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Facebook Shares Retreat Below IPO Price
First time accepted submitter gtirloni writes "Just days after wrapping up the biggest initial public offering in Silicon Valley history, shares of Facebook slumped 6% and tumbled below their issue price on Monday, a troubling signal for the newly-public social network. Facebook broke below its $38-a-share issue IPO price in the wake of a highly-anticipated offering that raised more than $16 billion, the second-largest domestic IPO after Visa's 2008 debut. Shares of Facebook were recently off 6.44% to $35.72."
I can't really understand why you're saying that share price going down on IPO is a troubling signal. During normal operation, sure, but on IPO? It just means that the company didn't undervalue themselves and sell their shares at too low prices.
If I were a shareholder before the IPO and the per share price would had doubled, that would mean half of my potential profit and ownership lost. It's not rocket science. Remember that Facebook fixed their shares price like 8 times to get it to correct level - I'm sure there was tons of people at Facebook trying to evaluate the right price during the last months.
So all in all, it's better for shareholders and Facebook that the price went down instead of up. Otherwise it doesn't really matter. Especially since they already raised that $16 billion on Friday.
So what's the troubling part? I cannot understand.
Looks like it actually got down to -12% within an hour of opening. From the sounds of it, NASDAQ royally screwed up this IPO and there's probably unexecuted orders lying around which is likely going to result in some very hilarious realized losses. Look, if Goldman Sachs is securing hundreds of millions of dollars in shares ahead of time and cashing out during a tech IPO, you as an individual are probably already too late the party. Of course, that's investment advice from an anonymous idiot on Slashdot but it looks like they will be one of the few parties laughing all the way to the bank (as usual).
My work here is dung.
At this point, Facebook has nowhere to go but down.
Summation 2
Is it the normal IPO rebound effect, like a rubber band snapping back, or is it like the realization of millions of investors trying to put a valuation on a company that has no tangible assets? Or is there another conclusion?
It would be trading at under $8 per share.
I would not be at all surprised to see it in that vicinity in the next 6 months.
Ian Ameline
This stops the chance of another dot-com bubble forming. Facebook was overvalued, if they can very quickly show how they can create an increase in revenue they'll be fine and continue to strive though.
Does anybody realistically believe that Facebook will EVER pay its investors a meaningful dividend? HELL NO!
Facebook is just a game of stock market musical chairs which foolish investors will dance around until it is replaced by the next big thing.
Good luck, day traders!
This result was expected based on what happened on Friday. It was reported that the underwriting investment banks were propping up Facebook's share price on Friday to keep it above the IPO price of $38, so as to help their clients avoid losing money on the first day. Now that we're past day 1, the banks have stopped buying shares at the apparently overvalued price, which makes sense -- after all, if the banks are buying at $38, then they stand to lose money when they sell at a lower price in the future. In other words, Facebook should've already been trading at something less than $38 on Friday, but it wasn't because the banks wouldn't let it.
My userid is prime!
If the stock moves significantly up after the IPO, this means that the company did not sell enough stock.
Instead, if the price remains flat, or even goes down, this says that the IPO was priced perfectly: all the revenue from the IPO goes to the company and/or the insiders selling the shares, rather than the IPO bank backer's insiders who got the inside track on the "hot IPO"
We should have all IPOs be like this IPO.
Test your net with Netalyzr
Enlightening article: http://atimes.com/atimes/Global_Economy/NE22Dj03.html
A Facebook page is a pre-arranged display window whose purpose is to block our gaze from the real person behind it.
That is Facebook's curse.
It attracts hundreds of millions of users by providing them with a platform for narcissism and the means to lie about themselves more persuasively, but it hopes to make money by learning what it is that they really like, the better to show them advertisements.
'nuff said :)
http://opencm3.net, http://www.nongnu.org/gm2/
Maybe someone should poke it.
It stayed within 10% because JP Morgan was paid $177 million to insure the stock. a bad bet for them; who knows how much they stand to lose now that they've had to buy so much FB stock to cover the policy? They're the big losers here, not the FB guys who dumped half their insider stock on Friday and made a killing.
There is a reason why after the depression that banks were not allowed to venture into speculative markets and real estate and the like. Then in the 90s, most of those laws were rescinded under the guise that regulation was hurting the banking industry. Now that a new generation has had experience with what happens when somebody your trust gambles with your money, maybe we'll go back to regulating banks so that they don't speculate on markets and insuring stock issues. Just a thought.
Who cares?
-- Cheers!
I'm amazed at how many writers in the press, and on /., seem to think that Facebook Inc. was the sole seller in the IPO, and furthermore that they sold all of their shares. Unbelievable cluelessness.
As a public service, here are the numbers:
2,559,318,652 total FB shares (100%)
421,233,615 shares (16.5%) were sold in IPO
180,000,000 shares (7%) were sold by Facebook Inc (43% of IPO)
241,233,615 shares (9.4%) were sold by investors/founders (57% of IPO)
In the earlier filings, the investors/founders were going to sell fewer of their shares. But at the last minute, on May 16, they increased their take by more than 53%, dumping another 83,818,263 shares because the risk profile is waaaay too high for any smart money.
Writers who say "Facebook raised $16B in this IPO" are either disingenuous, or clueless. Facebook Inc raised less than $7B. The other $9B went into the pockets of the pre-IPO investors/founders.
This IPO was clearly overpriced, for the benefit of investors & founders who want to get out while they still can. The numbers don't lie.
The people who will get most screwed by this are Facebook employees, and pre-IPO private-share-exchange buyers, who have a 6-month or more "lockout" period before they can sell FB shares to whomever wants to catch a falling knife.
While zero is the least money you could invest, I knew people back in the .com days whose investment was less then zero.
They would buy a lot of .com stock on margin (i.e. a stock loan), and the stock would fall faster then they could sell it - leaving them with no stock plus a loan (i.e. a negative investment)
As others have calculated, the valuation of Facebook if divided by the number of users is pretty damn high, especially since it isn't actually selling anything to their users. Rather it sells its users. To people who are used to buy in very large bulks to the tune of maybe a fraction of a cent per user.
You might THINK TV advertising is big and moves a lot of money, and you be right. It is BIG but so is the industry. TV's are everywhere and everywhere they sell Coca-Cola, yes even in places where people are dying of thirst. It is one of the funniest things you ever encounter, well, if your sense of humor is sick, that you can go within walking distance of people dying and being dead beside the road and see advertising for luxury products. That is why advertising is big, IT IS EVERYWHERE. It operates how on tiny amounts, just is massive bulk.
And Facebook, as alien as the thought might be to its fans, does NOT have bulk. Or rather, the one thing it has bulk off, nobody wants. LOTS OF SMALL GROUPS. The problem with advertising on the internet is that it is to specialist. There is an internet forum out there for furry, star trek, romney voting black hindu linebackers... but who on earth has a product to sell to them?
Facebook users are not a meaningful demographic. Precisely BECAUSE facebook knows so much about you, you loose value as a product for advertisers. If you are not their target, they don't want you. So from its not all that many users (compared to say viewers world-wide of a bond movie, or a Soccer championship, or the Olympics) only a very small subset is of interest to any particular advertiser. TV is much easier, they don't know who the fuck is watching their commercial but they know it is a lot so it is like shooting fish in a barrel with a needle, or something like that, they understand the metrics know how to play it.
Don't believe me? Fine, try this. DISCUSS, ANY single facebook advertising campaign that you talked about at work with a co-worker. Any? Even one? Okay... now name a DOZEN tv ads that you talked about with a co-worker. See?
BUT the people in Wall Street are desperate, they need SOMETHING to speculate in. Many were buying Facebook stock in the hope of the price immidiately going up and selling it as soon as possible. They were not investing, they were not looking at Facebook as a long term business, they just wanted to cash in quick on stock selling low and going up. And it didn't. Mostly because there were no long term investors so a lot of the buyers had no choice but to sell because they had bought with borrowed money.
But what else to speculate in? Real investing, putting your money down in a business in the hope it slowly grows over many years and then pays you back, that takes to fucking long and anyway, invest in what? Nobody is doing anything anymore, it is almost like all theother assholes with cast are just waiting to speculate or something!!!
So they saw Facebook, thought, this is going to go up because if they didn't, they would have nothing and so made up the scenario's in which Facebook would go up and they could all get rich quick and someone else would do the real investing in whatever Facebooks business plan happens to be.
This is what happens when you let gamblers run your economy.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
They were desperate for it. Just like the rest.
I'm all for hating the banks, let's just hate the right banks.
All bankers are parasites.
Hope This Helps with your understanding of the nature of banking.
Deleted
Goldman Sachs, Morgan Stanley, JP Morgan, Citi are at the top of the list of banks making use of Federal Reserve loan facilities. If they are and were so healthy why are they at the top of the list of heavy users?
Um, because you don't really understand those facilities. It's not long term loans because they need it, it's short-term loans because it provides liquidity into the market, and lets those federally-insured banks be far more effecient.
I'll just point out that the Federal Reserve was created for exactly the purpose of transferring risk to taxpayers by exactly the banks who made most use of it.
Source? The point was and is to provide liquidity by the only entity sufficiently large enough (and able-to-print-money-if-they-need-to-enough) to do it. Liquidity makes markets efficient which saves everyone money. It is furthermore, a tool to enable monetary policy in various ways, and to help regulate the banks (if they want such lending, for example). And it is not a major risk for taxpayers, because it's entirely collateralized (with a relatively high standard). (Meaning, if the borrowing bank went bankrupt, the Fed would have first say over that collateral, in order to recoup any money the bank was unable to pay back.)
Oh and JP Morgan did everyone a favour for taking Bear Stearns over a $2 a share, financed again by the Federal Reserve? Oh please.
Yes. At the time, they were taking on a ton of unknown risk. They didn't want to do it, but agreed to because there was plenty of potential reward, they had a very very strong balance sheet themselves, and the Fed backstopped their losses to some extent (but certainly not entirely). No one else could have done it, which was made apparent when Lehman went down because the Fed couldn't convince anyone to take them on, and that's when the economy took the biggest hit. Also, they ended up agreeing to $10 a share, just saying.