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Hedge Funder Who Bet $100 Million On Facebook IPO Is Furious

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Re: Hedge Funder Who Bet $100 Million On Facebook IPO Is Furious

#51

Post by stewartbutler »

I still don't understand why Facebook has such an overblown valuation to begin with. The entire business is a house of cards based on the possibility that it might make someone else some money someday. Sure, there are some vultures like Zynga that make out like bandits preying on people with addictive personalities who shell out cash, and I'm sure there are a few success stories regarding successful social media advertizing campaigns, but I count the former as resulting from a lack of morals and the latter as unpredictable anomalies that happened to tweak something in the hivemind.

I don't perceive any value in Facebook. It is an enormous time sink with rapidly diminishing returns on time investment, and I feel it is only a matter of time before the average user experience is more noise than signal. As soon as that point hits, I can easily see Facebook going the way of MySpace and its ilk. Facebook has some amazing talent on their team, so maybe someone there can see a way forward, but as far as I can tell the end game for all social s appears to be an exodus to a more specialized or sparsely populated network.

As an outsider my opinion is of limited utility, but I also think that Facebook is a poison on the tech industry as a whole. I don't see that they have created anything innovative, useful, or even substantial aside from this enormous echo chamber. I'm very glad to see that Wall Street isn't gorging on this IPO, even if it was an accidental fuckup that has spoiled the appetite. With any luck, this flop will convince investors to put their money onto things that create something useful.

If anyone has counterpoints, please post them. I write this in frustration, since I just really don't see where this "105 billion" valuation is coming from. Where is the potential in Facebook? What is being produced? Why should I give a damn?

- They missed the boat if they are trying to compete with the Google advertizing empire, so that can't be it.

- They admit that they aren't having the success they hoped for in the mobile arena.

- The only thing going for it is that it is the single largest repository on information about individuals, but that information cannot be ethically or legally used to its full utility, and most of it is white noise anyhow.

- The company has repeatedly shown that it doesn't give a damn about its users or small developers.

What makes this a sound investment?

Re: Hedge Funder Who Bet $100 Million On Facebook IPO Is Furious

#52

Post by dangero »

I bought Facebook with a limit order when it went on sale to the general public last Friday, and I can confirm it was a terrible experience. Here's basically what happened:

I put in a limit order through tdameritrade the night before with a max price of $44. I'm in front of the computer that morning to watch my order when the IPO starts. The price spikes up to 45, then treads around low 40s. I refresh my account. My limit order has not gone through. I wait AN HOUR. Still, it has not gone through so I cancel it. Now it says, "Pending Cancellation." It remains "Pending Cancellation" for over an hour, so I try to call tdameritrade, but their lines are completely backed up with calls. Finally, the system suddenly reports that my order was accepted and I bought Facebook at 42. It's only an hour from market close by the time I see this. What this meant for me and most everyone else was that I was locked out of the market for the first 2 hours after IPO and my assets were frozen. I could neither buy nor sell. I don't think we can really know what the impact of this was on the market, but it certainly didn't instill short term confidence in the Facebook IPO and I think it definitely decreased the volume on the stock.

I'm not going to defend everything the guy said, but I do believe that NASDAQ botched the IPO badly and it may be a few months before we know what the market really values Facebook at. There may even be permanent damage done to Facebook's reputation.

Re: Hedge Funder Who Bet $100 Million On Facebook IPO Is Furious

#53

Post by SODaniel »

Do we need anymore proof that the concept of 'stock ownership' is irreparably broken?

Basically his entire point is that because a trading system was delaying orders for a few hours over $100 BILLION in value was potentially lost?

Yeah, that seems like a sound market with long term owners that trade because they believe in a company.. Right?

Re: Hedge Funder Who Bet $100 Million On Facebook IPO Is Furious

#54

Post by Locke1689 »

DigitalSea wrote: post #42
lotharbot wrote: post #35

Earlier quoted context omitted.

> "He is complaining about how the casino operated, not how he bet." This is exactly right. I have no sympathy for a gambler who gets beat because he made the wrong read or the wrong play. I have no sympathy for a trader who loses money because he was wrong about the market. But when a gambler gets beat because the casino kept misdealing the cards, or a trader loses big money because the exchange botched the trade, h…

As the article points out, technical glitches are covered in the rules. When you invest you accept these rules, if the hedge fund manager has a problem with the rules then he should not be investing. Therefore no rules were broken as the article points out, it's a stock exchange they aren't dumb they know how to cover their bases (they're bankers after all). He isn't the only one affected by this situation. The botto…

If NASDAQ knew there were problems but continued anyway that may actually not be covered in the rules.

Re: Hedge Funder Who Bet $100 Million On Facebook IPO Is Furious

#55

Post by SODaniel »

What he really should have said:

"We were all betting on millions of small traders shoving $5,000 into this bubble to push the share price north of $70 so that all the large hedge funds could cash out and get rich off the backs of the average Joe. A technical malfunction prohibited us from exiting with 100% profit on intro day and now we are stuck with a bunch of shares we know are worthless. Dammit, how am I going to pay for my next summer houses? Damn you NASDAQ!"

Re: Hedge Funder Who Bet $100 Million On Facebook IPO Is Furious

#56

Post by nl »

powera wrote: post #40

This guy is a moron. Anybody who believes the stock would be at $70 if "the market" worked better doesn't understand how markets work in theory or practice. If there are people who really believe the stock is worth $70, there would have been buyers the past two days. Expecting "hype" around the IPO to support ONE HUNDRED BILLION dollars of extra valuation is beyond stupid.

Using words like "moron" is pretty strong. There are a large number of historical precedents to back up that belief.

Ignoring well-known examples like Amazon (which even today trades well above where it "should"[1]), there are other examples like "The Globe", which had a first-day gain of 249%[2]

More recently, Splunk popped 83%[3].

He addressed the there would have been buyers the past two days thing, too: It never stood a shot. If there was any enthusiasm for this deal, that got wiped out. Think about a guy who was going to put five grand on this. You go to Vegas and put $5,000 on the roulette wheel and it breaks, it's like, hold on, I'm not going to do that. Suddenly you're like this is Wall Street and I hate Wall Street.

[1] http://finance.yahoo.com/q?s=AMZN - AMZN has a P/E ratio of 177. Compare that to EBAY: 15, GOOG: 18

[2] http://news.cnet.com/2100-1023-217913.html

[3] http://online.wsj.com/article/BT-CO-20120419-713258.html

Re: Hedge Funder Who Bet $100 Million On Facebook IPO Is Furious

#57

Post by seanalltogether »

dos1 wrote: post #7

I have a hard time drumming up sympathy for these guys. They're mad because they couldn't make a quick buck. Isn't a hedge fund just gambling? It's high time Wall St. learns that it's never a good idea to put more in the pot than you can lose. The part that is most striking to me is that share price and a company's intrinsic value are seemingly in different galaxies. This guy is talking about decisions based on hype…

> Do these guys really trade based on public opinion?

What is the stock market if not a giant popularity contest? Real investors make deals with companies, stock buyers are just hoping to catch the right wave.

Re: Hedge Funder Who Bet $100 Million On Facebook IPO Is Furious

#58

Post by mbreese »

powera wrote: post #40

This guy is a moron. Anybody who believes the stock would be at $70 if "the market" worked better doesn't understand how markets work in theory or practice. If there are people who really believe the stock is worth $70, there would have been buyers the past two days. Expecting "hype" around the IPO to support ONE HUNDRED BILLION dollars of extra valuation is beyond stupid.

There very well may have been buyers on Friday who thought the stock was worth $70. If the market had been able to handle the volume, then we may very well be seeing FB at $70 today. However, since we know that the market couldn't handle the volume, it most certainly did affect the share price on Friday. Now, you let people sit and think about this over the weekend and they may have different feelings about that supposed $70 valuation.

Next, if you assume his story about selling on Monday was true, you have additional downward pressure put on FB as a result of NASDAQ itself. So much so that it closes at $34, eroding everyone's confidence in the $70 valuation that they had in their minds on Friday.

Markets only work if they operate efficiently (can handle the volume). When they don't work efficiently, they become harder to predict. And if an investor can't even be sure of what their position is, they can't participate in the market at all. It isn't at all out of the question that glitches in NASDAQ could have caused FB shares to plumet. It most certainly took away any possibility of an IPO bump.

The real question this beings up is what did NASDAQ know, and when did they know it. If they knew their system wasn't going to be able to handle the volume, as bad as that might have been for them, they should have aborted the IPO (if that's at all possible).

Re: Hedge Funder Who Bet $100 Million On Facebook IPO Is Furious

#59

Post by saulrh »

stewartbutler wrote: post #51

I still don't understand why Facebook has such an overblown valuation to begin with. The entire business is a house of cards based on the possibility that it might make someone else some money someday. Sure, there are some vultures like Zynga that make out like bandits preying on people with addictive personalities who shell out cash, and I'm sure there are a few success stories regarding successful social media adve…

You're missing a point there. The information may be mostly white noise, but with that much data, even filtered by laws and ethics, statistics are powerful. You are not the customer; neither are the developers. It's Target. http://www.forbes.com/sites/kashmirhill/2012/02/16/how-targe...

Re: Hedge Funder Who Bet $100 Million On Facebook IPO Is Furious

#60

Post by minimax »

veyron wrote: post #12
dos1 wrote: post #7

I have a hard time drumming up sympathy for these guys. They're mad because they couldn't make a quick buck. Isn't a hedge fund just gambling? It's high time Wall St. learns that it's never a good idea to put more in the pot than you can lose. The part that is most striking to me is that share price and a company's intrinsic value are seemingly in different galaxies. This guy is talking about decisions based on hype…

He is complaining because he was sandbagged. He didnt know what his position was, and NASDAQ and MS both dropped the ball here. You can vilify hedge funds till kingdom come, but it sounds here that this guy played by the rules and lost due to a circumstance that he didn't believe was fair. If the opposite happened (price spiked) yet the same technology problems happened, you'd have a bunch of people complaining that…

What gets me is how mysterious it sounds, when there is a ton of obvious troubleshooting that should have happened... and probably did but I can't find reported anywhere.

Hedge fund places order. NASDAQ returns an order id.

Did that order show up in the market data feed?

Did they see that order get hit on the market data side?

Did they get an order accept?

Did they try to cancel?

What happened when they tried to cancel?

What actually happened? Did the orders really just get accepted and then go into a black hole?

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