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Mark Cuban Blames Himself For Losing Money On Facebook IPO
McGruber writes "In a blog entry, American business magnate Mark Cuban explained who he blames for his losing money in Facebook stock: 'I bought and sold FB shares as a TRADE, not an investment. I lost money. When the stock didn't bounce as I thought/hoped it would, I realized I was wrong and got out. It wasn't the fault of the FB CFO that I lost money. It was my fault. I know that no one sells me shares of stock because they expect the price of the stock to go up. So someone saw me coming and they sold me the stock. That is the way the stock market works. When you sit at the trading terminal you look for the sucker. When you don't see one, it's you. In this case it was me.'"
From Google Nasdaq FB
18.98 +0.02 (0.11%)
Sep 7 - Close
Range 18.78 - 19.42
52 week 17.55 - 45.00
Open 19.10
Vol / Avg. 36.37M/51.68M
Mkt cap 40.66B
P/E 105.96
So down to well under 1/2 of the IPO opening price - if was Gomez Addams I'd be breaking out the champagne!
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if I was an investor, I would have stayed far far away. I'm pretty sure the majority of people who lost a lot of money on it don't actively use it; their biggest experience with it was watching a relative play Farmville.
Occasionally living proof of the Ballmer peak.
I feel like I might actually be dumber having read that series of comments.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
I'm sure that it isn't the first time that this quote, or a variation has been uttered, but Mark's quote sounds an awful lot like the opening scenes of "Rounders"
Mike McDermott: "Listen, here's the thing. If you can't spot the sucker in the first half hour at the table, then you ARE the sucker."
(Thank you, IMDB)
Grandpa: My Homer is not a communist. He may be a liar, a pig, an idiot, a communist, but he is not a porn star.
He should've borrowed Knight Capital's explanation.
Many of us did stay away - far away. Facebook and GroupOn were a no brainer for me NOT to invest. I'm mostly a "value and growth investor" and those two companies had neither of those. It seemed to me that those IPOs were to cash out the VCs and original investors; not to get more capital to expand or invest.
The folks who bought the stock after the IPO were folks who either didn't look at the financials or folks who were hoping for the Greater Fool Theory to work for them. In either case, if they paid attention to the late 1990s, they would have been a bit more careful.
Although, I don't want to seem too cocky/arrogant/know-it-all because I thought the same of Apple a few years ago and I think it's too late to get in on the APPL gravy train. Investing can be real humbling .....
When the stock didn't bounce as I thought/hoped it would, I realized I was wrong and got out
The bounce is the problem with the IPO market - if the stock was priced correctly, there should be no bounce (and no crash either). If the stock bounces, it means the company left money on the table that should be in their pockets. If the stock crashes, then it means that investors lost money that never should have gone to the company.
An IPO auction would be more fair, that way everyone who wants to buy shares can get some if they are willing to pay the auction price. With prorata distribution they may not get as many as they wanted (and they may try to game the system by asking for more than they wanted), but you don't need to have special ties with the company to get IPO shares at the opening price.
I usually price stock at 1:1 price:revenue (a very traditional measure), in which case it's a $2-3 stock, reaching maybe $5 over the next couple of years.
In any case, Facebook is a dead-end for advertisers. They need to figure out a way to make money without advertisements, since social media is terrible for ads. Why would a company pay to have their ad next to a photo of your friend from high-school throwing up, when they can place it next to a fashion spread of Kate Moss? This is why social media will never compete against traditional media, because they won't be able to bring in the national advertising dollars, and will forever be stuck with local 10 cent ads.
They're trying to fix that with their edge-graph algorithm, to only shows you stories that are popular, but the problem with that is that it's a computed process, not an human-edited process that advertisers prefer. Also, this kills brand Facebook page views, so brands have less reason to care about Facebook if their stories only reach 6% of their likes. Twitter doesn't filter out your posts, so it reaches all your followers.
Facebook has an audience of 900 million, yet only makes $4billion/yr. Conde-Nast has an audience of maybe 20 million, yet also makes $4 billion, because professional human production & editing will always win over amateurs and computers.
I have no respect for anyone who's business model is "there are a lot of suckers in the world". I know most rich people use this business model, but I am convinced that humanity as a whole (including them) suffers a lot because of these nearsighted selfish idiots.
new sig
Wasn't there are a US trade embargo against Cuban and his cigars?
rewriting history since 2109
He's publicly stating that much of the stock market is about finding the bigger bagholder- the poor sap you stick with the losses to gain thereby.
It's about time one of the high-rollers owned that reality.
Buying stocks is a risk. That's the whole point. More risk means potentially more profit, but can also mean you lose everything.
If there was a way to make profit without risk, everyone would do it which would automatically remove the profit.
Trying to reduce the risk through lawsuits is just lame.
Before the IPO, there were tons of articles predicting the FB stocks would fail.
So if you're actually in the financial world, how the heck can you claim that you're naive and blame the FB CEO?
So: If I had to pay for Facebook (as I pay for my Dropbox account) how much would it be worth to me? Well, to me it's worthless and I don't use it. Currently the UK paid-for nearest equivalent is BlackBerry services which cost around $5/month. But that includes an internet allowance, so the incremental cost is about $2/month. If 800 million users were prepared to pay $24 a year, that would come out to around $20 billion a year in revenue, maximum. Most people are unlikely to be prepared to pay that much. My guess is that realistically on present numbers that puts a limit on Facebook of about $10 billion, which suggests that it has nowhere to go except flat or down.
From scarped cliff or quarried stone she cries "A thousand types are gone, I care for nothing, no not one."
The only reason I would have bought a share of FB was if I could get a paper certificate that I could frame and keep in my office.
When I found out I could not get one, I skipped it.
As a Poster it was worth $40,
When you sit at the trading terminal you look for the sucker. When you don't see one, it's you. In this case it was me.
And there is the great truth of the stock market, revealed by someone who knows how the system works.
His view of the stock market is cynical. The guy selling you stock might really be taking a vacation. He might be a 'boomer selling down his IRA to make ends meet.
Cuban sounds like yet another Internet mind-reader in this piece.
As for FB, I smelled trouble before it even went IPO. It boggled my mind to think anybody would have an interest in it. At 44 though, I forget that when I was new to investing I was avidly interested in Netscape.
Cuban should have been able to see this a mile away. It was held private for so long. A PE of 100 is fine if there's room for growth, but FB is already claiming a billion users in a world with single-digit billions. Any additional monetization degrades the experience and reduces that count, perhaps dramaticly. The site has some value, but HTF could I know? The only winning move is not to play.
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
Think about that. All those facebook addicts out there. I bet that most of them would be willing to pay $1 a month to use it. That's about $800,000,000 a MONTH in revenue. Even if only half of them sign up that's still $400,000,000. If you pay the dollar you get an add free version and maybe a little more control on how your data is used and shared. People pay to use Dropbox why not facebook?
Throughout the recent history of the last couple of decades of tech IPOs, the story has been that Wall Street underwriters screw the founders, programmers and other stockholders of the company that's going public by forcing them to UNDERVALUE the stock tremendously so the underwriters can give a free but valuable gift to their best customers who get in at the cheap IPO price, and flip the stock for a quick painless gain when the undervalued stock pops on first day of public trading. This basically cheats the original shareholders by giving them less than they should have gotten if the stock was priced fairly.
This time, the tables were turned as the nerds managed to screw Wall Street, by hypnotizing the underwritersinto setting the IPO price way too high thereby screwing the favored investors instead of the tech company. It was so satisfying to see the 'gift'' that the underwriters gave their best buddies come back to bite those greedy weasels who got a price crash instead of the quick pop and sellout. Actually some of those let into the IPO (if they managed to get the broken Nasdaq to execute for them on that day) DID manage to flip FB and so a lot of the stupid investors were the second wave that mindlessly bought into the stock on the first day at close to the IPO price then watched it slide from there.
As others have noted, FB's PE is outrageously high and there's was and is no obvious reason why it's going to be become very profitable (Google, by comparison, certainly DID have a real revenue model when they IPO'd). The problem is that there is a lot more money sloshing around in in the pockets of the US wealthy than brains in their heads.
rather than dependent on the socialist corporate welfare supplied by our government
oh wait, i'm sorry, such condemnation only applies to poor people
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
Today a man with 1,000,000,000 hats shrugged off the loss of a hat.
"That is the way the stock market works. When you sit at the trading terminal you look for the sucker. "
So... someone who should know finally admits, in public, that stock trading (as opposed to real investing) is nothing more than a con game.
We have con-men running our banking system.
this guys billion dollar fortune essentially comes from selling "tv.com" or some retarded domain name to yahoo for a billion dollars during the dotcom bubble.
Why is this on /.?
News for Nerds, stuff that matters...
No sign of that here...
Except that it does say in the very beginning that he was buying it as a trade, not an investment so he completely makes sense in that regard. However, those that purchased shares expecting it to be a worthwhile investment into a large tech company do have a reason to be pissed off at the management and how badly they fumbled what could have been a great success.
It's the same at any public or even private company that has.. say.... a board of directors. If you screw up and lose the company a very large amount of money, or a possible large money revenue stream., I'm sure those board members who have large amounts at risk invested into the company will not be pleased in the least.
Stupid, the average price/earnings ratio (P/E) of Nasdaq is about 21, Yahoo 17, Apple 16, Microsoft 15, see, Facebook is 105. You do not have to be an investor to see the company is hugely overvalued, the stock should be heading south.
The people who lost on facebook knew it was overvalued. However they expected it to become even more overvalued. They were thinking along the lines of "I'll buy at 30 and dump at 50, no way can it sustain that price." They were half right, facebook would have an unsustainable launch and bounce, they merely got the entry/exit points wrong. Had there been fewer shares it may have made it to 50.
Everyone trading knew there would be "irrational exuberance" and they thought they could make a quick buck off of it. They were not investing.
... Facebook is a dead-end for advertisers ...
For an iPhone/iPad app I find that google ads are more effective and cost less. I've run a rotation of google-only, facebook-only, google-and-facebook, and no ads. Maybe facebook ads work for web and desktop but they do not seem to work for mobile.
You are worth $45/year to facebook.
No. Advertisers think a facebook user is worth $45/year. If advertisers do not see that $45/year translate into well over $45/year of additional sales then that $45 value will drop as fast as the stock price.
nuff said
Is to cut your losers. Don't know what price Cuban bought and sold at, but if he cut his losses before they grew too big, then it shouldn't have been a big deal to him.
The problem with the stock market is that it is all rampant speculation instead of being based on anything real.
If, for example, the way that one made money from a stock was by the Company being profitable and issuing dividends, then you don't get the sort of nonsense that we see everyday in the stock market now.
The price of a share of stock has become completely divorced from any real world metric of how well the company in question is doing. Is it any wonder that the prices spike up and down with little to no reason - based solely on someone's marketing pitch?
And Scandinavia . and.Somalia.
Somalia.Somalia.Somalia.
Let's just repeat this, with some editing down:
>'I bought and sold FB shares as a TRADE, not an investment. ... It wasn't the fault of the FB CFO that I lost money. It was my fault. [N]o one sells me shares of stock because they expect the price of the stock to go up. ... That is the way the stock market works. [Y]ou look for the sucker. When you don't see one, it's you. In this case it was me.'
Well, it used to be, that when you bought a stock you made an investment... a long-term one, which required a belief that the joint-stock company that you were allocating resources to had some product, a business plan, and some chance at profitability which would recoup and even yield dividends on the investment.
Today, instead of that relatively rational process, it is about getting short-term gains (profits) without work, and finding suckers to hand money to When you sit at the trading terminal you. This rewards foolishness and hype, such as Facebook, and denies resources to the most worthwhile and rational pursuits.
In short, it means the sharks have made suckers out of all of us. Witness housing meltdown, financial meltdown, and so forth. It's a system whose fundamental flaws have been allowed to grow, until they've now taken over from what good was once done.
Based on their projected future earnings growth Amazon's PE should be about 30. So 90% of the value of Amazon will collapse when that bubble bursts.
Really Facebook, the founders took out $8 billion, the company made a quarterly loss, the fact the founders got out should tell you all you need to know. Cuban was a sucker, he was taken, Amazon shows he's not alone, go form a help group.
Seriously, if people come along and sell you magic beans with no profit and tell you they're worth 100 billion, you have only yourself to blame. Gullibles Anonymous is there to help you!
When you sit at the trading terminal you look for the sucker
What an immensely sad comment on the nature of Capitalism, but very elegantly summed up.
WHO CARES? How is this news that matter?
roman_mir -
after your comment scored a 5 on saturday, someone noticed your bad karma and asked about it. you should go take advantage of the situation and show how noble your sock puppeteering is for countering the actions of the evil empire.
faggets with retail accounts bought the stock which your broker lent to the short sellers. Who then sold to more of you faggets with leverage.
Imagine a guy selling widgets. But the interesting thing is that there is a limited supply of widgets. No more can ever be made. Well how the fuck does he stay in business after he sells all of his widgets?
Well, he borrows all of your damn widgets that HE ALREADY SOLD YOU. You get no say in this. It's okay, because you don't even know he's borrowed them. Then he sells those borrowed widgets to more people at a discount. This drives the cost of his widgets WAY DOWN. Then you (because you're a fagget) will sell your widgets back to him at a loss to yourself. Now he doesn't even need to give back the widgets he borrowed from you.
Still doesn't have enough widgets, so he just keeps selling them at deeper and deeper discounts. Meanwhile, the news is all up in your face with some chart with a near vertical slope. And you're thinking, "shit, I better get rid of my fucking widgets!" So you sell your widgets back to him.
Now he's once again got a full supply of widgets! The cycle will repeat. He maintains both a short-term and long-term cycle. The short-term is what he uses to perform his actual job duty of maintaining liquidity. The long-term cycle is for himself. He makes sure he always holds his widgets in this account for at least one year.
He is the market maker. Or we used to call them Specialists. They specialize at this game. What I described to you is how every NYSE stock is managed. he is just but one widget seller. The widget sellers all realized they could move the price of their widgets EVEN BETTER if they developed some index that tracked the price of all widgets. Then they could engage in some misdirection as the public watched this index and became emotionally attached to it.
Best to not buy their fucking widgets and buy land instead. Or invest real capital in real tangible startups. Now go fuck off, gambling faggets.
So FB has about 900 million "users" and has a P/E of 105. Do people really think that it can grow to a much larger user-base? I don't think it can. So now what about converting users to $$$, well FB hasn't figured it out yet and I doubt they will. So in the absense of utility conversion to $$$ and an already saturated user-base where do you think the stock price will go? I have to say that Mark Cuban...not the smartest move. For someone that is worth lots of $$$ maybe he should spend some of that $$$ on a financial adviser.