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Mark Zuckerberg's Big Facebook Mistake

Soulskill posted more than 2 years ago | from the whatever-the-latest-UI-change-is dept.

Businesses 418

Hugh Pickens writes "Nathan Vardi writes in Forbes that in the last two months, Mark Zuckerberg has had a rude introduction to the capital markets. With Facebook's stock in free-fall, down more than 40% from its IPO price, Zuckerberg has a big problem. 'Zuckerberg did not want to deal with the pressures of being a public company. Like many entrepreneurs these days he viewed the capital markets with suspicion,' writes Vardi. 'So Zuckerberg made a fateful decision, he decided to keep Facebook a privately-held company for much longer than other success stories like Google or Amazon.' But waiting eight years to conduct an IPO has turned out to be an impossible problem to manage. The bankers at Morgan Stanley applied all the lessons of the last 15 years and priced the IPO at $38, which was very aggressive, in an attempt to avoid leaving any money on the table and the embarrassment that a huge IPO pop would represent. With such a big valuation at IPO time, Facebook had to show some results. But the numbers that Facebook announced in its first quarterly earnings report were underwhelming and the trading hordes drove Facebook's stock down by 15% in Friday morning trading. Now the early institutional investors are heading for the exits and it's hard to imagine morale at Facebook won't take a hit that correlates with the loss in value of the shares belonging to the employees. 'The lesson of the Facebook fiasco for Silicon Valley is clear. Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.'"

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Reality bites (4, Interesting)

garyebickford (222422) | more than 2 years ago | (#40794317)

Now the suits will start flying, and filing suits.

Did I get FP? Golly.

Re:Reality bites (5, Funny)

Anonymous Coward | more than 2 years ago | (#40794349)

Couldn't have happened to a nicer guy.

Re:Reality bites (4, Insightful)

jhoegl (638955) | more than 2 years ago | (#40794377)

It was obvious that the shares would be priced too high. They have been working on hyping Facebook for over a year, and the frenzy by idiots only added to the starting price.
I think Zuckerberg was right to stay out of a public offering, and he should have.
There are too many "yes" men and shills in the public offering arena, patting you on the back while drawing a blade.
Stock markets... pppfftttt, more like legalized gambling.

Re:Reality bites (2, Interesting)

Anonymous Coward | more than 2 years ago | (#40794805)

Stock markets... pppfftttt, more like legalized gambling.

Hey now, let's not forget insurance - legalized and occasionally MANDATORY gambling. Against yourself.

Re:Reality bites (4, Insightful)

datavirtue (1104259) | more than 2 years ago | (#40794987)

They priced it too high. If it was offered at $25 a share (probably the true value) it would have popped to around $50 and drifted down to $40. This is what happen when you price something wrong on the market. It gets thrown off balance and the pricing pressure results in pain.

Re:Reality bites (4, Informative)

JoeMerchant (803320) | more than 2 years ago | (#40794409)

There are always lawsuits in any big IPO.

I fail to see how any of this is a problem for MZ, or even out of character for him... he effectively (intentionally or not) suckered the market for much more money up front than Facebook is turning out to be worth. If FB were "priced right" at IPO, it might "perform better" but I don't see how that has any positive benefits for the pre-IPO shareholders.

TLDR: Not a problem for Zuckerberg, just a problem for anyone who bought FB shares.

Re:Reality bites (2)

mbadolato (105588) | more than 2 years ago | (#40794465)

Really? A TL:DR summary for 3 sentences? That's what we've come to?

Re:Reality bites (3, Funny)

Anne_Nonymous (313852) | more than 2 years ago | (#40794547)

TL;DR

Re:Reality bites (2)

leonardluen (211265) | more than 2 years ago | (#40794755)

DR

Re:Reality bites (2)

JoeMerchant (803320) | more than 2 years ago | (#40794593)

If you want to reach 95%+ of the /. reading audience, yes. Those three sentences had several three+ syllable words.

Re:Reality bites (-1, Offtopic)

thisisfutile (2640809) | more than 2 years ago | (#40794825)

LMAO! "several three+ syllable words"

You do understand the folly of your 95% logic don't you? You haven't explained all of your points and then explained the explanations in an effort to leave no stone unturned...your post is a field day for the average slashdotian because there is too much room for interpretation. Heck, who knew only writing 3 sentences and putting TLDR would get an attack by the grammar police. They even got modded UP!

+1 for JoeMerchant and -1 for me please!

Re:Reality bites (1)

mister_playboy (1474163) | more than 2 years ago | (#40794623)

Blame Twitter.

Re:Reality bites (1)

ebs16 (1069862) | more than 2 years ago | (#40794729)

Really? A TL:DR summary for 3 sentences? That's what we've come to?

TLDR: Fuck

Re:Reality bites (0)

Anonymous Coward | more than 2 years ago | (#40794865)

Opening at P/E of 100 is just plain nuts... that said the investors that bought into the IPO are just cry babies... any begginer trader would know to stay clear of a IPO valuation like that...

Re:Reality bites (0)

Anonymous Coward | more than 2 years ago | (#40795019)

Not a problem - if you bought Facebook shares, you deserve to lose every dollar you invested to make those guys rich. Did they make something awesome, absolutely...for now. Can they sustain it by any means that will keep their users happy? No way. They are a business now, they have to make money and show the bottom line - time to start screwing their users to the fullest. Take their data, sell it, do whatever they want with it. You deserve it, FB owners - enjoy losing your money and watching the FB elite walk away with too much money. Bwahahahhahahahaha.

Re:Reality bites (0)

Anonymous Coward | more than 2 years ago | (#40794459)

Mistake? Didn't he make $1B while under 30?
I want to make a mistake like that!

Re:Reality bites (5, Insightful)

jedidiah (1196) | more than 2 years ago | (#40794759)

Quite.

This is not Zuckerberg's fiasco. It's the underwritter's fiasco. Zuckerberg in fact made out like a bandit here.

arrest the banksters (1)

harvey the nerd (582806) | more than 2 years ago | (#40794969)

As long as they did the lying and misrepresentation.... He got their money with little loss of control. F 'em.

Re:Reality bites (1)

jythie (914043) | more than 2 years ago | (#40794677)

If I recall correctly, didn't he cash out immediately (or at least sell off a large chunk) while employees are barred from selling their stock for a year or something?

Re:Reality bites (2)

Desler (1608317) | more than 2 years ago | (#40794801)

No. He sold 30 million of the 533 million he held. He sold less than 6% of his stock.

Re:Reality bites (0)

Anonymous Coward | more than 2 years ago | (#40794859)

No. He sold 30 million of the 533 million he held. He sold less than 6% of his stock.

And he still made a shit tone (yes that is a metric shit tone) of money off of the 6%.

Shame on Morgan Stanley (2, Funny)

Alien Being (18488) | more than 2 years ago | (#40794345)

Wall Street greed strikes again. I'm just glad that I wasn't stupid enough to invest. My off-the-cuff valuation would have been somewhere around $5/share.

Re:Shame on Morgan Stanley (4, Informative)

jeffmeden (135043) | more than 2 years ago | (#40794609)

Wall Street greed strikes again. I'm just glad that I wasn't stupid enough to invest. My off-the-cuff valuation would have been somewhere around $5/share.

And just last year, we were on Slashdot ( http://yro.slashdot.org/story/11/01/18/004226/goldman-sachs-says-no-facebook-shares-for-us-investors [slashdot.org] ) debating the merits of Facebook allowing direct investment without being publicly traded, specifically how small investors in the US couldn't buy into facebook due to them being privately held. A number of "insightful" posters waxed theological about how "overprotective" the US investment system is for having a restriction like this. I hope those wise investors got the opportunity to throw their money in back when Facebook was a $100B company...

Sad day (-1)

Anonymous Coward | more than 2 years ago | (#40794361)

I wish Rob Malda had lived to see this. RIP, Commander, rest in peace.

Wait, what? (5, Insightful)

s.petry (762400) | more than 2 years ago | (#40794373)

So the problem is Zuckerberg's alone to bear? How about the responsibility of the Banks in price fixing the IPO? How about the attempted over inflation of the stock by those same banks on opening day? How about the SEC and their lack of (either ability or willingness) enforcing their own rules and regulations?

I'm not a fan of Facebook by any means. They have done numerous shitty things and continue to do shitty things. The Capitalist Economy has mechanisms for dealing with those practices. To blame the financial fiasco on one person is simply ludicrous!

Re:Wait, what? (2)

JoeMerchant (803320) | more than 2 years ago | (#40794457)

And, what, if anything, are they going to do about this "problem?"

I really don't see Zuckerberg, the Banks, the SEC, or anybody else giving FB shareholders any money.

Giving SHAREHOLDERS? (5, Insightful)

SuperKendall (25149) | more than 2 years ago | (#40794675)

Why should the shareholders get any compensation?

I don't have any Facebook stock because I AM NOT AN IDIOT.

Anyone with a single brain cell, indeed even most amoebas stayed far away from the Facebook IPO.

The problem was in initial setup conditions and if you were too stupid to figure out the initial price was wrong beyond belief you deserve the loss and pain that resulted.

That is the stock market.

People on Slashdot talk a big game about how they believe in survival of the fittest and evolution but then don't seem to want the game to apply to them...

Re:Giving SHAREHOLDERS? (1)

JoeMerchant (803320) | more than 2 years ago | (#40794871)

Not saying they should, just saying that they almost definitely won't.

Re:Giving SHAREHOLDERS? (3, Insightful)

cpu6502 (1960974) | more than 2 years ago | (#40794913)

>>>People [in banks and megacorps] talk a big game about how they believe in survival of the fittest and evolution but then don't seem to want the game to apply to them...

That's why they beg Congress for bailouts. "Private profits and socialized losses" to quote Peter Schiff.

Re:Wait, what? (5, Informative)

gbjbaanb (229885) | more than 2 years ago | (#40794673)

They sold all the stock didn't they - to greedy investors who thought it'd go shooting up the day after IPO and they could make a killing flogging their stock (which I think all the institutions did), or stupid investors who thought that FB is the new paradigm and would take over the world's communications.

Either way, who cares? The only ones I see whining are those who bought the stock expecting to make easy money. The IPO price was obviously set at the right price as there was enough demand.

As for FB itself, it's still a private company, old Zucker didn't want any pesky shareholders (ie company owners) voting on what to do so all that stock is (IIRC) non-voting. So apart from a huge pile of cash taken from the stupid and/or greedy, nothings changed.

Re:Wait, what? (3, Interesting)

jeffmeden (135043) | more than 2 years ago | (#40794721)

So the problem is Zuckerberg's alone to bear? How about the responsibility of the Banks in price fixing the IPO? How about the attempted over inflation of the stock by those same banks on opening day? How about the SEC and their lack of (either ability or willingness) enforcing their own rules and regulations?

I'm not a fan of Facebook by any means. They have done numerous shitty things and continue to do shitty things. The Capitalist Economy has mechanisms for dealing with those practices. To blame the financial fiasco on one person is simply ludicrous!

Well he is the captain of the ship... Unless you have reason to believe he was substantially mislead by one of his employees or paid advisors, then yes that company is his to make or break. And right now it is breaking under the weight of a valuation that was so untenable as to be obvious to anyone but the most over-optimistic of investment bankers. He should have known better and didnt. Just think of what else he should know about running a company but doesn't, and extrapolate the probability of his success out. He should have sold his idea to those Harvard dickwads and walked away, at least they have a degree in screwing up businesses, instead of just winging it.

"discipline" of capital markets? (0)

Anonymous Coward | more than 2 years ago | (#40794379)

seriously? with a straight face? ahahah yes I want a bunch of idiot suits derping about next quarter's profits at the expense of long-term growth.

Re:"discipline" of capital markets? (0)

Anonymous Coward | more than 2 years ago | (#40794613)

+1 derping

Re:"discipline" of capital markets? (0)

HornWumpus (783565) | more than 2 years ago | (#40794629)

You are attacking a straw man. The only people who believe markets only focus on next quarter also deny that politicians focus on the next election cycle. Truth is both markets and politicians put some focus on the short term.

Don't buy the bullshit. Anybody who explains things simply, is lying.

Re:"discipline" of capital markets? (0)

Anonymous Coward | more than 2 years ago | (#40794935)

So should we not trust you? I mean that was a simple explanation so by your logic you must be lying.

Spain got hit by the recession, not bad decisions (-1)

Anonymous Coward | more than 2 years ago | (#40794425)

What kind of fucking retard are you letting mislead you about macroeconomics?

Whoever it is I suggest you find someone else because you are a woefully misinformed dumbass.

Re:Spain got hit by the recession, not bad decisio (1)

CanHasDIY (1672858) | more than 2 years ago | (#40794561)

What kind of fucking retard are you letting mislead you about macroeconomics?

Whoever it is I suggest you find someone else because you are a woefully misinformed dumbass.

Speaking of retarded dumbasses...

What do you think causes recessions, Einstein, if not bad decisions? Fucking elf magic?

Re:Spain got hit by the recession, not bad decisio (0)

Anonymous Coward | more than 2 years ago | (#40795007)

growth/production outstripping demand

Lost your money (0)

Anonymous Coward | more than 2 years ago | (#40794431)

by betting on the spy machine? Hahahahaha!

Zero sympathy, you insect!

Sorry, what? (4, Insightful)

Antipater (2053064) | more than 2 years ago | (#40794433)

"Facebook + stocks = shit. Therefore, Facebook should have joined the stock market earlier."

Does anyone else find that logical jump a little odd?

Re:Sorry, what? (2)

the_humeister (922869) | more than 2 years ago | (#40794569)

Yes quite odd. The other option is to remain private. There are many huge private companies in the USA: Cargill, Mars, Bechtel, Meijer, etc.

Re:Sorry, what? (4, Insightful)

HeckRuler (1369601) | more than 2 years ago | (#40795015)

THIS!

The lesson of the Facebook fiasco for Silicon Valley is clear. Start-up entrepreneurs cannot evade the discipline of the capital markets

WTF? That is the biggest load of bullshit I've heard since... well, about a week. Facebook could simply choose not to go public. EASY AS THAT.
Seriously, any time you hear "The lesson is clear", it's probably isn't. It's one of those terms that salesman use to pretend they not full of lies an villainy.

Re:Sorry, what? (2)

Baloroth (2370816) | more than 2 years ago | (#40794779)

Not really, no. The problem with waiting was Facebook got so large no one really knew what it was worth, and more importantly they did the IPO right as Facebook was more or less peaking in size and revenue. That means investors bought into the company expecting vastly continued growth and expanding revenue (because Facebook had been growing so fast), and ended up with... well, some growth and and revenue increase, but not as much as expected.

If the IPO had been made earlier, when Facebook was much smaller and still expanding rapidly, the actual value would have been somewhat easier to determine, expectations would have been considerably easier to meet, and the hype would not have inflated the price quite so much. As it stands, Facebook has very little room for growth, which is expected based on their history (even though, of course, they really don't have many more users they even can add) and their attempts to revitalize (by changing the layout, for example) have not helped. Add to that that Facebook is pretty much a one-trick, super-hyped pony, and you have a recipe for disappointed investors.

Re:Sorry, what? (2)

Antipater (2053064) | more than 2 years ago | (#40794971)

But see, you're missing my point, which is that both you and the article are making a huge assumption: that FB had to go public. If your friend jumps off a cliff and breaks his leg in shallow water, you don't ask "Well, why didn't you do it at high tide, dumbass?" You ask "Why the hell did you jump off a cliff?"

"the discipline of the capital markets" (4, Funny)

SolemnLord (775377) | more than 2 years ago | (#40794451)

Hahahahahahahahahaha oh. You were serious. Right after saying:

The bankers at Morgan Stanley applied all the lessons of the last 15 years and priced the IPO at $38, which was very aggressive, in an attempt to avoid leaving any money on the table and the embarrassment that a huge IPO pop would represent.

That sounds like a huge amount of discipline.

Lessons of the past 15 years (5, Funny)

Kupfernigk (1190345) | more than 2 years ago | (#40794567)

Lesson 1: Investors are stupid.
Lesson 2: Investors are so stupid they still believe banks after the toxic mortgages fiasco in which they were lied to morning and night.
Lesson 3: Investors are so stupid they believe a fashion business in a volatile industry is worth sackloads of money.
Lesson 4: Nobody ever missed a bonus through screwing investors.

Yup, looks like they applied all the lessons.

Re:"the discipline of the capital markets" (1)

ethanms (319039) | more than 2 years ago | (#40794717)

"discipline" is a concept, by itself we have no idea of the amount... in this case I would imagine they must me the complete absence of it.

Billionaire. (4, Insightful)

Hatta (162192) | more than 2 years ago | (#40794467)

Zuckerberg is a billionaire. He has no problems worth worrying about. If he doesn't like what he's doing, he can quit and buy a tropical island.

Re:Billionaire. (2)

Spy Handler (822350) | more than 2 years ago | (#40794699)

Hatta is a thousanaire. He has no problems that I would worry about. If he doesn't like what he's doing, he can quit and still buy all the food he can eat.

-Ugh Kamumba, Starvation Village, Ethiopia

Re:Billionaire. (1)

SourceFrog (627014) | more than 2 years ago | (#40794709)

Zuckerberg doesn't actually have to pay that money back, no matter how low the stock falls. He made billions by luring thousands of unsuspecting investors (including home 'mom and pop' type investors) into buying his overvalued bubble stock. I don't see how that's a "big problem" for him, the "big problem" is for all those people who gambled substantial proportions of their life savings on Zuckerberg's 'Dot Com v2' scam, and will never get their money back. Zuckerberg, on the other hand, will remain incredibly wealthy no matter what happens.

Re:Billionaire. (0)

Desler (1608317) | more than 2 years ago | (#40794927)

You realize he only has that money on paper, right? He actually has to sell his stocks to get cash andf no one buys his paper worth isn't worth the paper it's printed on.

Re:Billionaire. (1)

0123456 (636235) | more than 2 years ago | (#40794985)

And Facebook has the actual, real money. So if he pays himself millions a year until the company goes bust or gets bought out, he'll still be very rich.

Re:Billionaire. (0)

fran6gagne (1467469) | more than 2 years ago | (#40794979)

He made billions by luring thousands of unsuspecting investors (including home 'mom and pop' type investors) into buying his overvalued bubble stock

I thought that getting shares from an IPO like the Facebook's one was very difficult for small investors, because the big banks or brokerage firms responsible of the IPO kept the stocks for their big clients. I guess the people who had enough money to be one of those clients had a clue of what they were buying.

Can you elaborate on those "thousands of unsuspecting investors (including home 'mom and pop' type investors)" ?

Re:Billionaire. (1)

sribe (304414) | more than 2 years ago | (#40795009)

Zuckerberg is a billionaire. He has no problems worth worrying about. If he doesn't like what he's doing, he can quit and buy a tropical island.

Yeah, but Larry already bought the nicest one ;-)

The sad thing is... (5, Interesting)

wcrowe (94389) | more than 2 years ago | (#40794489)

The sad part is that Facebook IS capable of making money, just not gazillions of dollars worth. I've been wondering all along HOW Facebook was going to justify valuation. I guess we have the answer now -- it can't.

Re:The sad thing is... (4, Informative)

i kan reed (749298) | more than 2 years ago | (#40794637)

Yes, but the ruinous part is that they will keep trying. A steady reasonable profit is functional for a privately held company, but a publicly held one will be under constant pressure to improve quarterly earnings, and in the medium run, will undermine the existing profit structure to suit outside investors with no actual understanding of the company.

It's a culture of failure that large U.S. corporations have developed, and the only one immune seems to be Apple(who mostly seem to worry about increasing par value of stock).

Re:The sad thing is... (1)

SirGarlon (845873) | more than 2 years ago | (#40794747)

I've been wondering all along HOW Facebook was going to justify valuation.

It didn't have to justify its valuation, it only had to maintain valuation through the IPO so the venture capitalists could cash out.

Re:The sad thing is... (2)

rwv (1636355) | more than 2 years ago | (#40794803)

Yeah... but adding $38 * N (where N is the number of shares sold during the IPO) to the Facebook balance sheet is better than adding $24 * N. An IPO is an opportunity to fund the operations of a business. Facebook's war chest has $38 * N more than it used to have. They can buy other companies, buy buildings, make payroll, fund lobbyists, and other things that an expanding company needs to do. The fact that the stock is down $14 * N (36%) since the IPO means shareholders have lost a lot of money, but this isn't a Facebook mistake. I'm sure Zuck is happy about having $11 Billion compared to $16 Billion that was theoretically available to him at the time of the IPO. And having a $50 Billion company with $38 * N instead of a $50 Billion company with only $24 * N.... Facebook is in pretty good shape.

I bet Steve Regge (1)

Spy Handler (822350) | more than 2 years ago | (#40794511)

isn't ranting about Google+ and how Facebook is great because they "get" platforms anymore...

Re:I bet Steve Regge (0)

Anonymous Coward | more than 2 years ago | (#40794815)

[I bet Steve Regge] isn't ranting about Google+ and how Facebook is great because they "get" platforms anymore...

Diagram that sentence. I DARE you.

they produce nothing (0)

Anonymous Coward | more than 2 years ago | (#40794531)

General Electric produces aircraft turbofan engines and nuclear reactors and medical imaging machines.

Caterpillar produces heavy construction equipment.

Intel produces CPUs.

Ben and Jerry produces ice cream.

Facebook produces... nothing. It adds no value. It doesn't do anything that you can't do just as well without it, and if notoriously fickle public preferences shift like they did from Myspace, Facebook will be a has-been a year after that. It's a convenience, nothing more.

Their IPO was comically overvalued by any rational standard.

Re:they produce nothing (1)

ethanms (319039) | more than 2 years ago | (#40794837)

and if notoriously fickle public preferences shift like they did from Myspace, Facebook will be a has-been a year after that. It's a convenience, nothing more.

That same argument could be used for Coke... Pepsi... Ben & Jerry. Or probably the best comparison, your local television and radio stations.

Facebook is a service provider. What it provides is tangible in the same ways that what netflix, cable, ISPs, tv and radio stations provide...

FB and your local radio/TV stations don't get paid by you, they get paid by advertisers.

FB is real, and saying it isn't real, or wishing it would go away like MySpace will not make it happen, nor will it make the role that companies like FB play today (and will continue to play) any smaller.

The whole thing is a big Ponzi scheme (-1)

Anonymous Coward | more than 2 years ago | (#40794565)

Companies aren't supposed to release statements before an IPO to avoid overvaluation, but Facebook got a whole feature film courtesy of Zuckerberg's Jew buddies in Hollywood. Facebook is going to go bankrupt in a few years, just like MySpace and Digg. Their product is nothing more than a giant MySQL database with some PHP chrome. Some elementary school children can do this. The only thing that sets them apart from all of the would-be competitors is their user base. Nobody wants to join a social network with no members.

The user base is fickle though. Already people are moving over to Twitter and whatever stupid new thing there is. As Facebook is required to generate more money it will increasingly annoy its users with ads and selling their private info. This will only accelerate the loss of users until the whole thing collapses. Meanwhile, the Jews will be laughing all the way to the bank.

Maybe i dont get the stock market. (5, Interesting)

NoisySplatter (847631) | more than 2 years ago | (#40794589)

How does the share price falling hurt Facebook? They sold the shaes at the IPO price so they already got the money. If they want more money in the future they issue more shares... Basically Facebook just got shitloads of money in exchange for a marginal loss of control. How are they losing out?

Re:Maybe i dont get the stock market. (0)

Anonymous Coward | more than 2 years ago | (#40794831)

Holding on existing stock, stock options, etc... If you use the stock as incentive for employees, now employee moral is down in the dumps (ie if they have an option to buy the stock at $35 it doesn't do them much good if the stock is at $23). Lots of reasons why the company is still very much interested in their stock value.

In addition, the shareholders have the option to boot existing management or if the stock gets low enough, another company may find it favorable for a takeover.

Re:Maybe i dont get the stock market. (3, Informative)

Fastolfe (1470) | more than 2 years ago | (#40794893)

It doesn't directly impact the company. However:

1. It affects employees of the company, because employees of a company tend to hold a disproportionate share of their long-term savings in company stock and options.

2. A public company's board of directors is usually elected by the shareholders. If the shareholders view a falling share price as a sign that the company has problems, they may work through the board (or replace the board) to change the leadership of the company. This is less of a concern with companies like Google and Facebook since the founders own enough shares that they can withstand that sort of pressure.

No no no (1)

Pirulo (621010) | more than 2 years ago | (#40794597)

The investors and the market made a huge mistake.
Zuckerberg did what he had to do for himself . He's no philantropist.

Re:No no no (0)

Anonymous Coward | more than 2 years ago | (#40794939)

But, but, free markets! LOL!

Overvalued? Then don't buy (1)

moderators_are_w*nke (571920) | more than 2 years ago | (#40794605)

The value of anything is what people are prepared to pay, and if people are prepared to pay $38 a share then that is what they were worth on that day at that point in time. Like many people I thought that was too high and didn't buy. That's okay, that's how markets work. If you thought it was a good buy then you were wrong and you lost some money, that's the nature of this type of investment. You may or may not get it back depending on how long you hold it and how well Facebook does.

I don't think anyone can say that the signs weren't there when so many people were saying it was overvalued.

How did he make a mistake? (0)

Anonymous Coward | more than 2 years ago | (#40794617)

He got WAY more cash out of the IPO than what the company is worth. Contrast this with Google's IPO, where they undervalued it.

How is that a mistake? The only mistakes made were by people that purchased at the IPO price.

Re:How did he make a mistake? (1)

fran6gagne (1467469) | more than 2 years ago | (#40795023)

I guess he is still laughing at the "dumb fucks" who "trusted him" once again.

Lesson of the Facebook fiasco for Silicon Valley (0)

Anonymous Coward | more than 2 years ago | (#40794633)

"The lesson of the Facebook fiasco for Silicon Valley is clear."

The lesson is very clear, don't cash out, keep control of the revenue stream and take your profits from that. I know a guy who was paid small amounts of stock in private silicon valley companies, owns 2%. He gets dividend checks for $500, $2500, $1000, $10,000, $50, $3000. Over the last twenty years he's gotten around $150k. Meanwhile I see guys working startups and busting their ass for what turns out to be $30--50k when all is said and done.

"discipline" (5, Interesting)

argStyopa (232550) | more than 2 years ago | (#40794653)

"....can't escape the discipline of the capital markets..."

Discipline.
That's a funny word to use with a market that:
- turns trades of tens of millions of shares in literally seconds
- acts like a flock of frightened sheep at the slightest whiff of trouble
- punishes companies who accept short-term sacrifices in favor of long-term growth/gains.

Our company "went public" and I am hard-pressed to understand who - other than the execs, who get fat options and big share-piles - benefits?

The company CERTAINLY doesn't.

Where previously you had a private firm whose only real measure was year-on-year viability as a company, now we have a giant firm whose sole strategic goal seems to be "hit the monthly numbers". Foolishness, chicanery, and outright lying seem to all be acceptable tactics, and the business now has a 30-day outlook, instead of the previous generation(s) of CEOs who looked at what it would take to develop markets and commercial potentials in decade-long or even (for a family company) generational-length timelines.

Re:"discipline" (1)

mosb1000 (710161) | more than 2 years ago | (#40794763)

They don't mean that the traders are disciplined, they mean that companies being traded need to be disciplined or risk loosing all their value over trivial nonsense like rumors or a single bad quarter, or a change in direction that happens too quickly.

implications of overvaluation (1)

harvey the nerd (582806) | more than 2 years ago | (#40795013)

Except Facebook was overvalued. It's not discipline, it's a free gift from a one time raid on the capital marks.

Re:"discipline" (0)

Anonymous Coward | more than 2 years ago | (#40794905)

Relative to Facebook itself? I'd say it's quite disciplined. Dumb fucks.

Re:"discipline" (0)

Anonymous Coward | more than 2 years ago | (#40794907)

not every public company is that way, it must be the people who run your company

Re:"discipline" (1)

assertation (1255714) | more than 2 years ago | (#40794951)

+1

Slashdot confirms: Facebook is dying (4, Funny)

Anonymous Coward | more than 2 years ago | (#40794671)

Yet another crippling bombshell hit the already beleaguered Facebook community today when Slashdot (who heard it from Hugh Pickens, who heard it from Nathan Vardi, who heard it at Forbes, which is a sensational money magazine) announced that Facebook is dying. The rate on superpokes is plummeting, and as for Farmville cows, you can't even _give_ them away...

"drove Facebook's stock down by 15%" (1)

tttonyyy (726776) | more than 2 years ago | (#40794691)

You like this.

A little slashdot virtual facebook machine humour for you there ;)

Do you want the good news or bad news first Mr. Z? (1)

techstar25 (556988) | more than 2 years ago | (#40794705)

The good news is that today you lost about $8 billion. The better news is that you still have about $12 billion.

CIA/DARPA (0)

Anonymous Coward | more than 2 years ago | (#40794725)

Will just pump more money into it as it is too big an information mine to fail.

Sure we can. (4, Insightful)

mosb1000 (710161) | more than 2 years ago | (#40794735)

Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.

Sure we can, all we have do to is continue to hold the company privately.

IPO basics; the banks got screwed, not FB (4, Informative)

mounthood (993037) | more than 2 years ago | (#40794775)

The bankers at Morgan Stanley applied all the lessons of the last 15 years and priced the IPO at $38, which was very aggressive, in an attempt to avoid leaving any money on the table and the embarrassment that a huge IPO pop would represent.

That's not how it works: FB sold its stock at $38 to the underwriters (the banks), who assume the market risk and sell the stock on the market. It's in the underwriters interests to pay the company a low amount, and see the valuation rise in the market. Companies want a higher valuation, and a jump in the stock price does NOT profit them. When the valuation was raised to $38 at the last minute, it was good for FB and bad for the banks.

I can only assume this fundamental aspect of IPOs is ignored because it doesn't make for a good story.

http://en.wikipedia.org/wiki/Initial_public_offering#Pricing_of_IPO [wikipedia.org]

Article is completely misguided (5, Insightful)

dnaumov (453672) | more than 2 years ago | (#40794777)

It was a failed IPO for speculators, it was an absolutely fantastic IPO for Facebook. The 2 parties are at odds with each other: the company that is having an IPO wants to sell it's share for a high price, to get as big of a cash infusion as possible, while the speculators want the IPO price to be as low as possible, so when there is a quick "pop" after the IPO, the speculators get rich quickly.

Mark Zuckerberg and Facebook got about as good of a deal as they could've ever dreamed of and with Mark still retaining control over 50% of the shares, he doesn't have to give a damn about the rest of the shareholders even if every single one of them bunched up together to make demands.

Why was this a mistake on Zuckerberg's part? (0)

Anonymous Coward | more than 2 years ago | (#40794781)

Had Facebook gone public earlier, the inevitable "rude introduction to the capital markets" would've occurred at a time when Zuckerberg had far less experience running the company than he does now, and he may have been ousted by the board.

From his personal perspective, he probably made the right move. Maybe he left a few billion dollars on the table, but it seems that hardly matters unless he's planning on buying a professional sports team.

Popularity is not the same as value. (1)

PeanutButterBreath (1224570) | more than 2 years ago | (#40794827)

What is Zuckerberg to do? He has a popular product and legions of people with more money than sense who think that any internet sensation must be a goldmine beating down his door for a piece of the (imaginary) action.

Facebook's only value is not in user numbers or user data, it is the minds of people willing to buy Facebook stock.

Zuckerberg's chief problem is the same as everyone else's -- the lost ability to come up with innovations that are actually worthwhile, as opposed to internet baubles and gadgets for yuppies.

Wait, what? (2)

fuzzyfuzzyfungus (1223518) | more than 2 years ago | (#40794829)

Where, exactly, in the whole farce of the Facebook IPO is the 'discipline' of the capital markets?

We saw the Respectable Institution fuck up the offering price, we saw the assorted insider shenanigans, we saw the hyping and pumping of the noise-trader losers upon which the more sophisticated feed, we saw the following price drop when the hot air started to leak out...

I'm just not seeing the 'discipline' here

Frankly, were it not for the observable fact that real investment banks and NASDAQ and whatnot where involved, I could have been convinced that the whole thing had been cooked up as some sort of elaborate marxist performance art piece...

What mistake? (1)

pentadecagon (1926186) | more than 2 years ago | (#40794835)

Quite the opposite, M.Z. has out-smarted all the professional investors. They lost. He won. The company (facebook) won.

This a disinformation campain to hide the facts (0)

Anonymous Coward | more than 2 years ago | (#40794849)

This article linked to popcorn articles about playing with the big boys. The reason the stock is down has nothing to do with "pressures of being a large company". This is about insider trading and "selective disclosure" which shows how corrupt wall street works behind the scenes. The SEC needs to crack down on wall street and not allow this elitist mentality to happen. The truth is, this IPO was a shell game and it was rigged.

Here's what really happened:
http://www.businessinsider.com/exclusive-heres-the-inside-story-of-what-happened-on-the-facebook-ipo-2012-5 [businessinsider.com]

Insider and material information was verbally conveyed to the big investors but not to smaller investors. On May 9th, Facebook filed an amended IPO prospectus with the SEC which implied growth and the appearance that everything was fine. The truth was the that Facebook's value was deteriorating.

Re:This a disinformation campain to hide the facts (1)

0123456 (636235) | more than 2 years ago | (#40795027)

But anyone with two clues to rub together should have known that Facebook was vastly overpriced.

They call this 'due dilligence' and you're supposed to do it before buying shares in a company, rather than believing whatever nonsense the company tells you.

Evading capital markets (2)

smooth wombat (796938) | more than 2 years ago | (#40794899)

Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.'"

But Wall Street can. That was whole point of suspending mark-to-market. They didn't want to have to price their worthless or near-worthless securities at market values. Thus they got the SEC to suspend the time-honored and financially sound principle of valuing assets at what the market is willing to pay for those assets.

Further, Wall Street got the taxpayers to foot the bill for their incompetence AND got to use that money to give themselves bonuses for the great job they were doing.

While Zuckerberg can't evade market discipline, there are those who can, have and will continue to do so.

The Real mistake...... (2)

who_stole_my_kidneys (1956012) | more than 2 years ago | (#40794901)

was not selling 100% of his stock in the IPO. Everyone (with a brain) knew it was overvalued, its another Myspace, and he only made enough to make him a billionaire. He should have sold everything to those sheep that bought the stock, and walked away counting his money instead of staying on a sinking ship.

Don't overcomplicate this (0)

damn_registrars (1103043) | more than 2 years ago | (#40794917)

Zuckerberg's big mistake was not having a meaningful business plan. It seemed OK to casual investors, but when people bought in and realized the business plan was "gather personal data and sell it", they were less excited. Facebook is not the next Google, it is instead the next AOL.

A smarter alternative (2)

DogDude (805747) | more than 2 years ago | (#40794933)

Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.'

Sure they can. They can maintain their own equity and grow the company with cash. You only have to deal with the capital markets if you get greedy, in which case, you get what you deserve.

Translation (3, Interesting)

dkleinsc (563838) | more than 2 years ago | (#40794943)

"We believed the hype and got suckered into thinking that Facebook was worth more than it actually was. That must be Mark Zuckerberg's problem, because it can't possibly be *my* problem."

Problem? What problem? (4, Insightful)

petes_PoV (912422) | more than 2 years ago | (#40794963)

From FB's point of view the IPO was a success. They sold all the shares they put up for offer and got a very good price. If anyone made a mistake it was the people who bought them at the original $38, not the company that managed to sell them all.

If the company hasn't lived up to the expectations of the suckers who bought it, well: tough - that's capitalism for you.

maybe... (1)

kenorland (2691677) | more than 2 years ago | (#40794975)

I think Facebook's lack of success might be related to Facebook being a fad and not having much of a business model?

also Zs fault, the housing market. (0)

Anonymous Coward | more than 2 years ago | (#40795005)

Face it, the market got conned, next time they'll offset the risk with a CDS like product so the taxpayer bails them out. Just making money.

"Discipline" my ass (0)

Anonymous Coward | more than 2 years ago | (#40795021)

Re: that last bit - funny how Spain and Italy are both fucked right now because they've had to massively bail out their banking sectors, yet oddly the banksters get to keep their jobs and bonuses while everyone *else* gets to suffer the "discipline" of the capital markets.

The fact that GS and friends have a share price ABOVE ZERO after nearly imploding the world economy means there's no real "discipline", just people like Angela Merkel having BDSM fantasies on a global scale...

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