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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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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.
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.
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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.
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."
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"?
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.
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?
Half of them won't sign up, i'd be surprised if 1% would sign up. Facebook needs critical mass. It they take a dollar to let you post stuff on your wall, there will be a huge outcry among all the users, even or especially the fans. Facebook will lose a lot of its fans and the mass will go to the next free social media platform: Google+
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?
Facebook already makes almost $4/month/user. An extra $1/month/user wouldn't significantly change their financials. To get in line with comparable stocks in terms of P/E, they'd need you to pay around $20/month. Would you do that?
"I zero-index my hamsters" - Willtor (147206)
The problem is that the decay would be exponential. If 50% of the users signed up for the paid subscription to "try it out", they would quickly notice that (about) HALF of their friends are now gone. So when time comes to renew the next month, those who lost a significant amount of friends (making the service useless) would quit.
Then, the remaining 30% would have less friends subscribed and would cancel the next month. When you're down to 10% of the original user base, what incentive is there to stay? You can talk to about 1 of your 10 "friends" on the service. That would be pointless.
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.
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.
The reality, as I understand it is that this is a gross oversimplification. The reality is that very few users are worth anything at all, but there are certain users that are worth more than their gold plated effigy would be. Those are the people who everyone links to. Although this is usually celebrities or otherwise already influential people, sometimes these are people who have created their own sphere within social networking.
As others suggest, Facebook isn't worth fuckall for advertisements, even targeted ones. The real content pros know how to do that so much better. Its real worth is finding ways to influence the people who influence others. The fact that it is a social network means that people are literally inputting the data into Facebook's databases for them.
Consider your most respected and/or popular FB friend. Your group of friends tends to be intelligent and generally cynical or immune to advertising. What if an agency found a way to influence that person into liking a band or a product in some way, either overtly or indirectly? Chances are good you'd take that person's word over some advertisement. Once these companies start to discover how to, what I guess I'd call "micro-infuencing" smaller friend groups, you could find some penetration you had no chance of getting with older mass methods, and by having it go through a sort of "word of mouth" method, there might be higher trust in the message, and higher brand loyalty once purchases are made.
The question is, how does one carry this out? But the information needed, the social networks, are right there in FB.
It depends. Let's say a company makes a profit. They can either hold it on their books which makes them worth more and raises the stock price or give it out as a dividend. What typically happens is if a company is in a mature market like a Utility they will issue dividends since there isn't much use keeping the cash on the books. On the other hand if the company is trying to grow the best use of that cash is to reinvest grow which increases the overall value of the company.
I love Jesus, except for his foreign policy.
Yeah, there's really no point in going public and then issuing a dividend since the whole point of going public is, at least in theory, to raise cash. (although these days it's really just a way for the founders and VCs to cash out)