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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
I'm going to be betting on it the moment facebook option trading opens up and I can short the life out of it. I'd have loved to short at $40+ that it was trading at on Friday as I was pretty sure it's going to go down. Most IPO's underprice themselves slightly and there's euphoria in the just-after-IPO trading that usually sees a good 20-50% upside and a good downswing in the same day of the IPO. This never happened (it opened at $42, hit $45 in a few minutes and was $38-40 range bound the rest of the day meaning that the IPO was priced pretty much at the maximum that investors are willing to go at. Therefore any hope for upwards movement now comes from positive surprises and better than expected earnings. However considering the valuation at 100x trailing 12m earnings the valuation already assumes exponential earnings growth. Therefore as someone already put it ... only way is down. Once options come online I'm going to short at $30/$35 range for 6-9 months depending on the option price and I'm fairly certain I'm going to make a ton as I doubt FB can run 2-3 consecutive quarters with exponential earnings growth and once that doesn't happen the valuation will go through a heavy correction (likely to around 20-40x earnings) which is likely to mean a 40-60% downwards shift to around $20 territory. Might not happen with one earnings result or two, but I doubt they'll keep the euphoria for more than that. But for FB itself and the investors that cashed out with the IPO it was perfectly priced :P
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.
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.