followed his brain, then what would REALLY happen is that the 1% become 0.9%.
Average income, ever heard of it? Well, average income is the total of all income divivded by the number of people with an income. The more people have a high income, the more people need to make a low income to compensate.
If you got 10 people and they average an income of 1000 then the total is 10.000. But if one of them makes 10.000, then the average is still a 1000 as long as the others make zero.
Now, do a fun lookup. Research the average wage in the US and look up how much say a Bill Gates make. Then realize how many people are begging on the street so Bill Gate can be so rich.
That is how the whole 1% vs 99% works. And more people becoming millionaires doesn't do anything but make far more people poor.
Without resorting to what are basically number games, explain to me precisely how Bill Gates being rich automatically makes someone else poor. Do you believe that there is this fixed pool of wealth and that the only way for me to have more is for you to have less?
To answer your unstated rhetorical question concerning how many people are begging on the street so Bill Gates can be rich: The answer is zero. Not a single person is begging on the streets so a rich person can be rich.
Re: (Score:3)
Do you believe that there is this fixed pool of wealth and that the only way for me to have more is for you to have less?
In theory that doesn't have to be true. In practice, the easiest way to get wealthy is to skim off money that would otherwise have gone to other people, whether it's through skimming people's pension schemes through excessive fees on their 401(k)'s or running pump-and-dump-style IPOs or even just getting a monopoly and charging every business in the country through the nose for your product like Microsoft did. (In fact, I think economically speaking it may well be the only way to become individually wealthy
Re: (Score:3)
I ran across this while metamoderating, someone modded you "offtopic. I don't see it.
But I do see a glaring mistake on your argument -- the average [wikipedia.org] income is much higher than the median [wikipedia.org] income.
Re:No, that is not how it works (Score:5, Insightful)
Average income does not rise for a very, very long time -- there is slow and somewhat uneven inflation, but same job's salary buys same things, so it's just inflation, and therefore US economy is a zero-sum game.
It also can be seen by the importance of advertising in modern US economy -- when products are already known to the consumers, spending on advertising is the closest thing a company can do to biting a chunk out of a competitor.
Re:No, that is not how it works (Score:5, Informative)
The hypocracy being, the protesters sitting in the public parks, parks paid for with taxpayer money
Zuccotti Park is privately owned. That's why it was chosen, it wasn't subject to NYC's public park curfew laws.
Re:No, that is not how it works (Score:5, Insightful)
It's hypocritical that you know what the problem is but you're bitching about the people that are actually raising awareness of the problem.
Bull (Score:5, Informative)
That's not a "trickle-down effect", it's just economics. If *I* buy house and want to remodel it, then I might get someone to do it, who will - shock, horror - be paid for it and they might then spend that money on something. That's how our economy works.
The idea that because these people will have lots of (potential) money in the form of Facebook shares means that they're going to spark some kind of economic boom is ludicrous; sure, some of them might go on spending sprees, others will probably invest it, others will keep all their shares in the hope the prices will go higher, but on average it won't make any significant difference to the economy as a whole.
Re:Bull (Score:5, Insightful)
Re:Bull (Score:5, Insightful)
yes, I'm a victim of the requirement to have somewhere to live when I retire. I had this requirement as a juvenile, and I still have it now as an adult.
Re:Bull (Score:5, Insightful)
No, you're a victim of wanting to own a house in a horendously expensive area.
There are plenty of depressed areas. Detroit is the one people hear about the most, but there are LOTS of others. Because there are few or no jobs available in the area (after a plant closing, or whatnot) homes are very nearly given away. I think everyone can muster $1,000 for a place to live, and a little bit more for maintenance. No slavery needed. If you're already set for retirement, the problem of no jobs is a non-issue, and the savings is huge.
That's not the only choice, either. Here in CA, moving to Arizona or Colorado after retirement is pretty common.
And if you insist on living in an expensive area, you still have options. Moving out a bit further from the city centers always helps. Living high-density, ala condos or long-term apartment rental might end up cheaper. There's even the option of mobile homes.
So, you're not a slave of needing a place to live. You're a slave of your desire to live in a certain style and location.
Re: (Score:3)
Your solution is to buy a home (which is probably in desperate need of replair) in the slums where there are no jobs? That doesn't even make any sense. o.O
I live in a modest home, under 100k in 1999, and I make six figure salary. My neighborhood wasn't "horendously expensive" but my taxes are, they are currently higher then my mortage payment. At the height of the housing bubble there was a money grab by the local government, they had everyone's home reassessed and bumped up the taxes considerably. Now
Re:Bull (Score:5, Funny)
here in europe, what you call "liberals", we call "normal people".
Re: (Score:3)
The idea that because these people will have lots of (potential) money in the form of Facebook shares means that they're going to spark some kind of economic boom is ludicrous
Yes. I think a better idea is to ask where all this "new" money is coming from. Ultimately, it comes from average people, most of whom have no idea that their money is being used to buy Facebook stock. But the contractor whose bank is buying Facebook stock is not going to benefit at all from rich people playing in the rainforest or joyriding into space.
This is the reality of our economy, all of the wealth at the top comes from the bottom, but not all of the wealth at the top trickles down to the bottom.
Not on Credit. (Score:4, Informative)
Almost no stocks are bought on credit. And IPO's can't.
It's been a while since I have been in that particular corner of the industry, so my figures might be a little out of date. But in late 1999 / early 2000 margin loans were less then 5 percent of retail accounts, and less then that for institutional accounts.
Now, what you are saying makes a lot of sense if we were talking about pre-1930 gold standard no federal reserve economy tied to the farming seasons. Then you might have a leg to stand on.
The smart ones... (Score:5, Insightful)
Re:The smart ones... (Score:5, Insightful)
Typically employees can't sell their shares until at least six months post-IPO. Which, yes, can put you in a very bad position if you start spending "your" money right after the IPO in anticipation of the future wealth, and then the stock tanks and you're now in debt.
Re:The smart ones... (Score:5, Interesting)
can put you in a very bad position if you start spending "your" money right after the IPO in anticipation of the future wealth, and then the stock tanks and you're now in debt.
That is an excellent point. We don't know how financially knowledgeable most of the employees who will receive stocks are. They may well be taking advice from fools and end up believing themselves filthy rich before they ever see any actual money from their stock.
Even worse would be if employees invest in it for their retirement accounts. Back when I worked at CompUSA (back when it was American-owned and publicly traded), I knew someone who invested heavily in company stock for his retirement. Thankfully I was not that person, although I was tempted. The company folded before he reached retirement, as I recall - I just don't know if he got anything back from the buyout.
Re: (Score:3)
There were quite a few people in the 1999-2000 tech boom who exercised their stock options and kept (rather than immediately sold) their shares, expecting they would go even higher. The problem is, the exercise is treated as a taxable gain. So if the stock later tanks, you have a big tax bill and no money to pay it.
How much is Facebook really worth? (Score:5, Interesting)
Typically employees can't sell their shares until at least six months post-IPO.
The SEC required a 2-year wait until the early 1990s. Which is partly why IPOs that ran way up after the IPO and then crashed [wikipedia.org] were so popular during the original dot-com boom.
How much is Facebook really worth, anyway? Let's look at the numbers. Facebook revenue for 2010 was $1.86 billion. [pcmag.com] Goldman Sachs, which makes a private market in Facebook stock, sent a report to their investors indicating Facebook earned $355 million in the first 9 months of 2010. [reuters.com] That would be $473 million for the year, for a 25% profit margin. Of course, those are unaudited numbers. When the SEC filings take place for an IPO, they may decrease as accounting gimmicks are disclosed and discounted.
The next question is, do we value Facebook as a growth company or an ongoing company? Let's look at Facebook's traffic stats. [alexa.com] Traffic went up steadily until mid-2011, when it peaked. (Before Google+ started, incidentally.) It's been down a bit since then. So Facebook may have maxed out and started on its decline, like every other social network from AOL to Myspace did. There probably isn't a lot of growth left. Is there anyone not on Facebook who wants in?
OK, what's a company with $473 million in annual revenue worth? Google's price/earnings ratio is 21.39. Microsoft, 9.34. IBM, 12.69. Netflix 16.11. AOL 26.43. Yahoo 19.51. IAC (Ask's parent) 18.27. So we can say that the market is at best valuing mature Internet companies around 20x earnings.
That gives Facebook a valuation around $9 billion.
Even that may be optimistic. That assumes Facebook's user base doesn't shrink. Remember when Myspace was on top? This is Myspace on the way down. [alexa.com] To earn that $9 billion valuation, Facebook has to maintain its current size and profitability for 20 years. Does anybody think that will happen?
(How many people here remember when one of the founders of Slashdot was asking on here what to do with his money when VA Linux, the parent of Slashdot, went public in 1999? They had the biggest first-day runup after an IPO ever. The stock hit $239 on the first day, and then went into a screaming dive. Six months later it was around $40. Not as rich as he thought. By 2002, it had dropped to $0.54. The stock is still trading as GKNT, formerly LNUX. Here's the chart. [yahoo.com])
Re: (Score:3)
Hah, I remember that, but it was Eric Raymond, not a Slashdot founder: "Surprised by Wealth" [slashdot.org]
Re:The smart ones... (Score:5, Insightful)
Social networking itself is not the bubble. Facebook might die out, but it needs a real competitor first. Saying social netsorking will die out is like saying word processing applications will die out. Sure, they may turn into digital scribes with us just speaking what we want to write or something, but the basic function they provide is something that lots of people find useful, and will continue to find useful. Even Slashdot itself is a kind of social network, all web forums are. People like to share news and ideas.
Re:The smart ones... (Score:4, Insightful)
Social networking itself is not the bubble
I beg to differ.
Facebook might die out, but it needs a real competitor first
Not necessarily. Products have previously risen and fallen in terms of hype and excitement without being replaced.
Saying social netsorking will die out is like saying word processing applications will die out
Word processors are important business tools. Facebook is not.
I think a better comparison for facebook is the segway human transporter. Remember how much hype went to "IT" before we knew what "IT" was? Then we found it cost $5,000 and almost nobody was interested any more. It didn't need to be replaced by anything, because we realized it wasn't that important to begin with and it wasn't much better than options we already had.
Similarly, facebook isn't really that important, and not any better than options we already had.
Even Slashdot itself is a kind of social network
And slashdot is, undoubtedly, dying. It just didn't reach the large number of readers/victims that facebook had, so nobody really paid that much attention to it's demise.
People like to share news and ideas.
Which, strangely enough, we were able to do before facebook, and we can still do without facebook.
A month? (Score:5, Insightful)
Really ? I think you have maybe a couple of hours.
Note, there will almost certainly be a hold clause on the stock for normal employees. The ordinary employees will have to hold the shares for a specfic minimum period. This allows the management to dump their shares at the peak price, before the bulk of the supply of shares kicks in.
Groupon dropped from 26 to 16 inside a week. They're still making a loss but there's some muppet out there buying them.
Re:The smart ones... (Score:5, Interesting)
Wouldn't all of them selling their stock make the price plummet?
Possibly. That depends on how much of the original stocks are distributed to the employees versus how much is sold to raise money, and how much is sold in the IPO. The total percent owned by employees could potentially be a small portion of the total volume.
If, for some reason, the employees actually held most of the total sock volume, then yes if they sold it off immediately that would be bad for the price.
Though frankly I'd be astonished if it was worth anything at all by 2016.
Re: (Score:3)
More important question is, wouldn't the fact that Facebook is not all that valuable make the price plummet?
Re:The smart ones... (Score:5, Interesting)
Trickle down doesnt mean you deify the wealthy. (Score:5, Insightful)
That doesnt mean you treat the people on top like deities while treating regular US citizens with contempt.
Trickle down (Score:4, Interesting)
The only real 'trickle down' is in production, not in consumption. People who invest their savings into businesses create opportunity for new products, new services, new jobs and new investments for others. That's the only real trickle down and what is called 'trickle down' in modern society is no such thing. 'Trickle down' based on spending is very limited, very narrow and is sporadic (so somebody spends a few hundred thousand dollars today, he is not going to spend the same amount tomorrow).
Besides, any spending that takes place disperses the investment capital and makes it less likely to be used as an investment. The real trickle down is working very well, but it's working in China, not in US or Europe. It's working where people invest and produce.
As a side note any taxes also destroy investment capital and prevent economy from growing for the same reason - this stuff is not used for meaningful production, only to subsidize consumption one way or another.
--
PS. I said it on 16th of September that holding deposits in banks has become dangerous, because banks will just steal the deposits. [slashdot.org]
On October 25, 2011 MF Global reported a $191.6 million quarterly loss as a result of trading on European government bonds. [wikipedia.org] On October 31, 2011 MF Global filed for Chapter 11 bankruptcy. Depositors lost money, not 'investors' or traders - depositors. The bankers are now stealing deposits as I said they would, so stay clear of banks.
Re:Trickle down (Score:4, Insightful)
Before the Fed (which was instigated by the business community who wanted the regulation), the economy was extremely volatile and risky (which business hated). We didn't have recessions and expansions - we had booms and busts where people were filthy rich one month and then begging for food the next.
Once government starts 'regulating business', it means it's there to steal power and sell it and the business that is closest to the trough (the Fed) becomes the government. Since it becomes a part of government that is not beholden to the voters, it can steal without any impunity.
That's overstating it a bit. Before the Fed you still had very powerful people controlling the economy - see any Bio of JP Morgan.The Fed was also created to remove power from people like that.
I like Ron Paul. He brings up some very interesting points and I agree the Fed system needs to be tweeked. But when I read what Ron Paul and the things you have written, there's an obvious lack of knowledge of pre-Fed economic history.
If you haven't read this yet, read Lords of Finance [amazon.com]. It's about the Post WWI World Economic collapse and has a wonderful explanation of why we can't be on the gold standard, btw.
I would honestly like to see your take on it. - you're a sharp person who just needs to take a break from the Ron Paul Kool-Aid.
Re:Trickle down (Score:4, Informative)
The reality is that before all of the regulations and the Fed existence and before FDIC the banks never failed institutionally, as in - they never had a government giving them free money and preventing any potential competition
No, they went bust individually and people who happened to have accounts with those banks suddenly found that they were broke. Loans owed to the bank would be transferred to whoever bought them from the bankruptcy, but people in credit at the bank would have their savings wiped out. Customers had no way of evaluating how safe banks were, because the banks were not required (by evil regulations) to disclose how much capital they had nor what form it took.
Re: (Score:3, Interesting)
Banks competed and some went bust. That's a good thing - prevents a bad bank from continuing bad practices. You don't like banks going bust? Well, your government doesn't like it either, that's why it has destroyed your productivity and will destroy your currency - to keep appearance of a working bank system.
What is funny is that it seems you are arguing for regulated banking, saying that without regulations the banks fail, yet you admit that banks used to fail individually, but not institutionally. But tod
Re: (Score:3)
Re:Trickle down (Score:5, Insightful)
(1) People want to earn money.
(2) People are based their predictions of the future on past experience. This means if a stock went up in the past, they expect it to do well in the future. While not everyone falls prey to this all the time, it happens often enough in a market to cause the population, in general, to make very bad decisions, and drive the economy into bubbles.
not the US Fed obviously, but the same idea exactly - people threw everything into tulip growing and flooded the market
No that's not "the same idea exactly" because it happens without government intervention, it happened in the free market, and THAT'S EXACTLY MY POINT.
Re:Trickle down (Score:4, Insightful)
I have to disagree with this idea. If other people lose money it affects everyone. We are very interconnected. People who argue for free markets also agree with this idea of people being interconnected. If a bunch of people in an economy waste a bunch of money, then they have less wealth to spend and invest. This makes it difficult for other people trying to sell stuff. If I'm running a business in Detroit or Flint Michigan and suddenly the auto industry leaves, then people have less money and that makes my living as a business-owner much harder. My living as a business-owner depends on what money other people have.
To put this argument in a more modern context: if a bunch of people get over their heads in their mortgage and then default, it causes problems for the economy. That situation can happen whether or not the government provides "easy money". It's easy to imagine real-estate bubbles happening in any economy where home prices are rising quickly, causing people to buy-up expensive homes because they think they can resell them in 5 years for 50% more money - therefore, you should by the most expensive home you can since a larger loan equals a larger return when you sell it again. In that situation, a feeding-frenzy happens and it does not depend on whether the US government is loaning money at 0% interest or 4% interest - in both cases, the value of the real estate is outpacing any 4% interest rate that the US government is offering.
So, I'd take your original statement, "Yes, bubbles form and they burst, but
Re: (Score:3)
in Belgium the Flemish (regional) government currently has to pay a lot of money every year to companies and people whose cars were damaged due to badly maintained roads
- just another stupid thing that government does. Clearly this is stupid and wasteful, for gov't to pay for private transport, to fix private cars/trucks. That's really dumb. You should really get rid of that stupid government (like all other nations of-course).
Also I wonder how many more 'damaged' trucks and cars appeared all of a sudden when the program started.
It's not a program. It's court orders. And the root cause of this is that they prefer a balanced budget over fixing the roads, because for now paying those judgements is cheaper than fixing the roads. They are basically "saving" until they can afford to fix the roads without incurring debt.
I bet there are many times more 'damaged' cars now, I am sure there is all sorts of corruption going on too.
Just imagine what kind of a stupid subsidy to mechanics and dealerships and parts manufacturers this is - everybody now will just bring in their truck and car to replace any wear and tear with government subsidized parts.
I wonder how many mechanics just take the money and split it with the truck/car owners, where in fact there is no damage.
Do you see how stupid and wrong it is for government to put money into this? Same thing with everything it puts money into. It creates false demand where none existed and where private sector wasn't providing this extra demand, clearly there was no need for it.
I mainly see that you have a very rich imagination.
What you seem to miss is that the evil big bad government is simply one of the ways to do that
- it's the worst way of doing it, because it has nothing to do with real demand.
Of course it has to do with real demand. In a region like Flanders you'd in fact be hard pressed to build roads when there is no demand, because we simply don't have the
"Trickle-down" is more like a "torrent down" (Score:3)
Virtually all of that money will go into the general economy. The only part that won't will be a relatively tiny portion that will be invested in precious metals, typically less than a percent. All the rest will:
* be invested in other companies, either directly through stocks or indirectly through the banking system
* be spent on consumer goods and services
* be spent on real estate and the upkeep of real estate
* be donated to charity
* be paid to the public sector as taxes
* be invested in the public sector as bonds
The notion that wealth "trickles" down is total bullshit. It's like a flat-earth theory of economics.
The Good. The Crazy. The Disgusting (Score:5, Interesting)
The good. the IPO will provide the means to pay off school loans and buy a house or new car.
It is good to get out of debt and solidify yourself.
The Crazy. one former employee who expects his shares to be worth $50 million and is planning to book a trip to space with Virgin Galactic that would cost $200,000 or more
It is crazy to become wealthy then chance it all on being shot into space.
The Disgusting. real-estate agents are eagerly anticipating a surge of new buyers that could push prime real estate to new heights
Agents that can't wait to pump up the prices on homes in anticipation for a very small number of potential clients.
Re: (Score:3)
So, he's saying that once you're rich, you shouldn't take any risks anymore, but for poor people, it's OK to die in risky pursuits because, heck, they don't have anything to lose anyway? That is even worse than what I thought he said. Glad you cleared it up!
Re: (Score:3)
It's easy to understand, but it remains a stupid and arrogant thing to say.
Trickle down economics. (Score:5, Informative)
The reason why people are suspicious of trickle down economics is that when you're being trickled upon, the only thing you see above you is cunts and assholes.
Re:Trickle down economics. (Score:5, Funny)
The reason why people are suspicious of trickle down economics is that when you're being trickled upon, the only thing you see above you is cunts and assholes.
Not dicks?
Effect on the Economy (Score:4, Insightful)
Could someone explain to me how this has a net positive effect on the economy when the reason that the facebook employee made money was because he sold some of his shares to an investor, meaning the investor moved money *into* the stock (which suggests that the investor moved money out of the economy* and into the stock)? Now I suppose the investor has a finite amount of investment money, so he probably shifted money out of other stocks (rather than the economy*) which suggests that other stocks would take a small hit in stock price (since there's a relatively less demand for them), which affects other investors. It just sounds like the whole process would result in a net neutral effect on the economy - i.e. a Facebook employee might buy a new car which helps the economy, but another investor somewhere bought that facebook stock which takes the same amount of money out of the economy (at a different geographical location).
* By "the economy" I mean spending it on consumption.
Comment removed (Score:4, Interesting)
Re:Effect on the Economy (Score:4, Insightful)
This is why it is not an immediate zero sum game. If the company continues to grow revenues, and investors continue to anticipate growth, the value/wealth will continue to increase. When investors sour, the company stumbles, the revenues dry up, etc, which could be 1 year or 100 years later, the previously generated wealth evaporates.
One would argue - if the wealth eventually "evaporates", was it ever really there, or were people trading stocks just pretending it to be?
Frankly, it's why I don't really understand the stock market as it is. The original concept - buying stocks meaning investing into the company, and getting dividends normally proportional to how well it does later - makes perfect sense. You give someone money to fund their profitable activity, they earn more money, and they share some of it back with you at a pre-arranged rate. Everyone profits. I can see how this is good for economy, as well.
But buying stocks that don't pay anything, on the premise that you can find another sucker to sell them to for a bigger price later? No matter how I slice it, it looks like a pyramid scheme to me.
Re: (Score:3)
Yes, I understand that shares are called shares because they are quite literally a "share of the company". But that's the thing - when I buy a screwdriver, I normally don't buy it just to sell it to someone else later. I buy it to do some productive work with it. Its value, to me, is in the ability to do that work. Even if I run a tool shop, and I buy and resell screwdrivers for profit, the person who buys them from me will use it to do something useful.
It is similar with dividend stocks. I buy it, and it m
From someone that lives in the Silicon Valley (Score:4, Informative)
The trickle down effect here will be that housing prices will continue to go up, making it much harder for those that are not part of IPOs to get into a home (either first time).
Housing in the Silicon Valley is already brutal. A "starter home" which is 3 bedroom, 2.5bath and about 1600sq ft is already at $500,000. And that is in a neighborhood that doesn't have "desirable schools." Oh yeah and you're 10ft from all of your neighbors. We're not talking acreage here.
What if you want to have "desirable schools"? Then that exact same house would cost about $1million.
I've always told people when they consider living in the silicon valley, move here right out of college. That way, since you're used to being poor, it'll be an easy transition. Try selling your 3000sq, $300k home in RTP North Carolina and moving out here with a family of 5.
Yay! Facebook millionaires! (Score:3)
What? What? Was it something I said?
Re: (Score:3, Informative)
So maybe the 1% will become the 1.1%?
0.1% of US population is 300,000 people. Even if those were "only" millionaries (that are actually about 5% of US population), that would require 300 billion dollars, or almost the whole Apple market cap (Google wouldn't suffice).
Re:Score one for the engineers (Score:5, Informative)
Yet, hearing about these Facebook wanks getting rich feels like a hollow victory.
Don't worry, the banks and lawyers that are negotiating the IPO deal are getting far, far richer and up front, too. Feel cynical again?