Facebook Could Spawn Thousands of Milionaires

Hugh Pickens writes "Retuers reports that the world's No. 1 online social network is preparing for a blockbuster initial public offering that could create thousands of millionaires as Facebook employees past and present begin hatching plans on how to spend their anticipated new wealth. 'There's been discussions of sort of bucket list ideas that people are putting together of things they always wanted to do and now we'll be able to do it,' says one former employee who expects his shares to be worth $50 million and is planning to book a trip to space with Virgin Galactic that would cost $200,000 or more. 'It's been a childhood dream.' Another group of Facebook workers has begun laying the groundwork for its own jungle expedition to excavate a relatively untouched site of Mayan ruins in Mexico that sounds like Raiders of the Lost Ark. But for many of Facebook's staffers, the IPO will provide the means to pay off school loans and buy a house or new car and many homeowners and real-estate agents are eagerly anticipating a surge of new buyers that could push prime real estate to new heights. 'If a Facebook guy buys a house and wants to remodel it, maybe the contractor will buy another car,' says Buff Giurlani. 'Maybe the realtor will put a car in. There's a trickle-down effect.'"

Comments

Bull

[Spad]

That's not a "trickle-down effect", it's just economics. If *I* buy house and want to remodel it, then I might get someone to do it, who will - shock, horror - be paid for it and they might then spend that money on something. That's how our economy works.

The idea that because these people will have lots of (potential) money in the form of Facebook shares means that they're going to spark some kind of economic boom is ludicrous; sure, some of them might go on spending sprees, others will probably invest it, others will keep all their shares in the hope the prices will go higher, but on average it won't make any significant difference to the economy as a whole.

What money?

[unassimilatible]

The money will come from an IPO, not "stolen" from any workers (my understanding is that FB actually pays their workers and does not use slave labor). Investors - many if not most of them will likely be these poor little "workers" you speak of and their pension funds - will buy the stock on IPO day.

There are ways to make money apart from someone else handing you a paycheck.

Re:Thousands of millionares?

[Alex Belits]

So maybe the 1% will become the 1.1%?

0.1% of US population is 300,000 people. Even if those were "only" millionaries (that are actually about 5% of US population), that would require 300 billion dollars, or almost the whole Apple market cap (Google wouldn't suffice).

Re:Score one for the engineers

[Dunbal]

Yet, hearing about these Facebook wanks getting rich feels like a hollow victory.

Don't worry, the banks and lawyers that are negotiating the IPO deal are getting far, far richer and up front, too. Feel cynical again?

No bubble here.

[Colin Smith]

Noo. Up up and away. Yes the company is worth 100 billion, more. Just step right up and get your share certificates, hot from the press.

Nooo bubbles here. Social 1.0 isn't a fad or a bubble at all. Bet your grandchildren on it.

P. T. Barnum would be proud.

Note: Facebook is valued at a P/E of ~125. 12 is about average.

Re:No bubble here.

[MalleusEBHC]

Note: Facebook is valued at a P/E of ~125. 12 is about average.

That's the average for an established company. IPOs and other companies with strong growth potentials often have much higher P/E ratios. For example, Google's P/E was well over 100 when they went public, and now it is down to 21 as they are a much more mature company. That said, distinguishing between companies with strong growth potential and irrational exuberance is extremely difficult. I think Facebook falls in the latter camp, although certainly not with enough confidence to put my money where my mouth is.

Re:No bubble here.

[Half-pint HAL]

That's the average for an established company. IPOs and other companies with strong growth potentials often have much higher P/E ratios.

The problem with that statement is it assumes all IPOs are "new" companies. Facebook is (in my book) mature. They've reached saturation, they've driven their main competitors out of the market, and they have an established revenue stream (which isn't particularly impressive).

Re:Trickle down?

[bev_tech_rob]

I think the OP was thinking about Zynga......where you give up your options or face termination....was an article about that recently...

Re:No, that is not how it works

[FatLittleMonkey]

The hypocracy being, the protesters sitting in the public parks, parks paid for with taxpayer money

Zuccotti Park is privately owned. That's why it was chosen, it wasn't subject to NYC's public park curfew laws.

Trickle down economics.

[FatLittleMonkey]

The reason why people are suspicious of trickle down economics is that when you're being trickled upon, the only thing you see above you is cunts and assholes.

Re:Trickle down

[TheRaven64]

The reality is that before all of the regulations and the Fed existence and before FDIC the banks never failed institutionally, as in - they never had a government giving them free money and preventing any potential competition

No, they went bust individually and people who happened to have accounts with those banks suddenly found that they were broke. Loans owed to the bank would be transferred to whoever bought them from the bankruptcy, but people in credit at the bank would have their savings wiped out. Customers had no way of evaluating how safe banks were, because the banks were not required (by evil regulations) to disclose how much capital they had nor what form it took.

Not on Credit.

[alexander_686]

Almost no stocks are bought on credit. And IPO's can't.

It's been a while since I have been in that particular corner of the industry, so my figures might be a little out of date. But in late 1999 / early 2000 margin loans were less then 5 percent of retail accounts, and less then that for institutional accounts.

Now, what you are saying makes a lot of sense if we were talking about pre-1930 gold standard no federal reserve economy tied to the farming seasons. Then you might have a leg to stand on.

Re:I didn't get any money from the Fed

[AuMatar]

Or he saved up money. I'm a small investor, and it's extremely rare for me to have any margin loans. Most of the time I'm 12-25% cash, so I can buy on dips. How did I get the money? I saved, spending only a fraction of what I make every year. Even if I was borrowing on margin it wouldn't be safe to borrow more than an additional 10-15%, otherwise I'd risk losing everything on a margin call.

There's plenty of criticisms to make on the stock market (it's basically legalized gambling, especially when investing for price increases rather than dividends), but this one is completely invalid.

From someone that lives in the Silicon Valley

[HockeyPuck]

The trickle down effect here will be that housing prices will continue to go up, making it much harder for those that are not part of IPOs to get into a home (either first time).

Housing in the Silicon Valley is already brutal. A "starter home" which is 3 bedroom, 2.5bath and about 1600sq ft is already at $500,000. And that is in a neighborhood that doesn't have "desirable schools." Oh yeah and you're 10ft from all of your neighbors. We're not talking acreage here.

What if you want to have "desirable schools"? Then that exact same house would cost about $1million.

I've always told people when they consider living in the silicon valley, move here right out of college. That way, since you're used to being poor, it'll be an easy transition. Try selling your 3000sq, $300k home in RTP North Carolina and moving out here with a family of 5.

Re:I didn't get any money from the Fed

[khallow]

There's no way that you, on a middle class income, accumulated the $15 million necessary to break into the top 1% of net worth.

You mean somewhere around $9 million. And IMHO someone who's been investing most (not merely 10-20%) of their middle class income for many decades can indeed hit that.

Re:I don't think that word means what you think

[shutdown -p now]

GP wrote:

In fact, it's lifted my middle class family well into the "one percent" (net worth).

So it's not about income, it's about total assets available. In 2010, you needed roughly 9 million dollars to be in 1%.

Even from income perspective, your take is wrong. Just because median household income is $67k, doesn't mean that anyone above it is not middle class. $150k per person (which can translate to $300k per household) is rare but possible for a salaried employee, and is still middle class.