FB new low (18.23), down 52% from 38 IPO price(google.com)
google.com
FB new low (18.23), down 52% from 38 IPO price
http://www.google.com/finance?q=NDA:fb
52 comments
The reason why this cross is important is because it dropped more than 50%. Regulation T, which governs margin requirements in most accounts, says that you are allowed to borrow up to your cash balance to buy shares. So if you had 1900 dollars in your account (for simplicity of math), you could borrow 1900 more dollars to buy FB shares (3800 dollars = 100 shares). Now that FB dropped below 19 (and it looks like it'll close below 19), basically those investors lost ALL of their money (the value of the shares is now 1825, so your equity in the position is 1825[current value] - 1900[borrowed money] = -75) and we should expect another wave of selling pressure as those investors are forcibly closed out of their positions.
The importance is that institutions may decide not to participate in future IPOs (or may do so with weak uptake).
The importance is that institutions may decide not to participate in future IPOs (or may do so with weak uptake).
They were downgraded, that probably is partially leading to the drop:
http://news.investors.com/technology/083112-624214-facebook-...
Can anyone clarify whether the IPO was technically at $38 or $42? On the day of the IPO, everyone in the press was saying the price was $42. But now a lot of the online charts (google finance, yahoo finance, etc.) are showing it opened at $38. Obviously there were a lot of technical glitches that morning. What is going on here?
The IPO price was $38. When it opened the price rose to $42 in early public trading before the price started to fall.
http://www.businessinsider.com/this-is-what-traders-saw-when...
http://www.businessinsider.com/this-is-what-traders-saw-when...
I believe it IPOed at $38.
"The $38 IPO price is the rate at which Facebook's underwriters will sale shares to their clients."
http://money.cnn.com/2012/05/17/technology/facebook-ipo-fina...
"The $38 IPO price is the rate at which Facebook's underwriters will sale shares to their clients."
http://money.cnn.com/2012/05/17/technology/facebook-ipo-fina...
38 dollars per share was the price that the institutions who participated in the IPO paid. Facebook received slightly less than that.
Investors who paid 42 per share at the IPO received shares from the underwriters.
Investors who paid 42 per share at the IPO received shares from the underwriters.
The very first trade of a stock in the open market is by most accounts considered the IPO price or opening bid which for FB was 42.05. The IPO offer price was $38.
http://seekingalpha.com/article/217235-ipo-offering-vs-openi...
http://i.stack.imgur.com/35bNv.jpg
http://seekingalpha.com/article/217235-ipo-offering-vs-openi...
http://i.stack.imgur.com/35bNv.jpg
Worth to say thou that the real price was 42$ in fact. I bought via my bank and I could not get a trade confirmation for days (even big banks like UBS did sue about this) so it was more 42$ than 38$ for the few unlucky :)
Okay, I feel crazy but I definitely thought the IPO was $50, or I'm positive that I read that somewhere. Looking on google it seems like that was the expected price jump on the first day.
[deleted]
It is going to be a bumpy road if they miss future earnings estimates. Negative sentiment around this stock is strong.
I said it when it first IPO'd that this would be bad. Investors were looking at this company as they did many other things they invested in. What they couldn't understand is that IT IS NOT like the others. It is a social network. People tend to move on and get tired of them. I don't care what the numbers say, they could be misleading. I stopped going on facebook. And when I do go on, my 1000 friends or so don't have much posting going on. It has become pretty much a more popular version of photobucket or flickr. And when I go on, I don't get that "feeling" that I used to when I used to go on back in the days. A lot of my friends have deactivated and most others aren't on much. Unsuprisingly I might add.
"Investors were looking at this company as they did many other things they invested in."
tl;dr: Investors were looking for the IPO pop and then dumping it. Problem is, if everyone follows that idea, there's no upside left.
It was obvious from when FB first started trading on SecondMarket that the "IPO pop" would happen before the IPO. The IPO pop stems from a supply/demand mismatch (lots of people want to get in but are unable to). And because the accredited investors got in before the IPO, the only people left were "retail" investors (and we know how that story ended). Many analysts and investors don't understand that key point, which is why a lot of people were caught with their pants down.
tl;dr: Investors were looking for the IPO pop and then dumping it. Problem is, if everyone follows that idea, there's no upside left.
It was obvious from when FB first started trading on SecondMarket that the "IPO pop" would happen before the IPO. The IPO pop stems from a supply/demand mismatch (lots of people want to get in but are unable to). And because the accredited investors got in before the IPO, the only people left were "retail" investors (and we know how that story ended). Many analysts and investors don't understand that key point, which is why a lot of people were caught with their pants down.
Compare that with SPLK. Apparently there's something to this whole 'build stuff people will buy' thing.
Let's compare, shall we? Last year, Splunk lost a few million dollars on revenues of 66M. Facebook profited $1BN on revenues of 3.7BN.
Guess there's something to businesses that generate lots of snarky comments.
Guess there's something to businesses that generate lots of snarky comments.
Funny, I just today found Splunk, when I was searching for sparkline implementations and theirs was open sourced. I browsed a bit and thought this is a cool company, which I need to evaluate for investing. A tad too late to benefit from today's spike in SPLK's price...
They should just start charging a couple of bucks a year to use the damn thing. They have so many users even if some drop off they would still be making money.
(I don't use it so it's easy for me to say)
(I don't use it so it's easy for me to say)
It wouldn't be some, itd be most. What make FB appealing is that so many people use it. If most drop off, it would be less appealing and the amount of people willing to pay would be even less.
Or freemium servicing.
This makes me want to start buying up shares just so I could brag to friends saying I bought it when it was super low. Probably not a good reason, but the heart wants what the heart wants.
this isn't super low. $1-2 will be super low.
I plan to buy it if it falls to 4 dollars or less.
I bet it won't fall that low. $4 would be valuing the company at about 10x their 2011 income of $1B, which is extremely low for a company expected to grow. I wouldn't expect to see a valuation under 20x, or about $7-8 per share. My guess is ~$10 per share is the floor on this one.
http://www.forbes.com/sites/tomiogeron/2012/02/01/facebooks-...
http://www.forbes.com/sites/tomiogeron/2012/02/01/facebooks-...
Is Facebook really expected to grow that much? Even counting the 13% or so fake accounts, they have around 800 million active accounts.
That's a bit over 10% of the world's population. They can't really get the growth that's expected with their P/E, especially because of the difficulties that they're having with getting higher returns/user. They can't grow their userbase by that much either.
That's a bit over 10% of the world's population. They can't really get the growth that's expected with their P/E, especially because of the difficulties that they're having with getting higher returns/user. They can't grow their userbase by that much either.
What keeps the stock up is the idea that one day they may do something other than ads, and sell something to their user base.
I don't know if there is an example of a public internet company that was able to transition from being an ad-base business into selling stuff. The closest may be LinkedIn, who's selling recruiter tools and premium memberships. However, LinkedIn had been doing that before the IPO, as a relatively small company.
I'm skeptical that Facebook can pull this off in a reasonable time frame, but shareholders who are psychologically anchored to the IPO price are probably more optimistic.
I don't know if there is an example of a public internet company that was able to transition from being an ad-base business into selling stuff. The closest may be LinkedIn, who's selling recruiter tools and premium memberships. However, LinkedIn had been doing that before the IPO, as a relatively small company.
I'm skeptical that Facebook can pull this off in a reasonable time frame, but shareholders who are psychologically anchored to the IPO price are probably more optimistic.
What keeps the stock up is the idea that one day they may do something other than ads, and sell something to their user base.
Which sounds remarkably similar to the way people thought about companies during the dotcom boom: Get the users first, figure out how to make money off of them later. Facebook's admittedly got one key difference from companies during the dotcom heyday, which is that instead of a burn rate it has this thing called 'revenue'. But that aside, at least for a while investors seemed to have fallen back into the old trap of thinking that the monetary value of a user isn't somehow tied to the amount of income they provide.
Maybe Facebook will figure out something else. . . but if nobody's sure what that is right now then it's still an Underpants Gnomes[1] business model.
[1]: http://en.wikipedia.org/wiki/Gnomes_(South_Park)
Which sounds remarkably similar to the way people thought about companies during the dotcom boom: Get the users first, figure out how to make money off of them later. Facebook's admittedly got one key difference from companies during the dotcom heyday, which is that instead of a burn rate it has this thing called 'revenue'. But that aside, at least for a while investors seemed to have fallen back into the old trap of thinking that the monetary value of a user isn't somehow tied to the amount of income they provide.
Maybe Facebook will figure out something else. . . but if nobody's sure what that is right now then it's still an Underpants Gnomes[1] business model.
[1]: http://en.wikipedia.org/wiki/Gnomes_(South_Park)
FB can grow either by increasing it user base as you suggest, or by monetizing it's users better. So if it say increases usage by 5x and monetization by 5x you are looking at a 25x multiplier. Will this happen, I have no idea.
Unfortunately for Facebook, this is fighting a few trends. users numbers have gone down in the US and Britain [1] and mobile usage is going up [2], and Facebook is having a much harder time monetizing mobile over the web.
I agree with your general premise however, that Facebook's primary growth won't be on the user base, but needs to be on the revenue per subscriber numbers. This is going to really test one of the Valley's most recent premises, that building a massive user base will also create a massive business (Twitter, Instagram I'm looking at you...)
[1] http://www.telegraph.co.uk/technology/facebook/8573340/Faceb...
[2] http://www.forbes.com/sites/ericsavitz/2012/05/09/facebook-t...
I agree with your general premise however, that Facebook's primary growth won't be on the user base, but needs to be on the revenue per subscriber numbers. This is going to really test one of the Valley's most recent premises, that building a massive user base will also create a massive business (Twitter, Instagram I'm looking at you...)
[1] http://www.telegraph.co.uk/technology/facebook/8573340/Faceb...
[2] http://www.forbes.com/sites/ericsavitz/2012/05/09/facebook-t...
We actually have (at last public announcement) 955 million monthly active users.
"expected to grow"
i'm still waiting for the famous growth numbers to be made public. everyone talks about growth, but FB has not made estimates/target numbers available.
i'm still waiting for the famous growth numbers to be made public. everyone talks about growth, but FB has not made estimates/target numbers available.
I originally said the same at at $10, which it's on track to hit. Sentiment is making me reconsider...
It may bounce back or firm-up. Hard to say. They have a lot of great minds.
great minds != great stock
Bell Labs had great minds, but that didn't mean that the legal entity managed their innovations well ...
Bell Labs had great minds, but that didn't mean that the legal entity managed their innovations well ...
Very true. Some large tech companies now still have pretty horrendous stocks. Microsoft has been flat for like a decade and it's still an industry leader which is counterintuative to people who don't know that much about the market.
I'm sure he meant that they could, in theory, utilize their brilliance towards kickstarting something business oriented to reverse the sentiment. For whatever reason though, Mark seems more interested in Frank Gehry's NASA hanger than actually making money. It's a big fucking revelation to him that people in finance actually care about financials. Who knew?
The whole situation really makes me think how much the current funding model as just a glorified legal ponzi scheme: More users, more funding, more users, more funding, IPO & profit.
I'd say most of the better business minds were the investors and the prudent ones have already sold. I'm convinced Eduardo Saverin is really the genius of the entire group. He sold shares right before the IPO, renounced his US citizenship, and moved to Singapore. He may have been screwed over by Facebook before but he gets the last laugh now that he sold his shares for double what their worth and got to avoid some taxes while doing it :)
In contrast, Mark choose to be more of a Sean Parker - a great creator of free products and, thus far, a fairly lousy businessperson. Companies like Spotify are amazing for users yet that doesn't stop them from losing millions each month in licensing. These companies dig themselves into holes from the very beginning and simply pray the financial problem fixes itself. My opinion and seemingly that of investors is that there is no indication that it will until the model itself is changed. Recent IPOs all tell the same story: that businesses not built with long term viable business models have trouble performing well on the market. Until "free" can work like Google enables it to in more companies, nobody is willing to bet on the hole not getting deeper without the likelihood of a larger round to keep these failing companies afloat.
I'm sure he meant that they could, in theory, utilize their brilliance towards kickstarting something business oriented to reverse the sentiment. For whatever reason though, Mark seems more interested in Frank Gehry's NASA hanger than actually making money. It's a big fucking revelation to him that people in finance actually care about financials. Who knew?
The whole situation really makes me think how much the current funding model as just a glorified legal ponzi scheme: More users, more funding, more users, more funding, IPO & profit.
I'd say most of the better business minds were the investors and the prudent ones have already sold. I'm convinced Eduardo Saverin is really the genius of the entire group. He sold shares right before the IPO, renounced his US citizenship, and moved to Singapore. He may have been screwed over by Facebook before but he gets the last laugh now that he sold his shares for double what their worth and got to avoid some taxes while doing it :)
In contrast, Mark choose to be more of a Sean Parker - a great creator of free products and, thus far, a fairly lousy businessperson. Companies like Spotify are amazing for users yet that doesn't stop them from losing millions each month in licensing. These companies dig themselves into holes from the very beginning and simply pray the financial problem fixes itself. My opinion and seemingly that of investors is that there is no indication that it will until the model itself is changed. Recent IPOs all tell the same story: that businesses not built with long term viable business models have trouble performing well on the market. Until "free" can work like Google enables it to in more companies, nobody is willing to bet on the hole not getting deeper without the likelihood of a larger round to keep these failing companies afloat.
Some small additional info:
http://uk.reuters.com/article/2012/08/31/uk-facebook-shares-...
http://uk.reuters.com/article/2012/08/31/uk-facebook-shares-...
If you thought $38 was a good price, this must be a good time to buy some more with the prices low.
> If you thought $38 was a good price, this must be a good time to buy some more with the prices low.
Only if you never factor in new information to your decision making.
If you $38 was good with the assumption that there would be a pop to $50 then now you wouldn't buy as it's now clear there won't be a quick pop that gets you to $50.
Only if you never factor in new information to your decision making.
If you $38 was good with the assumption that there would be a pop to $50 then now you wouldn't buy as it's now clear there won't be a quick pop that gets you to $50.
$4 - $7 might be a good price to buy at, might.
Hmmm... Isn't facebook still growing? aren't they making money? aren't they expanding?
Yes. But the question is "how much?"
If I offered you FB stock at $10,000, what would you say? "Too much", I hope.
If I offered you FB stock at $0.05, what would you say? Probably, "Hell, yeah, that's a bargain".
So there's a rational price that the market agrees upon, within certain boundaries. The market seems to agree that the IPO overpriced the real market value of the shares. It's a real time machine that tells us what people think the shares are worth.
If I offered you FB stock at $10,000, what would you say? "Too much", I hope.
If I offered you FB stock at $0.05, what would you say? Probably, "Hell, yeah, that's a bargain".
So there's a rational price that the market agrees upon, within certain boundaries. The market seems to agree that the IPO overpriced the real market value of the shares. It's a real time machine that tells us what people think the shares are worth.
[deleted]
But seriously, is there something about Facebook that hit the news that is leading to this drop and is worth discussing? Or is this just to spur some discussion on stock price speculation? If the former, what's the news? If the latter, what's the point?