Posted on 05/18/2012 8:13:34 AM PDT by C19fan
I am watching the news before heading off to work and of course all the talk is about Facebook's IPO. Even one of the guys on CNBC was wearing a hoodie. There is all this talk about how tech IPOs have seen a "pop" in price of their new stock on average of 30%-40% on the first day of trading which would place Facebook as worth $50 on day 1 (35% over the IPO price of $38.) Why are Tech IPOs then systematically underpriced? If the Facebook IPO is so oversubscribed then why does Zuckerberg not say to whoever is handling the IPO to jack up the price to say $50 or is the "pop" the "juice" the banks get for handling the IPO?
It’s just another bubble that will ultimately burst and leave a lot of people broke, just like the Dot.com bubble of the late 1990s.
I think the initial dollar amount is a best guess sort of thing. They could open at $38 and two hours later be $20 or $70. All I know is after today there will be five more billionaires and 1000 more millionaires then they will become huge targets for the BHO admin.
It is a site based upon popularity and it may well continue on with the crowd already involved as they age.
But the younger (more sought after) demographic is NOT going to join Facebook “only geezers are on Facebook” they will say - “EVERYONE COOL is on ‘zipwire’” or whatnot - the new social networking site for YOUNG people.
And no - Facebook is getting a huge payout - that the price they sold it at will jump because of interest in the stock because it is in the news does not mean that their initial stock price was too low - just that there is a sucker born every minute - and sheep follow the herd.
That’s the spirit. Unlike the dot.com bust.. FACEBOOK ismactually a proven product already worth billions. NO, this is nothing like the dot.com bubble.
When you buy a Tech stock like Apple, Intel, AMD, Dell, HP and many others, you are buying real estate, manufacturing plants, a plethora of patents and owning a piece of a world-wide market that has grown for decades.
When you buy a share of FaceBook, you own a few sectors on a hard drive somewhere. It’s virtual. And, be forewarned that FaceBook is today, what MySpace was yesterday. For every Amazon.com (which is still growing) there are countless websites (and don’t kid yourself, at the end of the day FaceBook is a website) that have gone belly up.
Your money - do what you want. But, I’m not gonna touch this one with a 10ft pole.
It is neither a boom nor bust company. Right now it is looking like an opening of between 41-42 and I doubt it will spike anywhere near 50 today. As for a bust, this company already has over $3 billion in revenue in less than ten years, that is not a bust. The stock is too richly valued here but to ignore the revenue growth is absurd.
That would be true if there was zero average “pop” but Tech stocks have a systematic large pop up. That is what I find baffling.
Agree. Their ad revenue growth has been declining. I cannot fathom this valuation. It just doesn't hold up under analysis.
Facebook has peaked. In the IPO it will be selling at over 100 times trailing earnings. This requires continued phenomenal growth to make sense. Earnings are down this year. The market is saturated. Young people are becoming bored with Facebook. It is no longer cool. Older people who went on Facebook to see pictures of their grandchildren etc won't use it a lot.
Facebook gets almost 90% of its revenues from advertisements. Advertisers have determined that the money they spend on Facebook doesn't translate into sales and that there are far more efficient uses for their advertising dollars. GM recently said it will discontinue ads on Facebook. Expect other large advertisers to scale back or leave altogether.
Facebook stock is very overpriced.
They certainly are not getting “ripped off”. Zuckerberg and the others will hold enormous quantities of stock, so if it goes up from 38 to $50, they make an additional fortune. The company will make an initial fortune when it sells tons of stock at $38, which means Zuckerberg, etc make an additional fortune through the company.
Their risk is losing some of that money when/ if the stock falls. If they priced it too high, they might meet resistance and that would not be good for the IPO.
You mean like MySpace?
What I’m most concerned about is the timing. Will there be a sudden drop this summer with all the euro madness
Ok...would you consider Facebook comparable to Myspace?
I would.
Newscorp bought it for $580 million.
And sold it for $35 million.
I remember a time when I couldn’t turn on the radio, or look at the web, without seeing or hearing something about Myspace. Now, its too ‘old’.
Very soon, Facebook will be ‘too old’.
I do agree that the next technology will bump Facebook, but right now it doesn’t seem close..Facebook has time to keep redefining itself. Facebook’s business model is way different than Myspace was. Much more of a money making entity.
IMHO, that is an excessive premium for this business, including growth prospects. Irrational exuberrance anyone?
oopsie. > 33 times REVENUE!
The most appealing thing to me about FB is the free advertising. You can post pretty much what you want on FB. If you have a craft or any other type of home business it’s a good way to get your stuff out there.
Current bid is slightly over $39 a share, running very late. The upside is that the revenue from advertising on Facebook clicks are much lower with much higher potential than we saw with Google. With the potential of ad income growth, it is a good short-term play. Cautious on long-term investment, though.
“Your money - do what you want. But, I’m not gonna touch this one with a 10ft pole.”
I agree. FB is being priced at perfection based upon yesterday’s growth rate. Once the public wises up to the long term privacy implications, that growth rate will slow dramatically. That close personal connection will be gone. The initial growth is due to a global media that has been hyping FB at every opportunity to a fickle public. I do not see it to my advantage to have a global corporation owning my network of friends, my life, my politics, my photos, my family “in perpetuity”.
How long do you think it will be FREE?
At the end of the day, FaceBook is a fad.
FaceBook is big today, MySpace was big yesterday. Google+ is a veritable Ghost Town.
But, soon it won’t be ‘cool’ anymore to have a FaceBook account. Companies demanding passwords to your account, being fired for posting an inane comment about your job, not getting a job because of a party picture one of your “friends” posted that had you “tagged”. It’s all going to come tumbling down - and when it tumbles, it’s gonna be an avalanche.
Meanwhile, other websites like Pinterest are gathering steam. Some folks are abandoning FaceBook and going there - for reasons I cannot begin to understand. I do not understant this need to share details of my family, friends and my activities with the world. I like my privacy.
Tech IPO’s are not underpriced, they’re hyped by the underwriters and the business news media.
FB is a classic example of hype.
A tiny amount of homework reveals that they have no real prospects for revenue to match their stratospheric valuation.
Did you know that only roughly 20% of their users are in the U.S. ? That is where the consumers with money are.
Towelheads living in the mideast don’t send them any money or buy any products from facebooks advertisers.
The advertising is all U.S. centric - it’s U.S. consumer companies trying to reach U.S. consumers.
Their revenue per user per year is only about $4.
Other comparitive companies have figures of $20, $30, $60 pper year per user.
What good are 900 million users if they will never yield very many U.S. advertising dollars ?
facebook as a way to build a web presence is a redundant product; there’s something called a website. Virtually every business has one, has spent 10-15 years working on their website - and can develop it ANY way they want to instead of being locked into facebooks designs.
facebook is a big fat turd, basically.
When people realize that the IPO was a pump-and-dump scam (like most IPOs are), the market price of the stock will go so low that it will very negatively impact facebooks business operations.
facebook will be bankrupt or a shadow of it’s former self within a few years, possibly only within a year or two.
Agree with post #23
It isn’t free. Sure you get an entry account and lots of services but fb owns everything you put on there. They can insert advertisements anywhere they wish. They own your online identity. Not free at all.
My middle school and high school children, along with hundreds of their FB friends, have left FB and almost exclusively utilize Twitter. Many young people are calling FB old news.
Well, they are different products. That does not mean Facebook wont fade away too, which it inevitably will.
When I think of Facebook, I think of Netscape and especially, MySpace. Technology trends are so fickle.
I know Facebook has millions of users, but personally, I can’t see the sense of it. I have plenty of ways to stay in touch with people I want to stay in touch with. As such, I would never put my money into it.
It appears to be nothing more than a big pile of servers and a few programmers.
It does not take much reflection to recognize risks in the Facebook IPO.
For example, suppose the financial markets suddenly tank as they did in 2008, this time, due to the unraveling of the euro, or of China's rickety and over-leveraged financial system?
Or what if, say, Facebook's first quarter results show unexpectedly large operating losses and analysts ask hard questions that cast severe doubt on its ability to earn a profit?
A Barron's article in March of 2000 that calculated the 'burn rate' of major Internet companies helped pop the dot come bubble. Facebook must anticipate a similar line of analysis, and well-paid PR experts and securities lawyers are no doubt already preparing defenses if the Facebook IPO falters for a similar reason.
If the eyeballs and traffic on Facebook cannot soon be translated into advertising profits, the Facebook IPO will be seen as a folly, the stock price will falter, and the company, its officers, and the underwriters will have to spend much time and money defending themselves from bad press and lawsuits -- likely in retirement.
There’s nothing tangible behind any of it except electrons and pixels. Just wait and see...
I predict < $30 a share by Christmas...
the bald guy on CCNN predicted it to go to sixty to ninety at end of day
Hope he invested heavily.....
From Zero Hedge:
Forget that S&P 500 e-mini futures plunged to four-month lows at 1290; or Treasury yields crashed back to their record lows; or Gold and Silver’s surge today; or WTI’s plummet to almost a $90 handle; or Citi joining Morgan Stanley in the red year-to-date; or credit markets continuing into the red for the year; or IG9 10Y soaring further to 160bps - widest in 6 months; or VIX closing above 25% for the first time in 5 months (and decompressing to Europe’s pain). Today was all about one thing - the disaster that was/is/and will be Facebook - between late openings, overwhelmed systems, a dump to the syndicate bid and almost 600mm shares traded with the syndicate just soaking it all up at $38.00 early and into the close. Is it any wonder that every other social media stock plunged and how do they expect to ever get another internet IPO off again (at anything but a massive discount). No matter what correlation trick was tried to juice markets today - for the tenth day-in-a-row markets saw a BTFD turn into a STFR. Not a pretty end to the ugliest week in six month for the S&P 500 as it nears its 200DMA into the close.
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