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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.'"
This is exactly what everyone needs, a bunch of people believing they are going to be rich soon.
Contrary to the popular belief, there indeed is no God.
As opposed to the spending that would have been done had the money not been looted from the workers to begin with. If we're serious about getting out of the recession, perhaps we ought to do something radical like beef up worker protections and protections for small businesses.
As for FB, my bet is still that it goes the way of MySpace before too long.
So maybe the 1% will become the 1.1%?
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.
... will sell their stocks ASAP. Social networking is the next bubble and those who hold on to their stock as speculators will end up taking a bath. I would recommend the first ones who get their stock sell it within a month or less and then figure out what they want to do for a real job once the bubble bursts.
Damn_registrars has no butt-hole. Damn_registrars has no use for a butt-hole.
Instead, IF this were to even happen, and I thought trickle down economics died when Reagan's body finally followed his brain, then what would REALLY happen is that the 1% become 0.9%.
Average income, ever heard of it? Well, average income is the total of all income divivded by the number of people with an income. The more people have a high income, the more people need to make a low income to compensate.
If you got 10 people and they average an income of 1000 then the total is 10.000. But if one of them makes 10.000, then the average is still a 1000 as long as the others make zero.
Now, do a fun lookup. Research the average wage in the US and look up how much say a Bill Gates make. Then realize how many people are begging on the street so Bill Gate can be so rich.
That is how the whole 1% vs 99% works. And more people becoming millionaires doesn't do anything but make far more people poor.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
That doesnt mean you treat the people on top like deities while treating regular US citizens with contempt.
Twitter supports and protects racists - by smearing their critics with the "Hate Speech" label.
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.
Slashdot "libertarians": Small government for me, big government for those I disagree with. -1, I disagree with you
The only real 'trickle down' is in production, not in consumption. People who invest their savings into businesses create opportunity for new products, new services, new jobs and new investments for others. That's the only real trickle down and what is called 'trickle down' in modern society is no such thing. 'Trickle down' based on spending is very limited, very narrow and is sporadic (so somebody spends a few hundred thousand dollars today, he is not going to spend the same amount tomorrow).
Besides, any spending that takes place disperses the investment capital and makes it less likely to be used as an investment. The real trickle down is working very well, but it's working in China, not in US or Europe. It's working where people invest and produce.
As a side note any taxes also destroy investment capital and prevent economy from growing for the same reason - this stuff is not used for meaningful production, only to subsidize consumption one way or another.
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PS. I said it on 16th of September that holding deposits in banks has become dangerous, because banks will just steal the deposits.
On October 25, 2011 MF Global reported a $191.6 million quarterly loss as a result of trading on European government bonds. On October 31, 2011 MF Global filed for Chapter 11 bankruptcy. Depositors lost money, not 'investors' or traders - depositors. The bankers are now stealing deposits as I said they would, so stay clear of banks.
You can't handle the truth.
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).
Contrary to the popular belief, there indeed is no God.
Virtually all of that money will go into the general economy. The only part that won't will be a relatively tiny portion that will be invested in precious metals, typically less than a percent. All the rest will:
* be invested in other companies, either directly through stocks or indirectly through the banking system
* be spent on consumer goods and services
* be spent on real estate and the upkeep of real estate
* be donated to charity
* be paid to the public sector as taxes
* be invested in the public sector as bonds
The notion that wealth "trickles" down is total bullshit. It's like a flat-earth theory of economics.
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?
Seven puppies were harmed during the making of this post.
That is how the whole 1% vs 99% works. And more people becoming millionaires doesn't do anything but make far more people poor.
When opportunity is largely taken away by virtue of things like offshoring and the general contempt of regular, nonbusiness-owning people through things like contracted labor, you are correct.
The damage is done through their influence, not their wealth though. Any perceived expansion of the pie is negated by the influence that converts a dynamic pie into a near-fixed pie.
Twitter supports and protects racists - by smearing their critics with the "Hate Speech" label.
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.
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The good. the IPO will provide the means to pay off school loans and buy a house or new car.
It is good to get out of debt and solidify yourself.
The Crazy. 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 is crazy to become wealthy then chance it all on being shot into space.
The Disgusting. real-estate agents are eagerly anticipating a surge of new buyers that could push prime real estate to new heights
Agents that can't wait to pump up the prices on homes in anticipation for a very small number of potential clients.
Having to work for a living is the root of all evil.
Really ? I think you have maybe a couple of hours.
Note, there will almost certainly be a hold clause on the stock for normal employees. The ordinary employees will have to hold the shares for a specfic minimum period. This allows the management to dump their shares at the peak price, before the bulk of the supply of shares kicks in.
Groupon dropped from 26 to 16 inside a week. They're still making a loss but there's some muppet out there buying them.
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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.
Science is all about firing a drunk pig out of a cannon just to see what happens.
Could someone explain to me how this has a net positive effect on the economy when the reason that the facebook employee made money was because he sold some of his shares to an investor, meaning the investor moved money *into* the stock (which suggests that the investor moved money out of the economy* and into the stock)? Now I suppose the investor has a finite amount of investment money, so he probably shifted money out of other stocks (rather than the economy*) which suggests that other stocks would take a small hit in stock price (since there's a relatively less demand for them), which affects other investors. It just sounds like the whole process would result in a net neutral effect on the economy - i.e. a Facebook employee might buy a new car which helps the economy, but another investor somewhere bought that facebook stock which takes the same amount of money out of the economy (at a different geographical location).
* By "the economy" I mean spending it on consumption.
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.
I'm an individual retail investor, and I've done quite well in the market, thanks. In fact, it's lifted my middle class family well into the "one percent" (net worth).
Of course, I remain unconvinced FB can sufficiently monetize all those users to make the IPO a good deal for the average innvestor. But the point of the OP was that the workers were somehow being stolen from when they are already holding FB stock and will be enriched come IPO day. Just makes no sense.
Slashdot "libertarians": Small government for me, big government for those I disagree with. -1, I disagree with you
Typically employees can't sell their shares until at least six months post-IPO.
The SEC required a 2-year wait until the early 1990s. Which is partly why IPOs that ran way up after the IPO and then crashed were so popular during the original dot-com boom.
How much is Facebook really worth, anyway? Let's look at the numbers. Facebook revenue for 2010 was $1.86 billion. Goldman Sachs, which makes a private market in Facebook stock, sent a report to their investors indicating Facebook earned $355 million in the first 9 months of 2010. That would be $473 million for the year, for a 25% profit margin. Of course, those are unaudited numbers. When the SEC filings take place for an IPO, they may decrease as accounting gimmicks are disclosed and discounted.
The next question is, do we value Facebook as a growth company or an ongoing company? Let's look at Facebook's traffic stats. Traffic went up steadily until mid-2011, when it peaked. (Before Google+ started, incidentally.) It's been down a bit since then. So Facebook may have maxed out and started on its decline, like every other social network from AOL to Myspace did. There probably isn't a lot of growth left. Is there anyone not on Facebook who wants in?
OK, what's a company with $473 million in annual revenue worth? Google's price/earnings ratio is 21.39. Microsoft, 9.34. IBM, 12.69. Netflix 16.11. AOL 26.43. Yahoo 19.51. IAC (Ask's parent) 18.27. So we can say that the market is at best valuing mature Internet companies around 20x earnings.
That gives Facebook a valuation around $9 billion.
Even that may be optimistic. That assumes Facebook's user base doesn't shrink. Remember when Myspace was on top? This is Myspace on the way down. To earn that $9 billion valuation, Facebook has to maintain its current size and profitability for 20 years. Does anybody think that will happen?
(How many people here remember when one of the founders of Slashdot was asking on here what to do with his money when VA Linux, the parent of Slashdot, went public in 1999? They had the biggest first-day runup after an IPO ever. The stock hit $239 on the first day, and then went into a screaming dive. Six months later it was around $40. Not as rich as he thought. By 2002, it had dropped to $0.54. The stock is still trading as GKNT, formerly LNUX. Here's the chart.)
Retuers, really?
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.
No way in hell you went from middle class to the 1% No. Way. In. Hell. I can only assume you, like most Americans, have your own definition of middle class, attaching moral values to it, rather than a defined income level.
I'll give you the benefit of the doubt and assume you are talking about an dual income home. In 2003, $67,348 was the median household income for a household with two income earners.
in 2009, $343,927 was the minimum annual income to be considered in the 1%.
So you're telling me you increased your income by 5!? How many years of trading did this take?
We welcome all of the new Facebook millionaires! They can hang out in the posh Silicon Valley country clubs along with all of the Red Hat millionaires, the VA Linux millionaires, and the Netscape millionaires...
What? What? Was it something I said?
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Sure there are good fund managers. The question is how does one find them among the dross? Some are lucky, some are lucky for a decade only to be completely blindsided when the environment changes.
We're at a turning point just now. The next big investment vehicle is not going to be the same as the last couple of decades but a lot of fund managers will just run on with inertia, over the cliff.
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"Unless you derive enjoyment from the process of trading, you would be better off stuffing your money into an index fund and never touching them again" Nonsense. The Dow has been flat for 10 years. The stocks I've picked (like Apple, IBM) have not been, to say the least.
An index fund is like betting on every horse in a race, including the slowest ones. I'd rather just bet on the fast horses.
Slashdot "libertarians": Small government for me, big government for those I disagree with. -1, I disagree with you