Facebook IPO Seen Deepening Investor Distrust Of Stocks

http://www.bloomberg.com/news/2012-05-25/facebook-ipo-fallout-deepens-investor-distrust-of-stocks.html

by rajpaul • 14 years ago

39 26 14 years ago

bloomberg.com

endlessvoid94• 14 years ago

It's been less than a week.

jlgreco3• 14 years ago

That is exactly what they are considering...

"The IPO produced the worst five-day return among the largest U.S. deals of the past decade."

RomP• 14 years ago

Can we just stop beating this dead horse for once please?

tatsuke95• 14 years ago

Why? Like it or not, FB is the bellwether for the current technology/economic climate. It's one of the biggest IPOs ever, not just in size, but in renown. There was a mainstream movie made about it before it was even public. It's a huge story.

It's important to gauge these things as they happen, so the next time around you get to be the one saying, "I've seen this before." These stories may all turn out to be moot, and in 10 years Facebook could be a huge brand, in which case you can look back and remember how Bloomberg labelled it the worst performing IPO of the decade. Or, it could go south....

juiceandjuice• 14 years ago

You're right, it's important to gauge these things, and there's been a lot of things going on this past week, and people tend to assume because the facebook IPO didn't behave the exact same way as the linkedIn IPO that it has somehow failed... but it's the stock market. It's unpredictable, and so many things affect the price of a stock. There were trading glitches, largely affecting daytraders and companies who had no desire to hold the stock long term in the first place. And there's also been a lot of back and forth on the European debt crisis this past week and general volatility over all tech stocks, not just facebook, but facebook is in the spotlight right now.

I don't think facebook's IPO has any real bearing on the industry at hand. Other recent tech IPOs like LinkedIn and Jive have varied by more than 10% in the past week.

cocolos• 14 years ago

I wouldn't touch fb stocks with a 10 ft poll.

squeed• 14 years ago

You know what? Good. A stock that explodes after the IPO means it was priced too low, and the company didn't raise a fair amount of capital.

Facebook is obviously smart enough to think for the long term. I don't trust the financial machinery to do that.

jlgreco3• 14 years ago

Surely there should be a middle road between FB's IPO and "exploding". Perhaps 'preforming as expected'?

wh-uws• 14 years ago

Whats interesting about this though is your average person doesn't have that perspective.

These companies (most companies not just tech companies or just facebook) are largely black boxes to them.

They aren't thinking about how there are lots of hardworking people at them who deserve to be rewarded for their work.

I've been thinking a lot recently about this. How even myself I didn't really have a good perspective on how a company's stock price / ipo relates to them.

But with facebook its different though. I've known about facebook since I joined it in 2006 as a senior in high school.

And now I know people who work there. I even have a friend who works for Morgan Stanley.

So now im in a unique position to really understand where these numbers come from and the value they do or don't represent.

If you never learn that kind of stuff; either on your own, from others who have seen it, or don't have the benefit of the collective knowledge of a community like hacker news.

All you would have is:

"High stock price good, low stock price bad"

And the rabbit hole is actually much deeper than that.

Like in this instance even though the stock price didn't rise greatly it was actually good for the company. Because that's what an intial public offering is supposed to be about. A way for the company to raise capital. If the stock price doubles after that its all well and good but the company itself doesn't get to benefit from that aside from good press.

And I think a lot of people keep taking for granted that facebook is not public now because it wants to be but because it has to be, but thats a whole other conversation

adgar2• 14 years ago

Here's how real people think about a hyped, flop of an IPO:

People don't like the feeling of being sold something for more than it's worth. We call that being "ripped off," and most folks don't take too kindly to it. I believe you described this as getting a "fair amount."

People also don't like the folks who rip off other people. It's kind of a dick move to rip someone off. Those folks tend to do quite well, yes. That's FB in this case, who as you note made out just swell.

People especially resent it when those guys get incredibly wealthy by ripping off millions of people.

> Facebook is obviously smart enough to think for the long term. I don't trust the financial machinery to do that.

I think we can all agree - there's nobody we can trust more than Facebook to rip us off properly.

tedunangst2• 14 years ago

??? Who are the millions of people who got ripped off by Facebook?

mark_integerdsv• 14 years ago

I'm with you.

It still baffles me how anyone could think that this IPO was about anything but making vulgar amounts of money for Facebook.

I guess the label is now more accurate than ever: "...dumb fucks."

zeroonetwothree• 14 years ago

A 16% drop hardly qualifies as the "worst performing IPO of the decade".

jlgreco3• 14 years ago

Is there one that is worse that they missed? Article seems to suggest that MF Global Holdings Inc. had the second worst opening week.

veyron2• 14 years ago

BATS IPO had to be pulled. Although it's not the worst because traders were made whole.

crikli• 14 years ago

No it's not. FTA:

"The IPO produced the worst five-day return among the largest U.S. deals of the past decade."

That's an extremely qualified factoid. Please retitle this post.

rprasad• 14 years ago

Yes, it is. On an absolute basis, the Facebook IPO resulted in the lowest 5-day return of any US IPO in the past century. The qualifier "largest" was used only because FB lost more capital in 5 days than the total market caps of the companies involved in the worst IPOs, so it is not the worst IPO on a relative basis. Even then, Facebook still ranks among the worst IPOs in the past decade.

veyron2• 14 years ago

We won't know for some time (at least until a possible twitter IPO) the scale of the damage caused by the Facebook IPO on investors' appetites for social stocks. I'd reserve judgment.

jellicle• 14 years ago

The funny thing to me is how everyone swears that they only invest due to fundamentals, they absolutely aren't just gambling their money in the big slot machine and hoping to see three cherries come up instantly and coins pour into the tray.

And then when three cherries don't come up on the first spin, man, are they pissed off.

tedunangst2• 14 years ago

What's funny is FB still had a better week than DELL. Somehow that surprise just isn't worth talking about.

brisance• 14 years ago

I'm amazed the article didn't mention the lawsuits that are being filed against the lead underwriters Morgan Stanley, Goldman Sachs, JP Morgan etc; according to the claims, some institutional investors got insider info that presumably leaked through the "Chinese wall" that FB was ill-positioned to take advantage of growing mobile ad views and thus would have to lower its earnings guidance for the next quarter.

Then again, the SEC and practically all government agencies are revolving doors with big business so I wouldn't be surprised that all they get is a slap on the wrist.

ww5202• 14 years ago

That means the IPO was priced right. Investment bankers used to deliberately priced IPO low to let their favorite clients profited with the popup right off the gate. The companies lost lots of money when their IPO priced low.

Looks like Facebook avoided the problem and got the right price.

soup10• 14 years ago

It's not all good. Facebook employees are locked up for 3 months right? So the winners here were the VC's and other "preferred stock holders" who were allowed to sell their stock as part of the IPO. And the banks/underwriters who apparently always profit from ipo's even if they are mispriced.

The losers for the most part were retail investors and various funds/traders who believed the banks that the IPO was correctly priced, and probably facebook employees who will have to sell at a lower price now because this botched IPO has sown a lot of distrust in facebook stock.

The goal for an IPO is to correctly price the offering. Usually tech stocks are wildly over-valued and speculated on when they IPO, that doesn't make the banks wrong for setting a reasonable price.

Shrug it's all bullshit anyway. When your talking in the scale of billions of dollars, capitalism can get pretty inefficient. Internet bubbles just highlight the most absurd parts of it. $1B for a 1 month project on iOS(instagram)? $100B for a monopoly on the social graph?(facebook) It makes no sense, but it's really just the tip of the iceberg when it comes to market inefficiencies and the huge amount of capital some companies have compared to the value they provide to society.

ww5202• 14 years ago

Well, the main thing is the FB company got a great price on the IPO. The employees etc can be benefited in the long run from the great cash position the company is at.

Facebook IPO Seen Deepening Investor Distrust Of Stocks

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