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Facebook Shares Retreat Below IPO Price

samzenpus posted about 2 years ago | from the back-to-reality dept.

Social Networks 471

First time accepted submitter gtirloni writes "Just days after wrapping up the biggest initial public offering in Silicon Valley history, shares of Facebook slumped 6% and tumbled below their issue price on Monday, a troubling signal for the newly-public social network. Facebook broke below its $38-a-share issue IPO price in the wake of a highly-anticipated offering that raised more than $16 billion, the second-largest domestic IPO after Visa's 2008 debut. Shares of Facebook were recently off 6.44% to $35.72."

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471 comments

Troubling signal, why? (5, Insightful)

partofme (2643183) | about 2 years ago | (#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.

Re:Troubling signal, why? (5, Insightful)

SimonTheSoundMan (1012395) | about 2 years ago | (#40065591)

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

Re:Troubling signal, why? (5, Insightful)

Anonymous Coward | about 2 years ago | (#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.

Re:Troubling signal, why? (5, Funny)

Anonymous Coward | about 2 years ago | (#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.

Re:Troubling signal, why? (5, Informative)

omnichad (1198475) | about 2 years ago | (#40065941)

Because at the very least, you'll be likely to beat inflation with your investments. Money put under the mattress loses value as the value of a dollar goes down, and savings accounts don't pay much either.

Re:Troubling signal, why? (4, Interesting)

SimonTheSoundMan (1012395) | about 2 years ago | (#40065945)

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.

Re:Troubling signal, why? (-1, Flamebait)

s.petry (762400) | about 2 years ago | (#40065901)

Fox News (Though that has become an oxymoron, it is what they call themselves.) spent all morning trying to prop up the stock in the Valley/SF area. If this does not hint at how blatant the corruption is.. well, I can't even come up with an analogy to say how gullible you are.

Re:Troubling signal, why? (5, Insightful)

polar red (215081) | about 2 years ago | (#40065603)

didn't undervalue themselves

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

Re:Troubling signal, why? (3, Interesting)

BMOC (2478408) | about 2 years ago | (#40065625)

How expensive is marketing information per lead these days?

Re:Troubling signal, why? (5, Informative)

Anonymous Coward | about 2 years ago | (#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.

Re:Troubling signal, why? (4, Insightful)

polar red (215081) | about 2 years ago | (#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.

Re:Troubling signal, why? (0, Troll)

partofme (2643183) | about 2 years ago | (#40065683)

Not really, especially considering that all those users will just bring even more users and make sure Facebook stays relevant and the number one social network. While FB already has impressive number of users, there's 6 billions more people out there. I would say that $18 per user is even little bit low for the value and revenue every user brings to Facebook, ads revenue, sales revenue (from in-game coins), and the social effect of having all the users in the service. And who knows what other monetization Facebook will bring to the table once they get to it.

Re:Troubling signal, why? (3, Interesting)

Luckyo (1726890) | about 2 years ago | (#40065993)

Problem is, their numbers are already stagnanet where valuable users are - in the wealthy first world countries. They're not longer a fast growing company there.

They are growing in developing countries, but per user value there is miniscule in comparison, which also doesn't bode well for company value.

Re:Troubling signal, why? (0)

Anonymous Coward | about 2 years ago | (#40066037)

Users bringing in other users didn't work out long-term for MySpace!

>> And who knows what other monetization Facebook will bring to the table once they get to it.

LOL! Yeah, that seems a bit like Phase 2 (i.e., "?") of the underpants gnomes' business plan:

http://www.southparkstudios.com/clips/151040/the-underpants-business

>> While FB already has impressive number of users, there's 6 billions more people out there.

And there's Google+... And if Facebook drifts in a direction that alienates their users, or if a competing service is clearly more awesome, and if competitors make it easy to migrate, then it's game over for Facebook, just as it was for MySpace. Before predicting the glory of Facebook, you need to explain what happened to MySpace and why a similar thing couldn't possibly happen to Facebook.

Re:Troubling signal, why? (3, Interesting)

TheRaven64 (641858) | about 2 years ago | (#40065709)

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.

Re:Troubling signal, why? (4, Insightful)

Anonymous Coward | about 2 years ago | (#40065879)

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

Re:Troubling signal, why? (3, Insightful)

Zironic (1112127) | about 2 years ago | (#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.

Re:Troubling signal, why? (1)

s.petry (762400) | about 2 years ago | (#40065961)

While I agree with your premise that Facebook can make some revenue this way, when people start to hear about the lawsuits that quickly changes. Facebook could minimize this quite a bit by notifying customers and giving them a cut of the cash, and maybe that is already their strategy. Facebook is not a company known for it's good faith or concern for their customers.

Re:Troubling signal, why? (1)

Anonymous Coward | about 2 years ago | (#40066001)

Let's assume that the aggregate resale value of all of Facebook's data (including licensing people's songs or reselling people's photos) is indeed $18/user. The actual value, from an investor point of view, would then be much lower than that. The reason is simple: that theoretical value is not realizable. If Facebook started selling that data in a serious way, it would face an untold number of legal challenges. Bands would complain loudly if their music were being relicensed. Facebook's click-through EULA would be scrutinized, and it's unlikely that it would stand up in court. Even if it did stand up in some jurisdictions, it would stand up in all jurisdictions, which would severely limit how much money they can extract from the data. If user photos were relicensed, various privacy laws could get triggered, probably overriding whatever contract the users and Facebook have entered into. Also, if they go down the road of massive data-reselling, their reputation would tank, and they would bleed users. Since part of the company's value is expectations of future profits, which requires future users, this would further cut into the value.

My point is that even if in some sense a user's data is worth $18 (or whatever), from a monetization standpoint its value is going to be less than that. Facebook does not own the data in an clear-cut and unchallengeable way. From an investor's point-of-view, this makes that data much less valuable (once you adjust for possible legal costs, and myriad uncertainties).

Re:Troubling signal, why? (3, Informative)

omnichad (1198475) | about 2 years ago | (#40066023)

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.

Re:Troubling signal, why? (3, Insightful)

rb12345 (1170423) | about 2 years ago | (#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...

Re:Troubling signal, why? (4, Funny)

number11 (129686) | about 2 years ago | (#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.

When doing it right is wrong (2, Insightful)

Quila (201335) | about 2 years ago | (#40065639)

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.

Re:When doing it right is wrong (1)

TheEyes (1686556) | about 2 years ago | (#40066045)

It stayed within 10% because JP Morgan was paid $177 million to insure the stock. a bad bet for them; who knows how much they stand to lose now that they've had to buy so much FB stock to cover the policy? They're the big losers here, not the FB guys who dumped half their insider stock on Friday and made a killing.

Re:Troubling signal, why? (4, Interesting)

cpu6502 (1960974) | about 2 years ago | (#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?

Re:Troubling signal, why? (1)

partofme (2643183) | about 2 years ago | (#40065757)

During normal trading yes, but not on IPO. The company could had started at $76 too and the share price would had risen higher because there is limited amount of stock available, meaning you lose money because the company undervalued its shares. You want to be as close to the "real" price during IPO as possible.

Re:Troubling signal, why? (3, Interesting)

HornWumpus (783565) | about 2 years ago | (#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.

Re:Troubling signal, why? (4, Insightful)

jellomizer (103300) | about 2 years ago | (#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.

Re:Troubling signal, why? (5, Interesting)

OzPeter (195038) | about 2 years ago | (#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.

Re:Troubling signal, why? (1)

partofme (2643183) | about 2 years ago | (#40065787)

Facebook doesn't pay dividend. Those people can of course sell their stock when the price is higher. It's just been two market days.

Re:Troubling signal, why? (1)

OzPeter (195038) | about 2 years ago | (#40065837)

Facebook doesn't pay dividend. Those people can of course sell their stock when the price is higher. It's just been two market days.

And right now the price has flattened out at $33 (is $33 the new $38 fixed price?) .. so how likely do you expect the share price to rise above $38? What magical thing would FB have to do for such a rise?

Re:Troubling signal, why? (0)

Anonymous Coward | about 2 years ago | (#40066009)

Are you stupid enough to think that investing in the stock market guarantees a positive return? Or are you just arguing on their behalf?

Re:Troubling signal, why? (2)

MMC Monster (602931) | about 2 years ago | (#40065887)

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.

Re:Troubling signal, why? (1)

BrianRoach (614397) | about 2 years ago | (#40065893)

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?

Define "people".

Individual investors were chumps from the start (pretty much every analyst had said not to buy it) and allowed the financial institutions to make a nice 20% profit in a few minutes, selling their shares @ $42 - $45 when it opened.

If you're a financial institution ... it's a long term investment that you believe will pan out. They thought $38 was the correct valuation and are in it for the long haul.

Re:Troubling signal, why? (1)

DragonWriter (970822) | about 2 years ago | (#40066013)

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?

Its a zero-sum game: the more fully the company has exhausted the supply of available capital in setting its IPO price, the less room there is for people who bought in at the IPO price to make money in the short term.

What investors have to hope for is long-term growth, but if investors outside of Facebooks underwriters generally saw much potential there, the share price wouldn't have only stayed around the IPO price on the IPO day with underwriter intervention, and wouldn't be falling below that price now.

Apparently, the only people sold on Facebook being worth the price set at the IPO are the IPO underwriters.

Re:Troubling signal, why? (5, Insightful)

fuzzyfuzzyfungus (1223518) | about 2 years ago | (#40065699)

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.

Didn't underprice = overpriced = troubling (1)

Anonymous Coward | about 2 years ago | (#40065723)

Sure Goldmans etc got their money, but it means the ordinary investors get ripped off.

Mind you, more fool them. The IPO was clearly smoke and mirrors, they were to be shareholders who can't vote and the $1 billion (mostly in FB shares) for Instagram was obviously to make the shares look like they were worth that using the third party false validation trick.

So they were suckers and they got robbed. Tough.

Re:Troubling signal, why? (5, Interesting)

Jeremiah Cornelius (137) | about 2 years ago | (#40065729)

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]

Re:Troubling signal, why? (1)

jeffmeden (135043) | about 2 years ago | (#40065739)

The thing people are disappointed about is that the initial valuation was solely due to demand for the IPO itself. Institutionals got in on the IPO (they were the only ones that could) and enough of them wanted out RIGHT AWAY that the price actually went down, despite there being a huge huge HUGE new pool of potential buyers. That, frankly, is sad.

Re:Troubling signal, why? (0)

Anonymous Coward | about 2 years ago | (#40065741)

The investment bank's best clients who got preferred access to the shares at the opening bell price aren't happy. The price is supposed to go up significantly on the first day. And by extension, the bank isn't happy, and all investment banks will be more wary about future stock offerings from Facebook or any company that looks a lot like them.

Apart from the bankers, the company also wants the buzz conferred by a hot stock. That helps in any number of ways - consumers, investors, apps developers, business partners, and startups looking to be acquired all want to be associated with what's hot today, not last year.

Preferred buyers should have been pretty happy (0)

Anonymous Coward | about 2 years ago | (#40066047)

The investment bank's best clients who got preferred access to the shares at the opening bell price aren't happy. The price is supposed to go up significantly on the first day ...

The preferred buyers who got shares on the opening bell should have been pretty happy. They should have sold during those initial exuberant hours at $40-42, 5-10% profit for minutes of ownership. Few serious investor doubted that facebook would eventually go below their IPO price at some time in 2012. So get the opening price, sell on the initial exuberance, buy back months later if you really want the long term growth.

Re:Troubling signal, why? (0)

Anonymous Coward | about 2 years ago | (#40065765)

You are wrong.

It is better (with hindsight) for shareholders who SOLD at the IPO price for the price to now be lower than the price they sold at. For shareholders who didn't sell, they would be better off if the price is HIGHER today, not lower.

Re:Troubling signal, why? (1)

DragonWriter (970822) | about 2 years ago | (#40065841)

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.

Share price being relatively flat at and just after an IPO just means that, sure. The IPO underwriters having to intervene to keep the price at the IPO price on the IPO day and the price dropping significantly on day 2 means that and everything that the stock dropping during normal operations would mean.

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.

Uh, no.

If the per share price doubled at the IPO, then your potential realizable profit would have doubled, not lost half.

Its better for management if share price doesn't go up, because it means that all the money they could have raised was raised. But it doesn't somehow reduce the value of pre-IPO shareholders stock if the stock price goes up after the IPO. It increases that value.

Its definitely worse for pre-IPO shareholders if the stock price goes down after the IPO, and its as much a bad sign for the corporation as a similar decline would be any other time.

Re:Troubling signal, why? (1)

QuietLagoon (813062) | about 2 years ago | (#40065847)

it's better for shareholders ... that the price went down

For the stocks in which I am a shareholder, I do not think that it is better when the share price goes down instead of up.

Re:Troubling signal, why? (0)

Anonymous Coward | about 2 years ago | (#40065973)

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.

Troubling for facebook from the aspect that it makes them look bad, and in the stock market, perception counts for a lot. Also troubling for the underwriters in that it hurts their credibility a bit for future IPOs.

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.

Not really. If you sold your stock and it doubled, you would have lost out. If you held on and the share price doubled, then you lost very little. All that you would have lost was however much the share price would have increased had the IPO raised the company more money. I don't recall how much of the company was offered in the IPO, but I thought it was only like 10-15%. So if I'm doing my math right, I think that means your stock would only have lost 5-7.5% of the value it should have had.

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.

And yet they were still wrong by a considerable amount.

Actually 12% And Some Other Notes (5, Informative)

eldavojohn (898314) | about 2 years ago | (#40065509)

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).

Re:Actually 12% And Some Other Notes (2)

fuzzyfuzzyfungus (1223518) | about 2 years ago | (#40065801)

It's hard to imagine that an IPO would ever be a good place for Joe Civilian to stick his toes in(with the exception of the just-regular-code-monkeys who got lucky enough to score some stock options by working for the right startup and are cashing out as fast as tactfully possible)...

You are unlikely to beat the investment bank(s) and/or Venture guys who are there to handle the IPO, nor do you have a good chance of having better information than the company insiders who are either cashing out or picking up shares, and even if the company is on track to be a stable, long-term 'hold', there is likely to be some fairly volatile oscillation shortly after the IPO.

Re:Actually 12% And Some Other Notes (0)

Anonymous Coward | about 2 years ago | (#40065839)

As that article on Goldman Sachs alludes to, they usually get lots of shares of hot companies before their IPO and then dump them on the day of the IPO. Their job is basically to suck up as much money as possible, without having any faith in the company beyond its IPO performance. The article is a nice reminder that sometimes companies actually do very well after IPOs, and Goldman misses out.
 
That said, laypeople are pretty much always screwed when it comes to an IPO. Even if they make money, they're just riding the tides of stocks that would pay back very poorly -- if at all -- if they held them indefinitely. It's gambling on something designed to never pay you back.

Not surprising (5, Interesting)

Rik Sweeney (471717) | about 2 years ago | (#40065525)

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

Re:Not surprising (3, Insightful)

dkleinsc (563838) | about 2 years ago | (#40065681)

Absolutely - as far as I can tell, Facebook has now achieved everything it set out to do:
1. Make Mark Zuckerberg extremely rich.
2. Help Mark Zuckerberg find a smart and hot woman to get it on with.

Re:Not surprising (4, Funny)

jeffmeden (135043) | about 2 years ago | (#40065809)

Absolutely - as far as I can tell, Facebook has now achieved everything it set out to do:
1. Make Mark Zuckerberg extremely rich.
2. Help Mark Zuckerberg find a smart and hot woman to get it on with.

I found it HILARIOUS that his wedding was the day after the IPO. I wonder if his (then) fiancee was like "sure you are a billionaire, on PRIVATE PAPER... sweetie get me a billion in public shares and we can finally seal this deal"...

Re:Not surprising (2)

Lou3000 (2466814) | about 2 years ago | (#40065833)

Well, considering that there are an estimate 2.2 billion internet users in the world and only 800 million facebook users, I would say there is arguably room for growth, but there are troubling signs as well. It turns out that a majority of users are still concerned about facebook use and privacy, and even more worrisome is that almost half of the users consider it a "fad." If you follow the Steve Jobs mantra, users don't know what they want or need until you show it to them, but I wonder if at some point facebook begins struggling to add enough users to offset the departing ones (or the harder to quantify, inactive users). However, going public now means that facebook, despite what Zuckerberg says, is legally obligated to make decisions that benefit the shareholders. Therefore, at some point they are going to have to either keep big money advertisers like GM interested in the site or come up with a unique way to monetize the site (fb offers?).

Re:Not surprising (0)

Anonymous Coward | about 2 years ago | (#40065921)

Correction, there are 800 million facebook accounts. I know for a fact there are accounts still there that are pretty much unused. I wouldn't count those as "users" of facebook.

Re:Not surprising (0)

Anonymous Coward | about 2 years ago | (#40066025)

Correction, there are 800 million facebook accounts. I know for a fact there are accounts still there that are pretty much unused. I wouldn't count those as "users" of facebook.

You should also mention sock puppet accounts. ie. fake accounts setup to artificially inflate likes, etc. I control over 200 fb accounts that are used exclusively for artificially raising likes to get the ball rolling. I know lots of other guys who do the same thing. I would be surprised if more than 50% of the accounts are even real.

Facebook has nothing of value.. (0)

Anonymous Coward | about 2 years ago | (#40065539)

...and Wall Street knows it!

Re:Facebook has nothing of value.. (1)

Kenja (541830) | about 2 years ago | (#40065949)

Facebook has many things of value, the Facebook users. The problem is that Zuckerberg seems to have no clear plan on how to capitalize on what he has. Thus the business plan of the company is more then a little vague. What's more, since Zuckerberg kept more then 60% of the voting shares for himself, the rest of the stock holders really get no say in what the company does. This, coupled with large accounts such as GM pulling out of their Facebook marketing plans and the company is looking a little uncertain. If Zuckerberg comes up with a means of monetizing the Facebook user base beyond data mining and expands into the Asia markets, then the company will do well financially.

Means a perfectly priced IPO. (0)

ssyladin (458003) | about 2 years ago | (#40065551)

An IPO is where a company sells shares in order to raise money - ideally to fund expansion or let early investors cash in on profits. If the IPO price hasn't moved, it means that the finance nerds priced it EXACTLY where the market thinks the company is valued right now. Give those guys a bonus, as the investors didn't leave any money on the table.

Re:Means a perfectly priced IPO. (2)

BenJury (977929) | about 2 years ago | (#40065601)

I wouldn't describe -11% as not moving. Good for Facebook the company and the previous owners, bad for investors.

Re:Means a perfectly priced IPO. (1)

vlm (69642) | about 2 years ago | (#40065687)

ideally to fund expansion

That's the problem, what do they expand into?

Re:Means a perfectly priced IPO. (1)

elgeeko.com (2472782) | about 2 years ago | (#40065857)

Here's the deal, the stock price was way over priced. If they had priced it lower then the underwriters wouldn't have had to step in repeatedly to prop it up in order to maintain the $38 share price. Without the intervention of the underwriters the stock would have plummeted.

What we're seeing is the beginning of a market correction that will adjust the price to a real world value. The underwriters can only support it's value in the market for so long before they are no longer able to keep the artificial value where it's at.

At $38, Facebook's price-to-earnings ratio was more than four times Google's. Google's posting revenue and profit than were 10 times higher than Facebook. Google also had a long term strategic plan for the money they raised from their IPO. As far as I know Facebook had no public plan for the use of the funds raised during the IPO, it seemed more like a get rich plan for the people (and banks) who held stock.

Long term I'm sure Facebook will rebound in the market, but it's going to be months before the actual price of the stock has been determined by the market and we know for sure.

Bye bye Failbook (0)

Anonymous Coward | about 2 years ago | (#40065553)

I hope it becomes penny stock in the next 30 days. Facebook sucks ass and it deserves to fall flat on it's face.

pump and dump! (0)

Anonymous Coward | about 2 years ago | (#40065559)

That what it's all about! Pump and dump!

So, which is it? (4, Insightful)

A10Mechanic (1056868) | about 2 years ago | (#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?

Re:So, which is it? (1)

Jafafa Hots (580169) | about 2 years ago | (#40065623)

It has tangible assets, its PRODUCT: its users.

Re:So, which is it? (0)

Anonymous Coward | about 2 years ago | (#40065969)

I always thought that users were the consumers. Yeah, they are an asset just not sure how tangible they are.

Re:So, which is it? (1)

na1led (1030470) | about 2 years ago | (#40065881)

Facebook doesn't offer much that people absolutely need, and most of their revenue comes from advertising. Once people get sick of the spam and popups, people will flock to someplace else. I wouldn't invest my money if Facebook.

If it were trading at google's P/E (4, Insightful)

ameline (771895) | about 2 years ago | (#40065585)

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.

Re:If it were trading at google's P/E (5, Interesting)

toruonu (1696670) | about 2 years ago | (#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

Re:If it were trading at google's P/E (1)

Kupfernigk (1190345) | about 2 years ago | (#40065719)

And in fact the evidence in the days before the IPO is that even that would be excessive. Advertising worth less than on Google? Facebook phone when Google was just cleared to take over Motorola Mobility, and already is far down the development path with phones and software? Anybody buying those shares was either in a state of denial or just didn't understand the industry.

Re:If it were trading at google's P/E (1)

fuzzyfuzzyfungus (1223518) | about 2 years ago | (#40065821)

How are we going to get another bubble going with naysayers like you around? Don't you understand that 'social' is the new magic word, now that '.com' is for lame old people?

This is a good thing. (3, Interesting)

Severus Snape (2376318) | about 2 years ago | (#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.

What will Facebook ever give back? (4, Insightful)

MarkvW (1037596) | about 2 years ago | (#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!

Banks were propping up the price on Friday... (4, Informative)

Golgafrinchan (777313) | about 2 years ago | (#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.

Re:Banks were propping up the price on Friday... (1)

MightyYar (622222) | about 2 years ago | (#40065769)

It looks to me like someone is now holding it up at just below 34. I'm betting that they will give up soon if the stock doesn't go back up.

Just waiting for the best time to short (0)

Anonymous Coward | about 2 years ago | (#40065645)

I'll probably start shorting when I start up a facebook killer that actually respects privacy.

the zerohedge graph of FB vs myspace (1)

vlm (69642) | about 2 years ago | (#40065669)

zerohedge has been crawling with a graph of myspace use, showing its vaguely bell shaped rise and fall, overlaid with facebooks rise, now topping, and presumably much like myspace, falling to zero in a couple years.

What will the next bubble be in? We've done housing, doing FUD security theater, doing higher education, doing internet anti-social media... my guess is food is the next bubble? In the tech field I'm thinking the natural bubble after cloudiness is true parallelism, local or remote doesn't matter, the point is its gonna be erlang (or similar) on 100000 cores.

It says they priced the IPO PERFECTLY... (4, Informative)

nweaver (113078) | about 2 years ago | (#40065673)

If the stock moves significantly up after the IPO, this means that the company did not sell enough stock.

Instead, if the price remains flat, or even goes down, this says that the IPO was priced perfectly: all the revenue from the IPO goes to the company and/or the insiders selling the shares, rather than the IPO bank backer's insiders who got the inside track on the "hot IPO"

We should have all IPOs be like this IPO.

Re:It says they priced the IPO PERFECTLY... (0)

Anonymous Coward | about 2 years ago | (#40065867)

If the stock tanks, then it also means investors will be less likely to pay a premium for the remaining FB stock that did not float.

You can milk the cow many times, but you can only skin it once. A crashing IPO seems to me to be the latter.

Re:It says they priced the IPO PERFECTLY... (1)

avandesande (143899) | about 2 years ago | (#40065885)

The issue is ridiculously overpriced. It is going to be be less than 10$ in a few months- these are beenie babies of tech.

Re:It says they priced the IPO PERFECTLY... (1)

Sunshinerat (1114191) | about 2 years ago | (#40065931)

It is only true that it was priced perfectly if the stock remained within .5% of its closing price of Friday.
Since we have an uptick market today and FB stock going down, there is no such story as 'its been priced perfectly'.

FB has been overvalued to support the huge demand, the only problem with this is that the excess demand was for investors who want to ride the stock up in the first couple of days before dumping it with decent gains. Now that these gains are nowhere to be found and no long term investment strategy exists, the interest has melted away.

FB will have to win the investor crowd interest back soon to maintain its current price and I believe only a clear revenue strategy will do such a thing.
Until then, the stock price is at risk to drop to more acceptable P/E ratios.

It doesn't matter (0)

Anonymous Coward | about 2 years ago | (#40065697)

The current stock price is irrelevant. The hucksters got their money, which is the whole point of an IPO. This after market trading or shares is irrelevant to the company, itself. The IPO was a massive success.

Eye opener, one of: (5, Interesting)

dragisha (788) | about 2 years ago | (#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 :)

wait... you mean stock prices can DECREASE!?!??! (0)

Anonymous Coward | about 2 years ago | (#40065767)

who'd have thought... certainly not the IPO underwriters evidently.................

Dumped My Shares Today (0)

Anonymous Coward | about 2 years ago | (#40065773)

I'm glad I put a sell limit order in place over the weekend so my shares were sold before I lost any significant money. Maybe I'll consider buying some back when it bottoms out.

No surprise. (1)

JustAnotherIdiot (1980292) | about 2 years ago | (#40065849)

I've been saying since they announced it, it's going to go from $38 to $3.8 rather quickly.
Facebook doesn't produce anything, it doesn't sell anything, and there's no charge to use the service.
Why exactly would I want to invest any amount of money in it?

Re:No surprise. (1)

DragonWriter (970822) | about 2 years ago | (#40065913)

Facebook doesn't produce anything, it doesn't sell anything, and there's no charge to use the service.

That's not entirely true: it sells advertising, and it sells transaction services to application operators (by way of selling "Facebook credits".) But it doesn't sell enough of either to be worth anything near its the valuation implied by the IPO price, even if it wasn't -- by Facebook's own admission -- facing trouble with advertising due to its userbase shifting from the desktop (where there is plenty of advertising space to sell) to mobile (where they haven't figured out how to sell ads while still providing the functionality that would keep users using.)

Too soon! (0)

Anonymous Coward | about 2 years ago | (#40065899)

The Slashdot summary gives the impression that it is summarizing today's trading, but there are many hours to go!

The summary must have been written within the first 30 minutes of trading. But a mere hour or so later the stock price was down by 12% (almost double the amount mentioned in the summary: 6.44%).

Around noon (Eastern) the stock price was still around -11.98% lower than the closing price (and IPO price!) from Friday. Maybe "bargain hunters" will come in later today, keeping the stock price from falling further today. But I think the full magnitude of the initial dip is newsworthy in itself, and should be included in an update to the summary.

shareprice and "success" (1)

mbaGeek (1219224) | about 2 years ago | (#40065933)

the stock is being publically traded - so the price going down means that there are more "sellers" than "buyers" at the moment - what will be interesting is where the stock ends up in a year

remember, the underlying value of the company in question is a big factor in stock valuation, but the stock market is not a rational place, and people buy and sell for any number of reasons.

Facebook, Inc made its money on the i.p.o. (earlier posting said $16 billion) - the day to day fluctuations of the stock price don't directly impact its "bottom line"

for those who remember the dotcom bubble - the status symbol at that time was how much the stock price would rise, over the i.p.o. price ("Revolution OS" has a few examples of this near the end). I specifically remember RedHat's initial offering [cnet.com]

notice that RedHat only offered 6 million shares (today RedHat, now RHT, is slightly above that price) - I haven't checked the numbers but if the $16 billion dollar number is correct then FB must have offered over 421 million shares...

in any case I'm happy to see the Mark Zuckerberg could FINALLY afford to get married - it is so hard to support a family on a couple million dollars (estimate is that he is now the 29th richest human being on the face of the earth)

awww shit darun ravi just got 30 days in jail (-1)

Anonymous Coward | about 2 years ago | (#40066011)

i could do that standing on my head

cash out before facebook turns into myspace (0)

Anonymous Coward | about 2 years ago | (#40066017)

and News Corp buys it because it's "the next big thing"....

Ask me in 5 years time (1)

Alain Williams (2972) | about 2 years ago | (#40066029)

if facebook has been a good investment. All sorts of sounding off by ''experts'' on the basis of some volatility in the first few days of trading is nothing but hot air. Only the future can tell, I am not arrogant enough to pretend that I know & I can't remember where I put my crystal ball.

Who cares? (1)

goodmanj (234846) | about 2 years ago | (#40066031)

Who cares? Zuckerberg and the big investment banks who launched the IPO have gotten paid. Only people who stand to lose now are the little guys who don't matter.

Do the analysts even understand what a website is? (3, Informative)

shoppa (464619) | about 2 years ago | (#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.

So what? (0)

Anonymous Coward | about 2 years ago | (#40066061)

Zuckerburg and his cronies have minted it - which is all that counts.

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