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SEC Calls For Review of Facebook IPO

Soulskill posted about 2 years ago | from the somebody's-in-trouble dept.

Businesses 267

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

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267 comments

first cum (-1)

Anonymous Coward | about 2 years ago | (#40083775)

got to the dumb fuck zucks wife before he did XD

WWWBD? (1)

Anonymous Coward | about 2 years ago | (#40083783)

What would Warren Buffet do?

Re:WWWBD? (0)

Anonymous Coward | about 2 years ago | (#40083859)

His secretary? She pays more taxes than him. Oh wait no she does not, Warren paid more in taxes this year than she will make in her life...percentages are misleading.

Re:WWWBD? (4, Informative)

Anonymous Coward | about 2 years ago | (#40084009)

I don't see what's misleading about, "she pays a higher percentage of her income as tax, even though she makes a tiny fraction of what he does".

Certainly he wasn't confused when he said it.

Re:WWWBD? (0)

Anonymous Coward | about 2 years ago | (#40084369)

We know he certainly wasn't confused about how she has to pay taxes on her income as wages, whereas he doesn't have to, but could.

Re:WWWBD? (0)

Rainbowdash (2645097) | about 2 years ago | (#40084453)

I'm quite sure she works 9-5 while he works all around the clock it's not all roses and rainbows... well there is always rainbows x.

Re:WWWBD? (1, Interesting)

Anonymous Coward | about 2 years ago | (#40084467)

1) The tax you pay is not your money, it's the government's. No-one's taking anything from you - it wasn't yours to keep in the first place. The fact that you have to fill in a tax return to make sure the money goes to the right person is barely more than an administrative matter;

2) A rich person has by definition benefitted more from society than a poor one, so should be taxed more for it. If you want to pay tax as if you've earned a tenth of what you do, then don't expect the law to protect the remaining 90% of your earnings.

Private poperty is not a natural construct but a fiction created to balance the need to manage resources against our primitive desire to dominate - it is justified only as long as it works for society.

When Zuckie himself is selling shares (2, Interesting)

Anonymous Coward | about 2 years ago | (#40083789)

Re:When Zuckie himself is selling shares (3, Informative)

mirix (1649853) | about 2 years ago | (#40083877)

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

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

Re:When Zuckie himself is selling shares (4, Interesting)

Animats (122034) | about 2 years ago | (#40083925)

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

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

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

Re:When Zuckie himself is selling shares (1)

Anonymous Coward | about 2 years ago | (#40083981)

I agree. Social may be popular activity on the web but that does not mean that it will necessarily be great platform for the ads. Take email as an example, I think it is a popular activity but I wouldn't say that is making a lot of money for all of the companies offering the service for free for so many years (i.e. Yahoo, Hotmail, gmail) In more grand scheme of things, I think Google got incredibly lucky that the adword model fits so nicely with the search engine. I have hard time believing that facebook will get equally lucky which is what all the initial valuation trying to argue that it is going to be the next google based soley on the non-paying user numbers.

Re:When Zuckie himself is selling shares (1)

rhook (943951) | about 2 years ago | (#40084045)

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

Re:When Zuckie himself is selling shares (2, Informative)

Anonymous Coward | about 2 years ago | (#40084245)

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

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

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

Re:When Zuckie himself is selling shares (5, Insightful)

cjcela (1539859) | about 2 years ago | (#40084143)

Of course he did. That was the whole point of this IPO: they wanted to cash out before it burst. The money to be made out of it was already made by the original owners, at expense of the investors. There was not a single reason to believe FB was priced fairly and not overvalued, and no clear indication on how FB could make enough money in the future to justify a 100B valuation. After the market experiences in the last 15 years, I cannot believe how many bought into the hype of this.

Re:When Zuckie himself is selling shares (4, Interesting)

dadioflex (854298) | about 2 years ago | (#40084437)

Arguably the money will be made at the expense of the brokers like Morgan Stanley who stepped in to prop up the share at launch and bought up billions of dollars worth.

The mistake they made was over-estimating demand and releasing too many shares. A smaller float could well have become a feeding frenzy - not that I think it's worth thirty bucks a share, or whatever it sinks to today either.

Re:When Zuckie himself is selling shares (1, Troll)

gmhowell (26755) | about 2 years ago | (#40084251)

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

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

FUBAR (4, Informative)

geoffrobinson (109879) | about 2 years ago | (#40083791)

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

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

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

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

Super tired of these two banks. (5, Insightful)

Anonymous Coward | about 2 years ago | (#40083805)

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

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

Re:Super tired of these two banks. (5, Insightful)

Anonymous Coward | about 2 years ago | (#40083871)

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

Re:Super tired of these two banks. (0)

Anonymous Coward | about 2 years ago | (#40084043)

By that logic every company that makes loss is worth negative money.

Re:Super tired of these two banks. (1)

MaskedSlacker (911878) | about 2 years ago | (#40084137)

Were it not for limited liability laws, companies making long term losses would be worth negative money.

Re:Super tired of these two banks. (0)

Anonymous Coward | about 2 years ago | (#40084421)

Nah. They would shut down before things go bad or find other ways to limit their liability. Probably a combination of both.

Re:Super tired of these two banks. (5, Funny)

rgbrenner (317308) | about 2 years ago | (#40084281)

I agree.. Facebook is easily worth 100B. They have nearly 5B in assets. So that's only 20x

For comparison,
Nvidia has 6B in assets, and is worth 7.5B
AMD has 3.5B in assets, and is worth 4.3B
Amazon has 20B in assets, and is worth 97B
Intel has 70B in assets, and is worth 130B

But those companies aren't as cool as Facebook. I mean Facebook is at least 20x cooler than AMD. AMD just makes useless processors.. Facebook lets me send critical status updates to friends. How can you even compare the two?

Re:Super tired of these two banks. (0)

Anonymous Coward | about 2 years ago | (#40084417)

How can you even compare the two?

 
I can understand why he's making those statements, he bought Facebook Shares.

Re:Super tired of these two banks. (0)

Anonymous Coward | about 2 years ago | (#40084443)

Hell no. Ridiculous P/E means it's a risk investment and fecespoop simply cannot grow enough to make up for that risk. However, I do own shares of a company that has yet to make its first dime of profit.

Re:Super tired of these two banks. (0)

Anonymous Coward | about 2 years ago | (#40084253)

To be fair, that attitude could be applied to anyone who invests in the stock market with their own money. It's all just a stupid game that very rich people become more rich from.

Re:Super tired of these two banks. (5, Funny)

Anonymous Coward | about 2 years ago | (#40083875)

That's why you should vote for Mitt Romney. If only we had less banking regulation, then the Wall Street bankers would finally get a fair shake.

Re:Super tired of these two banks. (0)

Anonymous Coward | about 2 years ago | (#40084063)

Or... you know, we over reacted and shoved a huge amount of incredibly complex and overbearing regulations on all banking procedures. Maybe without them banks would start making loans for housing again. And then the housing glut would slough off, and construction jobs and related fields would pick back up. The creation of such jobs would fuel demand in the economy, reducing unemployment and causing average wages to rise and... oh, I'm sorry was I ruining your joke with actual economics? I'll try not to be as well informed from now on.

Re:Super tired of these two banks. (0)

Anonymous Coward | about 2 years ago | (#40084145)

Don't kid yourself, you aren't talking actual economics. Housing has never been a major economic force except during the housing bubble. If no houses were built in the next 20 years the effect to the economy would be trivial.

As far as regulating these banks, fuck yeah. They just took the world economy on a whirlspin. The net economic losses in production during this recession will be near $10 trillion for the world. That is $10 trillion that isn't taxed, that doesn't pay workers or investments, or anything else. It simply doesn't exist because the world economy almost shut down. Fuck the banks. Not only did they start this whirlspin of economic destruction, they then needed to be bailed out by taxpayers. There is no reason whatsoever not to regulate the crap out of them. If it decreases the productivity of the economy, well that is a consequence worth taking compared to another Great Recession.

Re:FUBAR (4, Insightful)

Liambp (1565081) | about 2 years ago | (#40084445)

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

What did they expect? (1)

Anonymous Coward | about 2 years ago | (#40083795)

The IPO occured the same week that the markets posted their worse performance so far in 2012.

could this be the end? (3, Interesting)

Anonymous Coward | about 2 years ago | (#40083813)

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

Re:could this be the end? (1)

registrations_suck (1075251) | about 2 years ago | (#40083857)

We can only hope.

Re:could this be the end? (3, Interesting)

Anonymous Coward | about 2 years ago | (#40083901)

It won't happen. Facebook is too important as an information gathering tool for the CIA and other government agencies. If it looked like it was about to fail some venture capital angels would swoop in and save it. Of course the VCAs would be the government agencies that are skimming the information from Facebook that they'd need to pay much more for if they had to hire actual information gathering resources.

Re:could this be the end? (1)

registrations_suck (1075251) | about 2 years ago | (#40084071)

Like, OMG! I can't believe you went there! CIA!! That's da bomb! Interested in how wasted I got last night? Gnarley dude!

Re:could this be the end? (3, Funny)

MaskedSlacker (911878) | about 2 years ago | (#40084151)

That's da bomb!

An unfortunate choice of words you may regret having chosen when the black vans park in your driveway.

Re:could this be the end? (4, Interesting)

micheas (231635) | about 2 years ago | (#40084121)

Probably, but that price is probably about 0.002.

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

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

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

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

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

Re:could this be the end? (1)

gmuslera (3436) | about 2 years ago | (#40084343)

Don't think so. But won't be surprised if get saved by some donation of a "neutral" party, with no connection with the things that caused those actions to fail, that will enable to keep running the company, after a few changes on policies. Facebook's user base is an asset that should not be lost, just need to be driven in the right direction.

shootyourcuminmyfacebook is not for winners. (-1)

Anonymous Coward | about 2 years ago | (#40083817)

It never was.

Nobody truly worthwhile wants anything to do with it.

Hard to value (1, Interesting)

countach (534280) | about 2 years ago | (#40083825)

As I recall there was a ton of skepticism around the Google IPO. The stock plummeted for a while. Then if you bought it you would have made money hand over fist. Or even if you'd held it from IPO you would have made a ton of money. These internet firms are incredibly hard to value. Facebook may be on its way to zero, or it maybe going to the moon. Nobody knows yet.

Re:Hard to value (5, Informative)

dAzED1 (33635) | about 2 years ago | (#40083893)

you recall incorrectly [yahoo.com]. It had a pre-IPO sale price of 84, which then went to 100 the day of IPO, and was a very clean and steady climb from there.

Re:Hard to value (2)

micheas (231635) | about 2 years ago | (#40084181)

It opened at 100 went to 113 over a few days, then fell back to 99 and then went on a run. So the miss remembering of the grandparent is that GOOG fell below the opening price, but it never fell to the IPO price.

Clearly GOOG was under priced. as Google would have raised 20% more had it been priced correctly, but due to wanting to get people to buy the IPO's the bankers really try to convince management that it is OK to under price the offering for all the good press it will generate.

Was the 16% discount worth it to Google? Nobody will know, but clearly it survived the discount just fine.

Re:Hard to value (0)

Anonymous Coward | about 2 years ago | (#40084147)

Why are you lying?

Or if you're not lying. Why are you posting before checking your own facts with a simple search on finance.google.com or finance.yahoo.com ?

Re:Hard to value (1)

X.25 (255792) | about 2 years ago | (#40084215)

As I recall there was a ton of skepticism around the Google IPO. The stock plummeted for a while. Then if you bought it you would have made money hand over fist. Or even if you'd held it from IPO you would have made a ton of money. These internet firms are incredibly hard to value. Facebook may be on its way to zero, or it maybe going to the moon. Nobody knows yet.

Uhm, no. There was no skepticism, there was uncertainty about the value, not whether there was a value.

If Google would disappear tomorrow, it would have horrific/tremendous effect on both businesses and individuals.

I don't think the same can be said for Facebook. I'd be tempted to say that "noone would notice", but that's not entirely true. All the narcissists and lazy people would notice.

The value of investments can go down as well as up (2)

grahammm (9083) | about 2 years ago | (#40083835)

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

Re:The value of investments can go down as well as (4, Interesting)

whoever57 (658626) | about 2 years ago | (#40083987)

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

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

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

Re:The value of investments can go down as well as (5, Interesting)

m.dillon (147925) | about 2 years ago | (#40084111)

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

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

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

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

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

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

-Matt

where's the bottom? (4, Funny)

cratermoon (765155) | about 2 years ago | (#40083851)

I was telling a friend just yesterday I thought Facebook would be a good buy at $17/share. Thomson Reuters Starmine's price makes my recommendation look like irrational exuberance.

HAHAHAHAHA, suckers!! (5, Insightful)

registrations_suck (1075251) | about 2 years ago | (#40083879)

Anyone buying Facebook deserves to lose money.

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

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

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

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

Re:HAHAHAHAHA, suckers!! (0)

Anonymous Coward | about 2 years ago | (#40083915)

Is it too late to turn in my Facebook shares for Bitcoins?

inevitable outcome (1)

slashmydots (2189826) | about 2 years ago | (#40083883)

It's sort of irrelevant when you consider that every user hates Facebook, ever who will ever join has, and there's nowhere to go but down. Everyone who was stupid enough to invest in them is going to lose their ass regardless of the opening price. Oh, and it seems everyone knew Facebook wasn't going to magically double, re-double, then re-double their profits in coming years, which is what experts say they'd need to do to maintain that kind of a stock price. So to say they revised their profit projections in semi-secret is pretty pointless too.

P.S. mega lols at the irony of their complete privacy and lack of openness, which Mark Zuckerberg is obsessed with.

Uh-Oh! (1, Insightful)

BlueStrat (756137) | about 2 years ago | (#40083895)

*Somebody* was a naughty little corporation, and didn't pay enough in "campaign contributions", lobbying , and political favors, hmm?

Let their example send a warning to you others out there that think you can just go around doing business without us getting our "vig", like it was a free country and open & fair marketplace or something!

Strat

Re:Uh-Oh! (1)

outsider007 (115534) | about 2 years ago | (#40083957)

I doubt it. It feels like a pump and dump but there's no way to prove it.

Re:Uh-Oh! (0)

BlueStrat (756137) | about 2 years ago | (#40083991)

It feels like a pump and dump but there's no way to prove it.

It feels much more like "The Chicago Way (tm)". Daly-machine politics and tactics at their best (worst?).

Strat

Re:Uh-Oh! (5, Informative)

TubeSteak (669689) | about 2 years ago | (#40084233)

*Somebody* was a naughty little corporation, and didn't pay enough in "campaign contributions", lobbying , and political favors, hmm?

Let their example send a warning to you others out there that think you can just go around doing business without us getting our "vig", like it was a free country and open & fair marketplace or something!

What the hell are you talking about?
Facebook's IPO was a clusterfuck from one end to the other.

The insiders got greedy and bumped the # of shares offered by 50%.
The main underwriter, Morgan Stanley, quietly issued negative recommendations for Facebook and allegedly told their biggest clients first.
NASDAQ (allegedly) knew their system was broken before Friday, but went ahead with the IPO.
NASDAQ caused prices to plummet again on Monday, with their "oops we fucked up" paperwork having a noon deadline.
The unsophisticated stock buyers (mom & pop) saw the colossal mess and stayed the hell away.

So many things went wrong that it was inevitable the SEC would get involved.

Re:Uh-Oh! (0)

Anonymous Coward | about 2 years ago | (#40084307)

The Administration would never play such a game with Facebook. They are dependent on Facebook. They fear "technical problems" occurring with the President's account when he tries to communicate with the minions next November. :-)

Facebook buys Instagram (4, Insightful)

Anonymous Coward | about 2 years ago | (#40083905)

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

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

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

Re:Facebook buys Instagram (1)

thoughtsatthemoment (1687848) | about 2 years ago | (#40083961)

The IRS reaped huge tax. That's why.

Re:Facebook buys Instagram (0)

Anonymous Coward | about 2 years ago | (#40083995)

There are no taxes on transactions like that, what the fuck are you talking about?

Re:Facebook buys Instagram (1)

jamstar7 (694492) | about 2 years ago | (#40084083)

Capital gains tax when you dump the shares at the end of the 'pump & dump' cycle. That's all this is, just like those spams you see sometimes touting a random 'penny stock'. Yeah, there's movement up, as new suckers jump on the bandwagon til it just about peaks, then the brokerage house's robobroker's algorithm kicks in and takes the suckers for a ride. Rinse and repeat.

HOW was this a surprise? (5, Informative)

Dahamma (304068) | about 2 years ago | (#40083913)

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

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

====

Google had $3.2B in revenue in 2004, and their IPO made them worth about $24B. Their net income the quarter preceding the IPO was $80M, and diluted EPS was $0.30.
Facebook had $3.7B in revenue in 2011, and their IPO made them worth over $100B. Net income last quarter was $137M, and EPS was $0.09.

Revenue and income are clearly in the same ballpark, but valuation and EPS sure aren't. Seems to me FB is in fact way overvalued right now...

And even more interesting to note is Google's revenue and income took off like a hockey stick in the quarters following their IPO (and thus so did the stock). I just don't see Facebook's revenue doing the same. There may soon be a lot of disappointed investors who naively assumed FB stock would be going the same route as GOOG just because it's a "trendy company" rather than actually looking at the financials...

Re:HOW was this a surprise? (4, Insightful)

thoughtsatthemoment (1687848) | about 2 years ago | (#40083997)

To make things worse, FB has to do the same things google has been doing for years in order to grow like google. Though far from perfect, gmail, gdoc, mobile are great. It is really hard to see how FB can out-do that. When google went IPO, its future seemed ahead. This time it seems FB just jumped the shark.

Re:HOW was this a surprise? (0)

Anonymous Coward | about 2 years ago | (#40084439)

What people are missing is that Google actually had a plan for monetizing their valuation, Facebook has stated nothing more than "trust us we have some pretty amazing things in the works"
 
Facebook is purely trading on their HYPE, and unfortunately it's proven to be a bad gamble for many investors.
 
Not for Facebook insiders though, they made good.
 
I would not be surprised to see evidence presented that FB'ers *knew perfectly well* the stock was MASSIVELY overvalued but decided to make a play which is functionally to "take the money while you can" knowing that the way the laws work they're not *actually* doing anything illegal.

Everyone loves watching a car crashes (1)

jaminJay (1198469) | about 2 years ago | (#40083919)

But it's always bad when someone gets hurt.

Re:Everyone loves watching a car crashes (1)

PolygamousRanchKid (1290638) | about 2 years ago | (#40083933)

But it's always bad when someone gets hurt.

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

Re:Everyone loves watching a car crashes (1)

jamstar7 (694492) | about 2 years ago | (#40084103)

But it's always bad when someone gets hurt.

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

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

Re:Everyone loves watching a car crashes (1)

gmhowell (26755) | about 2 years ago | (#40084315)

But it's always bad when someone gets hurt.

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

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

/aol

Re:Everyone loves watching a car crashes (1)

Anonymous Coward | about 2 years ago | (#40084059)

Zuckerman testifiying in front of the house banking committee will be fun.

Re:Everyone loves watching a car crashes (2)

gmhowell (26755) | about 2 years ago | (#40084319)

Zuckerman testifiying in front of the house banking committee will be fun.

Wonder if he'll wear a suit, or 'keep it real' in his hoodie and sneaks?

Press headlines can be misleading (3, Insightful)

m.dillon (147925) | about 2 years ago | (#40083939)

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

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

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

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

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

-Matt

Re:Press headlines can be misleading (1)

m.dillon (147925) | about 2 years ago | (#40084033)

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

So... I don't particularly like MS and I don't particularly think they did a good job, but good luck trying to blame them for this mess. People have only themselves to blame if they bought into this IPO.

-Matt

Let me guess (1)

Voogru (2503382) | about 2 years ago | (#40083959)

Clearly we need even more regulations!

Re:Let me guess (0)

Anonymous Coward | about 2 years ago | (#40084007)

Only if someone used my FDIC insured savings to place a bet on FB.

Re:Let me guess (0)

Anonymous Coward | about 2 years ago | (#40084017)

Indeed. This is Bush's fault; he deregulated everything and now the banksters are ripping off old ladies with facebook IPOs.

We Was Robbed!

Lawyers are sharpening their pencils (1)

Anonymous Coward | about 2 years ago | (#40083965)

And ordering their new cars/planes/yachts

at the prospect of some really juicy class actions and direct lawsuits.

Pop. Pop. Pop.

That is the sound of their pre-case party champagne going off.

Whatever happens, the small investor will lose and lose big time here.

Re:Lawyers are sharpening their pencils (0)

Anonymous Coward | about 2 years ago | (#40084003)

Whatever happens, the small investor will lose and lose big time here.

Isn't there a saying about fools and money?
sorry, I'm being distracted by the sound of millions of teensy-weensy violins....

Get-rich-quick greed backfired (4, Insightful)

Mannfred (2543170) | about 2 years ago | (#40083985)

To be fair, in the days and weeks ahead of the IPO I can't remember anyone thinking USD 38.0 was a reasonable price for this stock - it was obviously overvalued in relation to the company's revenues and arguably overvalued in relation to its growth potential. Everyone I know knew this, so I can't imagine people purchasing the stock at the opening price except for greedy speculators who hoped they could make a quick buck on the FB bubble before it popped. Regardless of what Jim Cramer et al will say in the coming days it's very difficult to feel bad for anyone who lost money betting on this overvalued IPO.

Fair pricing? (1)

0-9a-f (445046) | about 2 years ago | (#40084023)

It's funny that when an IPO is priced too low, everyone first complains that it's the merchant banks doing favours for their already-wealthy customers (who naturally got the biggest IPO packages). Early investors (pre-IPO) may complain about the company failing to fully monetise. Then, when the founders take flight after selling their own shares at great profit, shareholders complain about deals done for management at the expense of the company's future.

Conversely, when an IPO is priced too high, everyone criticises the merchant banks, who have obviously lined their own pockets with a percentage of funds raised, although most of the money actually goes to the company that was looking for funds in the first place. This should be in the company's (and thus the shareholders') long-term interests - but who cares about that in these days of 2-4 year executive tenure with share options?!

Of course there should be accuracy in pricing an IPO, but who has ever fairly valued some of the crazy-assed business models of internet businesses over the last 20 years, and social media more recently..? For the life of the commercial Internet it's been 10% maths and 90% hype, and likely to remain so.

Re:Fair pricing? (0)

hkmwbz (531650) | about 2 years ago | (#40084069)

So what you are saying is that whatever happens, the big banks win?

Re:Fair pricing? (2)

0-9a-f (445046) | about 2 years ago | (#40084353)

Naturally the big banks win, that's the nature of underwriting a low risk, fabulously popular IPO - it's easy money. The problem is they they either get accused of failing (new) shareholders if the IPO price is too high and drops, or accused of favouring their own high-value clients if the IPO price is too low and rises. In the public's eyes, it's all the underwriters' fault.

Nobody likes the big banks and their tactics, but given the cash grab that is an IPO (and especially looking at the last-minute changes in FB's valuation), you have to remember that FB are playing their investors as much as the banks, only FB ended up with most of the cash.

Facebroke.. (4, Interesting)

bdwoolman (561635) | about 2 years ago | (#40084031)

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

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

And shows it.

Re:Facebroke.. (1)

AndrewStephens (815287) | about 2 years ago | (#40084089)

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

FaceBooks only saving grace is that the mobile providers all hate each other and couldn't provide an appealing service if their lives depended on it (which, somehow it doesn't - I've never worked that out).

Re:Facebroke.. (2)

tipo159 (1151047) | about 2 years ago | (#40084391)

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

How's that working for Google Plus?

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

Re:Facebroke.. (3, Informative)

DerekLyons (302214) | about 2 years ago | (#40084179)

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

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

Facebook will be history in five years.

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

Good news everyone (5, Funny)

mseeger (40923) | about 2 years ago | (#40084075)

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

Re:Good news everyone (2)

gweihir (88907) | about 2 years ago | (#40084129)

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

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

Broader implications (1)

symes (835608) | about 2 years ago | (#40084109)

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

Re:Broader implications (3, Insightful)

5um0F1 (695976) | about 2 years ago | (#40084135)

but the goal for Zuck was to cash in and get out. Has he done that? If so mission accomplished. we all know its always been about him....

Re:Broader implications (1)

gl4ss (559668) | about 2 years ago | (#40084309)

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

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

just the fact that all you got in the IPO was play paper someone else decides what's it worth or what you can do with it. zuck still holds majority of the company, even if you bought _all_ available shares you wouldn't control shit, so it's just random betting paper(with no dividends ). nothing the sec can do about that either.

Dumbfuck Investors? (4, Insightful)

Anonymous Coward | about 2 years ago | (#40084271)

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

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