Facebook trades under $30, down 7%+

http://www.google.com/finance?q=fb&safe=active

135 159 14 years ago

Osiris• 14 years ago

While the IPO was bad for investors, it was certainly good (financially) for Facebook. They definitely maximized their earnings from the IPO and Zuckerberg really made out well getting just under $38/share for his $1.1bn in shares.

In contrast to the Google IPO in which the stock skyrocketed on the first day and really took off after that. Google may have been able to extract quite a bit from their IPO than they did.

badusername• 14 years ago

I assume it was financially healthy for a very small group of people within Facebook. Most of the employees would be on lockdown before they can sell their stocks on the public market, no?

ceejayoz• 14 years ago

Facebook, the company, got a lot of money out of the IPO, not Facebook's individual employee holdings.

ddet2• 14 years ago

I am assuming they have to wait 6 months, by then FB will not be worth much compared to their strike price.

gamble3• 14 years ago

The early investors made out like kings, but I doubt Facebook's employees are in a cheery mood as they watch their options sink underwater and their vested paper wealth dissipate while waiting for the lockup period to end.

birken• 14 years ago

Isn't that the fault of the private investors for overvaluing Facebook? Presumably all granted options had a strike based based on the current private valuation, which clearly the public market doesn't agree with (without judgement as to whether the public market is right or wrong).

bdr• 14 years ago

I'm skeptical that FB would be higher today if it had IPOd lower.

tedunangst• 14 years ago

I'd like for someone to explain precisely what Facebook should have done to ensure a big pop. Value the shares at $5? What if their internal projections indicated the company was worth more than that? Picking an artificially low strike price for the options probably would have resulted in people going to jail, not to mention all the employees owing taxes on the difference.

jonknee2• 14 years ago

> In contrast to the Google IPO in which the stock skyrocketed on the first day and really took off after that. Google may have been able to extract quite a bit from their IPO than they did.

Google priced their shares based on an auction, I'd say it was priced right. It was also much smaller because it wasn't a bunch of insiders trying to dump their shares at an inflated value.

Google sold 19.6M shares, 14.1M of them were from corporate. There were 271M shares in total, so only a very small amount of the company was transferred. In contrast for FB, there are 2.14B total shares and the IPO was for 421.2M of them, a much larger percentage of the company. In addition, insiders made up 241M of those shares sold, which is actually the majority of the IPO.

asdf333• 14 years ago

While this is anecdotal, some ibanking friends told me that alot of the traditional wall street banks 'boycotted' google for going w/ a smaller player who did a non-traditional format (auctions) that threatened their business model and that resulted in lower demand (and lower price) for their shares at IPO than would have otherwise been the case.

tomkarlo2• 14 years ago

The game is not as simple as maximizing the value of just the shares being sold on day 1. Post-IPO, a company's shareholders are largely the same as pre-IPO... the value they achieve for their shares in will be determined over a much longer time frame. Reputation / performance matters.

ddet2• 14 years ago

FB IPO is bad for the startup world

benjaminwootton• 14 years ago

Agreed.

I wonder how much of the current froth is based on people trying to be the next Facebook or Instagram?

If Facebook takes off and justifies their early valuation, the startup/angel/incubator/VC world would go into the stratopshere.

If it continues to languish, people are going to be much more skeptical in making investments and even starting web based businesses.

A lot hinges on this stock price for the rest of us....

il• 14 years ago

I don't think the possibility of a $50B exit vs a $100B exit will make any difference for most angel investors.

awj• 14 years ago

> If it continues to languish, people are going to be much more skeptical in making investments and even starting web based businesses.

Is the latter part of that really true? Starting a web based business is worlds easier/cheaper than just about any other kind. I see this more as injecting a dose of reality and doing away with the give-things-away-to-get-big-then-monetize-somehow "business plan".

pbreit• 14 years ago

No it's not. Facebook is an anomalous company so there's not much worth in comparing it to the rest of the industry. The fact is, some $10 billion dollars just entered investor hands who will no doubt be ploughing it back into (mostly Bay Area) startups for years to come. And Facebook becoming more acquisitive certainly helps as well.

bradgessler• 14 years ago

Not necessarily.

If FB valuations keep slipping, it will put downward pressure on all social startup valuations, which means those companies have less money to throw around.

This is great new for non-social startups. It could mean everything from cheaper rent for office space in SF to a larger pool of available talent to recruit from.

MisterBastahrd• 14 years ago

FB's IPO is based on imaginary numbers. 900 million users? How many actual users. Seems to me that the suits REALLY wanted to make this a $100B company regardless of how much worth it actually had.

There's only so much you can glean out of a social network where the vast majority of the time people are talking about how their day went. I think that some people fundamentally misunderstand the difference between Facebook and Google when it comes to figuring out what ads people want to see.

Let's say I'm on Facebook and I ask my friends for advice on which is the best lead pencil to purchase. They might tell me a few recommendations, and Facebook may even start producing ads based upon that conversation should I choose to revisit it.

But then I want to actually PURCHASE the lead pencil. Where am I going to go to look for that? Google. It will give me price recommendations, and once I've done the search, Google will continue to follow me around with ads tailored to my search.

bignoggins• 14 years ago

It's 900 million monthly active users. Say what you will about FB but they don't use vanity metrics.

fijal• 14 years ago

FB IPO is bad for the inflated startup world around the FB ecosystem. All stuff "social" and "connected". It's hopefully good for everyone else who is bringing some value, but was turned down/undervalued, because they're not social enough.

sek• 14 years ago

The employees, they dumped a lot of their shares probably. They are allowed since Monday to sell them.

TomGullen3• 14 years ago

How many shares did the employees own?

Even if they all sold all of them, is it really enough to have a meaningful impact on the price of the stock with that much trading volume and that large of a market cap? Probably not!

planetguy5• 14 years ago

If you count Zuckerberg as an employee, then I'm pretty sure he owns more shares than were issued in the IPO.

Even if you don't, a huge slab of the company is owned by current and former employees.

flyt• 14 years ago

Lockup doesn't expire until six months after the IPO. Employees and ex-employees have a while to wait until they can begin selling.

denniedarko• 14 years ago

6 month lockup no?

unreal372• 14 years ago

Can anyone explain why they are down 7%?

LargeWu• 14 years ago

I think a better question is why are they only down 7%

astrodust2• 14 years ago

As Facebook stands, they're doing okay. The stock might be over-valued, but that's the environment we're in now.

To get that stock going up they'll have to increase their market share and the only way to do that is to start acquiring big social networks, something they don't seen prepared to do, or diversify.

gamble3• 14 years ago

Facebook options trading began today.

TomGullen3• 14 years ago

Supply and demand is the answer, although probably not the one you are looking for!

The WSJ reported the options market has just opened for FB stocks. A lot of people seem to be very bearish about FB so a lot of short action could significantly impact the demand of FB stock.

I'm an amateur at this though, and would love someone to correct me if I'm completely off here :)

kirpekar• 14 years ago

Random Walk

planetguy5• 14 years ago

If I could explain why it's down 7% today then I could also explain why it's gonna be up/down n% tomorrow, and m% the next day. Unfortunately I'm not quite that smart.

unreal372• 14 years ago

I guess I meant why so much. I understand that on any particular day, a stock can be up or down by some small percentage on no news. But it's now down 10% for the day.

I'll buy the "options trading, short sellers" theory. Thanks!

taytus2• 14 years ago

I think that the big difference is that Google is a company while Facebook is a product.

taytus2• 14 years ago

Down voted? Nice community bro.

TomGullen3• 14 years ago

It's around a $23,000 reduction of market cap per second from the IPO 8 days ago (https://twitter.com/Scirra/status/207481113902465024)

A pretty spectacular rate of value loss

borism• 14 years ago

I guess that's it for the "hyperinflation is coming!!!" gold-crazed Ron Paul-supporting crowd.

rondon12• 14 years ago

Morgan Stanley has been putting in floors to keep this stock from totally crashing. They cannot keep it up forever.

zgohr• 14 years ago

Do you have proof? I know that on opening Friday we saw it sit at $38.00 and that was obviously MS, but since then I don't see any evidence in the stock price that this has happened since. On the 23rd the stock traded at 31.53 a few times but later in the day traded at 31.52.

I'd love to see MS take a beating for that 100m they got for underwriting this poorly orchestrated IPO, I just haven't been able to see it happening unless there is proof I am unaware of.

tomkarlo2• 14 years ago

At least for the first day, this was documented (and expected) from the underwriters. http://www.businessinsider.com/facebook-banker-morgan-stanle...

Underwriters start out with a net short position on an IPO so that they can step in to support if necessary.

evilbit• 14 years ago

http://www.google.com/search?q=greenshoe

rondon12• 14 years ago

NO I don't have any proof. If wall street left lots of proof in their wake, people would have gone to jail during the housing crash. Maybe I'm wrong, Maybe the stock randomly hit 34,32,30,29 and plateaued because normal investors put in orders for those prices.

nlz1• 14 years ago

So...when is Zuckerberg scheduled to be interviewed on Squawk Box?

nicholassmith• 14 years ago

Does anyone have any insider info on when Facebook's employee lockup period ends? The shares won't end up worthless but I can't see them being worth billions.

tghw• 14 years ago

Generally, it is 6 months after the IPO.

mattlong• 14 years ago

Employees are typically awarded stock options with a non-zero strike price based on the FMV of the company at the time the options grant. Those options very well could end up worthless.

hughw• 14 years ago

I imagine many of them hedged with options on the open market.

[edit] I just learned below that that market just opened, so that strategy must not have been available to them.

cletus2• 14 years ago

There are only two parties hurt by this:

1. The premiere clients of Goldman Sachs and Morgan Stanley who bought into the lie that FB should trade at >100:1 P/E; and

2. Facebook.

(1) I don't care about. (2) is the interesting one. You'll note that I don't include the employees in the list of injured parties. They're largely in a lockout anyway (I assume?). Whether it opens at $38 and drops to $30 or starts at $20 and climbs to $30 is of little consequence.

Facebook strategically seems concerned with only two companies: Google (disclaimer: I work for Google) and Apple, both of which have established, proven businesses and strategic assets in Internet and mobile going forward.

Facebook is a platform company without a mobile platform in a world becoming increasingly mobile.

Facebook has a lot of cheerleaders, optimists and pundits all backing this idea that the potential of all this data is huge, so much so that I believe they started to believe their own positive press. It's an easy trap to fall into.

But make no mistake: this is bad for Facebook. Sure some investors, Zuck and (maybe?) some employees made a few more dollars but Facebook doesn't need the money and neither do most of the investors. But that's incredibly shortsighted.

Facebook's ability to retain and attract talent and make stock-based acquisitions is in large part determined by the health and outlook of their stock. If they'd IPOed for $20-25 and jumped to $30 then they would have a lot of momentum behind them.

Instead the press is "how low will it go?" What kind of position is that to be in if, say, you're trying to negotiate a $1B+ stock-based acquisition?

Anyway, I'm glad about this drop. Not out of any kind of schadenfreude but because the market is acting... rationally. These P/Es were never justified and instead of not mattering and the stock skyrocketing anyway (which would happen were we in a bubble, which we are not), the stock is seeking a more appropriate level.

This is good for us, the tech industry and the market and the fact that some choice clients of Goldman Sachs and Morgan Stanley got bilked along the way is just gravy as far as I'm concerned.

EDIT: to clarify, I don't really have a position on what the appropriate level is other than $38 is and was too high. It could still well go lower than $30.

ryanmerket7• 14 years ago

How can you say the P/E isn't justified when Facebook isn't monetizing +60% of their impressions (mobile)?

Cushman2• 14 years ago

If everyone were valued by how much money they could be making, we'd all be billionaires.

dredmorbius4• 14 years ago

Well, neither is anyone else.

If there's money on the table, it's because everyone in the field has failed to figure out how to grab it.

InclinedPlane4• 14 years ago

Right, so Facebook could potentially grow by 150%, maybe. But their valuation is predicated on them growing by a factor of 10x or more. That's the issue.

potatolicious2• 14 years ago

Because the app has been out since 2008, gone through multiple iterations, currently holds a 2-star rating on the App Store, and still hasn't managed to monetize 60% of their impressions.

Cushman2• 14 years ago

> Anyway, I'm glad about this drop. Not out of any kind of schadenfreude but because the market is acting... rationally. These P/Es were never justified and instead of not mattering and the stock skyrocketing anyway (which would happen were we in a bubble, which we are not), the stock is seeking a more appropriate level.

Agreed entirely. Everyone's been acting disappointed by the lack of an IPO extravaganza, but that would have been horrifying-- this drop should be heartening to anyone in tech.

chucknelson• 14 years ago

I would argue that the drop isn't from the market acting rationally at all, but in response to yet more hype supplied by the press, specifically the "how low will it go?" narrative you mention.

cube133• 14 years ago

I disagree. While the market hasn't been acting too rationally in general over the last few years, FB dropping like a rock is actually a fairly rational response to their circumstances.

FB made less money in Q1 2012 than in Q1 2011. That was reported by them before the IPO. FB blamed it on the fact that more users are accessing Facebook through their mobile clients, which don't get them as much advertising money. Normal response to these kinds of reports is for the stock price to drop.

There's also the fact that they were horrendously overvalued in the first place. Facebook is quite possibly the most mature tech company to ever IPO. They already have their sources of income. They have arguably saturated their target market(1/6th of the human race has created accounts), and really don't have that much farther to grow, without seriously monetizing their current users. Unfortunately, as FB and all the other social network companies have found out, it's difficult to get more money out of your users without growing the user pool. Facebook can't grow their userbase exponentially, which really puts a lot of doubt on their future growth potential.

My gut feeling is that the IPO was not driven by Facebook needing the money(which would be normal), but that all the private investors and VC funds wanted to get out. They wanted as much money as possible, which would explain the high valuation.

st0p• 14 years ago

If the market would have acted rationally, FB would never have IPO'd at 38 per share given their profits. Being valued at 105 billion dollar when your profit is only around 1 billion a year is insane, especially when you also account for the highly volatile nature of social networking (FB might be replaced by something we've never heard about in a couple of years)

InclinedPlane4• 14 years ago

The problem is that mobile is just one of their problems. They need to increase their monetization by an order of magnitude per user. This will require them going from a niche advertiser to taking over a significant fraction of all worldwide ad revenue, this is no small feat. They also need to tackle mobile better and respond to all the other competitive threats that will come their way in the next decade.

They have several thousand employees and a few billion in cash now. They need to pivot and scramble like crazy. If they don't they will end up on the wrong side of the inflection point and on a glide slope to obsolescence. I don't get the sense that people inside facebook see things the same way, I think they see themselves as the crowned king of social, and with the IPO they are transitioning to being a value company, which could not be more wrong.

ryanmerket7• 14 years ago

"This will require them going from a niche advertiser to taking over a significant fraction of all worldwide ad revenue, this is no small feat."

But it is small for Facebook. They already have the footprint with over 9 million sites all running the Like button. Utilizing that same JS they can have a 'Social Adsense' revenue stream overnight. They can potentially grab the search queries from the headers and have implicit and explicit data to target off of (the holy grail of targeting).

imcqueen• 14 years ago

I would also think that it's easier to build a mobile app/social network that competes with Facebook than it is to build a mobile OS/device that competes with Android/iOS.

Tloewald2• 14 years ago

Hmmm. It's very easy to build a mobile platform to compete with Android -- fork it. This is Google's problem in China and with the Kindle Fire. This is probably why Google's "success" in mobile hasn't been reflected by huge stock market gains.

The success of Android forks has also impacted iOS to some hard to measure extent (were it not for Android and Android forks, Apple would, I think, be even more successful in the mobile spaces it plays in).

ma2rten• 14 years ago

Honest question: Why do you think that a share price of $30 is appropriate? Facebook still has a P/E more 6 times that of Google or Apple. To me (I don't understand a lot about the stock market), $30 sounds just as arbitrary as $38.

brianlash• 14 years ago

The honest-to-goodness justification you're going to hear is that Facebook is a nascent company, the potential earnings of which are only loosely a function of current earnings. That's to be contrasted with the likes of Google, Apple, and others as those tech staples have more predictable future earnings potential, which is at least relatively more bounded by current streams of income from reliable businesses.

NOTE: This is not to say I think a P/E of 100 was remotely justified.

omonra4• 14 years ago

You shouldn't really look at stock price (it's an arbitrary number). You should instead look at Market Value - should FB be worth 80bn when Google is worth 200?

eshrews• 14 years ago

>But make no mistake: this is bad for Facebook. Sure some investors, Zuck and (maybe?) some employees made a few more dollars but Facebook doesn't need the money and neither do most of the investors. But that's incredibly shortsighted.

>Facebook's ability to retain and attract talent and make stock-based acquisitions is in large part determined by the health and outlook of their stock. If they'd IPOed for $20-25 and jumped to $30 then they would have a lot of momentum behind them.

Why do you think the momentum of their stock has an effect on facebook's ability to attract talent? That's certainly not something I'm looking at (future stock price, yes; current momentum, no). Facebook's stock performance thus far has not changed my view of the potential future success of the company, and I think anyone who has actually done their homework regarding the Facebook valuation would feel the same way.

InclinedPlane4• 14 years ago

To get and keep talent you need not just a good work environment but cold, hard cash. Paying employees with stock options and grants on a stock on the way up is a very efficient way to encourage people to work for you or to stay working for you. You can also pay people with actual cash, but that's significantly more expensive to match the same level of reward. People who worked through the elbow at Microsoft, Google, Amazon, etc. became millionaires. And there are plenty more elbows out there for the taking in silicon valley, in new york, and elsewhere. It can be hard to compete for and retain employees who are talented enough to earn their millions by seeking out some other company. This is a huge problem at Microsoft, for example, where the stock has been flat for a decade.

Certainly there are many good reasons to work at facebook, but how many of those reasons can make up for missing out on millions of dollars? This is all the more relevant right now because so many of the early employees have gotten their millions through the IPO, and that has all the makings of creating a cultural divide in the company between those who got theirs and those who haven't, and won't.

gregable• 14 years ago

Option based compensation usually has a strike price at the value of the company around the point of hiring. Options are more volatile than stock. If the share price drops further, the options would be worthless. As the share price rises, the option value rises even faster.

forgotusername• 14 years ago

As ever a useful analysis, however what may I ask is it that you do at Google of relevance to armchair generalizing like this, that causes you to disclose your employment every time you post? It seems to me it detracts from the merit of otherwise consistently excellent write ups, and almost encourages suspicion of bias.

greedo• 14 years ago

I feel it's always better to disclose any potential biases or conflicts of interest up front. Cletus could have appended it to the end of his comment, but many readers might TLDR and miss it.

joe_the_user• 14 years ago

There are only two parties hurt by this

This kind of statement first has to be qualified as "two parties immediately hurt by this. It is common for price moves in a well known stock to exert a strong psychological influence on similar stocks and on the broader market. All markets are subject to flux but where things have fluxed to currently, it seems quite possible that others could be "injured" here.

Sure Facebook's move could, might, be good for the tech industry if investor perception separated Facebook from the rest of tech industry. If not, it is easy for things to go from irrational optimism to irrational pessimism.

recoiledsnake2• 14 years ago

>There are only two parties hurt by this:

>1. The premiere clients of Goldman Sachs and Morgan Stanley who bought into the lie that FB should trade at >100:1 P/E; and

>2. Facebook.

Wrong. FB did crazy volume on the first day at $45 to $38. 580 million shares were traded and the total number of shares in IPO was only ~470MM IIRC. That does not mean that the big clients unloaded all their shares because of shares getting traded multiple times and by HFT, but the really smart ones(most of them I would guess) sold their shares above $38 and some even went short and are making bank now, while the retail investors and other financial companies who bought the first day are left holding the bag.

micaeked• 14 years ago

In the US, IPOs cannot be sold short for a month after they start trading.

grey-area• 14 years ago

Facebook is a platform company without a mobile platform in a world becoming increasingly mobile.

I agree that Facebook sees mobile as a serious problem, as evidenced by their planned foray into mobile phones, however I think it's a distraction and will be a money pit for them. Much as Microsoft felt they had to get into search to compete against Google (they still don't compete in a meaningful way), Facebook feels they have to compete in the mobile space, but will never be able to execute as well as Apple on hardware or Google on integration with web services. It's very hard to get right, and I doubt very much they have the product design talent and supply chain experience to pull it off consistently and long-term, and it is way off their main area of competence. I'd be very surprised if they do well with a mobile platform given all the challenges it presents - they should work on improving their offerings on the main platforms instead, otherwise they will have 4 Facebook app binaries instead of 3 to maintain, and no obvious advantage as most of the users will not be on their phone.

Mobile is a complement to other devices, and a way of accessing the web, it is not a new segment which is orthogonal to web use - I'd argue mobile has only become popular as handsets became capable of accessing the web fully, and mobile apps may or may not win out over websites for some services, but for websites like Facebook they offer no real advantages save more access to user hardware for uploading pics etc. - something that a website can offer with an API and third party apps. Mobile apps are of course competing with the desktop, and will continue to do so, but not really with websites, they usually complement websites and use their APIs, not replace them.

Facebook's real problem, and real competitor, is the open web.

Facebook has been opposed to opening up from the beginning, and has pursued a very successful strategy of corralling their users, and requiring anyone who wants to interact with the service to sign in and share their info - I'm constantly plagued by their login messages when I visit a page. At some point this walled garden is going to start feeling very restrictive - it only works if there is a continually growing, or at least not shrinking, pool of people using the service - if it feels like everyone is logged in all the time, otherwise it becomes a bit of an echo chamber, infested with spambots and spammy companies like Zynga, and if your friends don't bother to check it any more or post, what's the point?

I suspect as the gloss wears off Facebook, particularly if they make a foray into mobile and waste energy there, it will be harder and harder to keep users inside their bounded version of the web, and competitors without the barrier to entry for readers (sign-in required for all essential services), will come in and capture user interest, as pinterest has for example.

As to their stock price, given their current revenue/profits and potential future profits, I'm astounded anyone still believes it was worth > $20B in today's money.

callmeed• 14 years ago

I would add:

2(a). The Instagram team

700M of the 1B acquisition was stock. Assuming they didn't sell it yet, that's a good amount of money lost.

base698• 14 years ago

Those poor bastards! Now they can only afford the Gulfstream IV.

smashing• 14 years ago

I think Hacker News should be renamed Facebook news.

brown9-22• 14 years ago

Can anyone explain to me how the P/E ratio is a meaningful metric for a company's stock price and what it "should be" at when that company does not distribute earnings to the shareholders?

I don't understand why this metric is tossed around for stocks in which the regular shareholders receive no compensation for the shares owned (nor have any voting power for that matter). Owning stock in these companies seems like a pure speculation move, as the only upside to be seen in purchasing shares is that one day other people will value the share higher than the day you bought it.

marcusf• 14 years ago

Just an amateur, so speculation abound. But presumably, on the basis that other investors that you hope will value it higher will use the P/E ratio as a metric as well, and that it gives a comparative metric between "similar" companies. E.g. it's an often used metric just because it's an often used metric.

chromatic2• 14 years ago

Can anyone explain to me how the P/E ratio is a meaningful metric for a company's stock price and what it "should be" at when that company does not distribute earnings to the shareholders?

There are two ways to gauge the value of a company. One way (the way to which you allude) is to buy it and hope that in the future, someone thinks it's worth more than what you paid for it. Some people call this the Greater Fool theory.

The other way is to treat owning shares like owning part of a business. (You might hear about this as the Graham-Dodd or Graham-Dodd-Buffett model.) In this case you consider the value of the company as the current liquidation value of the company's assets plus the total amount of free cash the business can produce over its useful lifespan.

The math of that valuation gets a little bit interesting, because if you project the free cash growth into the future ten or twenty years, you can use a present value calculation to get a fair price for the company right now. Divide that by the number of outstanding shares and you get a target price per share.

One of the flaws of this method is that you need to have a sane sense of the growth rate of free cash, so you'd better base that on a stable and measurable history, and you have to verify that against sanity and the company's published plans.

Graham's real insight was saying "If you do all that work, also add a significant margin of safety to account for any flaws in your calculations."

Of course you shouldn't use reported earnings for these calculations; they're far too easy to manipulate under GAAP and accrual accounting. Even so, finding realistic numbers and ruling out most stocks as overvalued is relatively easy.

(I'm working on a financial analysis site right now.)

saket123• 14 years ago

If PE is so important why is LinkedIn http://www.google.com/finance?q=NYSE%3ALNKD not getting bashed as fb is. Both are kind of social networks (used differently with different target audience) . LinkedIn is trading at 600+ PE.

jcitme• 14 years ago

Because LinkedIn can monetize a lot easier than facebook can.

traughber• 14 years ago

Clients of investment banks in an IPO have a choice to invest or pass on the deal. There are many things they consider when making this decision, and the price of the deal is one of those. Assuming they are not given inaccurate information, they are not getting "bilked" by the banks if the stock goes down in the aftermarket. The clients know this is a possibility, and they chose to invest at $38 per share. Right now those shares are worth less than the offer price, which is disappointing to the clients, but they made the decision to invest at $38 per share.

SkyMarshal• 14 years ago

I think what cletus is getting at is that the orchestrated IPO pop has become SOP for tech IPOs, and it's nice to see it fallible for a variety of reasons:

0. Keeps people guessing.

1. The company got most of its IPO market value, instead of having a portion extracted by Wall St. insiders.

2. The 'bubble' got popped early, which is probably a good thing for most everyone but Wall Street insiders.

3. Wall Street's ability to orchestrate asset bubbles, whether coordinated or purely emergent, and profit off them at the expense of potential crashes and financial crisies later, just took a hit.

4. There's less or no irrational exuberance this time around. The market may actually have learned from the 2000 and 2007/8 crashes.

woodall2• 14 years ago

In 1 month the price will be back to, or above, the original IPO.

planetguy5• 14 years ago

And how much of your own money are you putting where your mouth is on that one? If you're right, you could make a lot of money with that bet.

woodall2• 14 years ago

This is just my prediction. In a month's time I'll read back over my comments and, hopefully, I'll see this, check, and have an answer.

MSM• 14 years ago

How much money did these people that "knew it would fail, of course!" put on shorting it when it was $35? If any of the people that "knew $38 was way too high" had done that, they'd be out counting their money on a beach, not sitting at their desk.

It's all just hindsight garbage.

arturadib• 14 years ago

Alternate title: FB down 20%+ since IPO

You'd be gambling enough already if you bought FB stock at 20x earnings (the tech norm for well-established companies), let alone at 100x.

At 20x, you'd be speculating on FB's ability to sustain its current earnings power in an increasingly competitive and verticalized space. That's a tough proposition, particularly since social graphs are not as much of a competitive moat as people thought (Orkut for example had at some point virtually the entire online population of Brazil engaged with it, virtually none now), and everybody and their mother is investing in a new social network for a different vertical.

Of course, it is entirely possible that FB will not only maintain its market position, but also increase its earnings power five-fold or whatever. In that scenario, they would have squashed most other vertical social networks and found a sustainable business model (they haven't really yet, see [1]).

Again, not impossible, but bear in mind what assumptions the current valuation implies. It's not surprising to see the market re-adjust its valuation after the IPO craze.

[1] http://cdixon.org/2012/05/15/facebooks-business-model/

r00fus• 14 years ago

The social graph is not their moat. It's the ubiquity. It's a Microsoft-angle, to dominate "social" and become a de-facto identity provider.

That the social graph feeds ubiquity and vice-versa is what makes the proposition appealing.

Google+ is about the only real competition, and it's really designed for a separate purpose.

stonemetal• 14 years ago

I know everyone keeps pointing to the 100:1 P/E but with 900 million active users that is more than 100 bucks per user. Is the average FB user worth 100 dollars to FB?

jamesbressi• 14 years ago

If your math is right, then yes I think anyone would agree that the mind share of each active user on FB is worth even more than $100 bucks.

But, the problem is they have not proven they can monetize those users efficiently and effectively yet.

I remember when everyone questioned how Google was going to monetize on their traffic and they figured it out and hopefully FB will too.

The one interesting thing that is a big difference between Google and FB though is that Google had "traffic" and FB has a group of people hanging out so to speak. You would think that FB has the better potential to maximize monetization of customers, but how remains to be seen.

jdavid• 14 years ago

The problem with Facebook isn't about what a user's worth to the company, it's what the company is willing to do to make a user worth $100 or $1000.

qeorge• 14 years ago

Considering Google's ARPU is ~$30, and Facebook's users aren't nearly as valuable as Google's (IMO), that's a big hell no.

cube133• 14 years ago

To be fair, FB doesn't need to get $100/user to be worth the $100 billion valuation.

Realistically, they need to be making somewhere on the order of $6.7 billion/year to have a "healthy" P/E of 15.

So, assuming that costs scale linearly with profit(they won't), FB needs to really be making around $25/user for the $100 Billion valuation to have a healthy P/E.

molmalo• 14 years ago

Also, you should consider that $25 is way different for users from different countries. Its not the same to get that money from someone in the USA than from someone in Brazil (it's second market), India (3rd), Indonesia(4th), Mexico(5th), Turkey(7th), etc... [1]

Business in those countries will not pay the same to publish their ads in FB, simply because the expected return will be lower.

[1] http://www.socialbakers.com/facebook-statistics/?interval=la...

coreyo• 14 years ago

This is exactly how companies get sucked into the quarterly chase of Wallstreet. Facebook shouldn't be concerned and neither should you.

vibrunazo• 14 years ago

Wanna see something cool? Put FB and ZNGA side by side on the graph:

http://www.google.com/finance?chdnp=1&chdd=1&chds=1&...

slug• 14 years ago

I always do that when there's a post about facebook stock and it's quite entertaining to seem those two go side by side on the up-down roller coaster.

usaar333• 14 years ago

Why does Google show a market cap of only $62B? If the $38 IPO was a $104B valuation, $29 should be $79B

3pt14159• 14 years ago

I've been wondering that myself. Perhaps multiple share types one of which isn't on the market so it has a fixed price?

raldi• 14 years ago

http://www.quora.com/What-is-the-difference-between-market-c...

betadj• 14 years ago

An internet legendary destroyed by wallstreet.

bigdubs• 14 years ago

This view is actually false. I should probably respond to a more visible comment but this will have to suffice.

The winners in the IPO, and this has been said before (not just by me), is facebook and zuckerberg. The losers are the underwriters and their clients who the underwriters placed the stock with (and now, the rest of the retail investment market).

Typically an IPO is priced such that 'insiders' are getting a better deal than the retail investors will have when supply starts to open up. This IPO, that methodology was reversed. It was a huge stock->cash dump, and will benefit $FB near term because they have some 20+bn in cash now, but probably ruin them long term because of the reputation hit they took, and the prevailing view that their stock is worthless.

TL;DR; facebook screwed wallstreet more than it got screwed by wallstreet.

greg7mdp• 14 years ago

under $29 now! How low will it go?

agumonkey• 14 years ago

is there a point after which a decrease fulls itself ? I know nothing about stock market, first day drop might signals frailty or wrong pricing but won't stable negative continuity trigger a global resell reflex ?

offshoreguy1• 14 years ago

No surprise. It was grossly hyped and over valued. It's marketable price is being determined by the markets.

electic• 14 years ago

You would have to be nuts now to even think about taking a job at Facebook and if you are there, I'd think about leaving in all seriousness.

I predict that Facebook is going to have a hard time hiring good talent now. This is one of the downsides of filling up your stock with a lot of hot air. It's all short term gain.

h84ru3a2• 14 years ago

Let's look at this in simple terms. Let's look for evidence of a "business model".

Website becomes popular.

Website gets personal details from users: email, maybe photos, address, etc., plus it gets a list of "friends" for each user.

Website shows display ads.

(Website gives birth to games company. Games company goes public then loses half its value in two months.)

Does website have a "business model"?

Wait, we're not done.

Website monitors everything users do on the website as well as, to the extent they can, the other websites users visit, using web beacons scattered across the web (Like buttons, aka "Facebook Connect").

Website shows display ads.

Do we have a business model yet?

But wait, there's more.

Website goes public and raises a heap of easy cash.

Website acquires a web browser, produces a mobile phone and begins monitoring everything users do on the web and every conversation they have with their friends.

Website shows display ads.

Do we have a business model yet?

Or is this just lots and lots of spying, information collection and dreaming that this is somehow useful for business?

Display ads are not a business model that will grow a business, unless the business is itself a display ad company.

(And Google already acquired those guys years ago.)

Tichy• 14 years ago

I thought they are already making money.

h84ru3a2• 14 years ago

They made money in the past, as more and more users kept signing up and using the site (more new eyeballs on the display ads). We're looking to the future now. What happens when the number of new users starts to slow down? As a public company, there is increased pressure for it to perform and to grow. Increasing the enormous net worth of the CEO and some insiders and then gradually fizzling out is not, one would think, the objective of a corporation that goes public. The usual reason companies raise money through IPO's is to grow the company.

josscrowcroft• 14 years ago

So should I buy Facebook stock while it's low? Confused.

bourdine• 14 years ago

I think, the Facebook stocks down is not so tragic. Zuck well know what is real price of Facebook stocks and can take a bull strategy. And if it, this terrible falling is not so terrible for Zuck. It just my point of view, but it have some chance to be a real picture.

I'm agree with many hn's that mobile is a general way for today Facebook. But today main Zuck plan look like a only increasing ads on Facebook - I'm talking about new Promote button - http://www.socialbakers.com/blog/587-get-ready-4-new-faceboo... Let me be honest - I'm not undersand Zuck. He have long war with Google for search traffic but still not released a Facebook Search. He can build a many new sections with new features (with ad) but still not. Well, he can experience with new brand pages (bild a new guidline and start migrate website inside Facebook and host it) or choose a absolutley new way of monetization (they are obvious) but this all still do not. I think, Zuck must hire a new CEO and calm down, then stocks can grow up to $160-$220 and more.

denzil_correa• 14 years ago

Facebook is currently trading at 28.8, Down 9.62% [1].

[1] http://www.google.com/finance?chdnp=1&chdd=1&chds=1&...

Facebook trades under $30, down 7%+

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