Hedge Funder Who Bet $100 Million On Facebook IPO Is Furious • Hacker News Board

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

#121

Post by tomkarlo » Wed, May 23, 2012, 4:16 PM UTC

wcarss wrote: post #99

grey-area wrote: post #94

Earlier quoted context omitted.

There may even be permanent damage done to Facebook's reputation. Any permanent damage done to Facebook's reputation will purely be because they overvalued the IPO, overstated earnings, bought out other internet companies at inflated valuations pre-IPO, and burned those who bought at the inflated initial valuation. As to whether the trading system damaged confidence in Facebook - it's not always possible to get the d…

I don't generally disagree with what you said, and I'm largely just taking an opportunity to go on a rant. I have to ask -- is the stock market system really "the least worst option we have"? From an interpretation of "have" being "that is implemented and running", sure, but that's just tautological. It seems easy to conjure up systems where speculation isn't rewarded like this[1]. It just tends to mean no more insta…

Making investment less illiquid greatly increases the cost of capital, for a lot of reasons. It means you can't act on information that comes to light after the initial purchase. It also means you can't liquidate if an alternative, but better, investment comes along later (which increases the real option value you're losing by making any given investment.) Increased cost of capital means less investment, less growth, less innovation.

I'm not saying the current system is perfect, and I agree that the current system draws a disproportionate amount of talent out of the pool (although I'd argue that's mostly unrelated to the market itself). But going to a less-liquid, less-aggressively traded capital market would likely be a step backwards for everyone. If having the occasional minor clusterf..k like what happened with the FB IPO (which is still tiny compared to the "flash crash" last year) is the cost of the current system... it seems fine to me.

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

#122

Post by tomkarlo » Wed, May 23, 2012, 4:19 PM UTC

jlarocco wrote: post #68

mbreese wrote: post #58

Earlier quoted context omitted.

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 supp…

Well, honestly we'll never know for sure, but if a weekend of "thinking it over" cuts the price in half, did it really deserve the $70 valuation? After the hype, people are going to think it over at some point, right? Maybe it's better that it happened right off the bat.

You don't get a valuation because you "deserve" it. You get it because that's the highest price someone is willing to pay, and someone is willing to sell to them at that level. A day-trader doesn't care if that's connected to the fundamentals of the business - they're just trying to play the rise and fall.

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

#123

Post by dasil003 » Wed, May 23, 2012, 4:55 PM UTC

tibbon wrote: post #23

waterlesscloud wrote: post #13

Earlier quoted context omitted.

I think it's longer than a year. It'll take something really huge to overcome "Well, if Facebook couldn't break out, who can?" That will ripple back through all investment phases since the ipo is the dream payoff day for many investment rounds.

I agree with you. For all the startups that wanted to be the "Facebook of X"... if Facebook couldn't do it, why could they?

Facebook of B2B durable goods might be a good one to get it on.

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

#124

Post by mcherm » Wed, May 23, 2012, 8:12 PM UTC

sp332 wrote: post #104

mcherm wrote: post #93

Earlier quoted context omitted.

Nope.Vegas law says casinos are not liable for technical errors. There have been cases of slot machines setting off the giant "You Win Millions" buzzer but not getting it.

But if the roulette wheel is broken so that the ball occasionally flies off, and the casino just says "ok, everyone loses" I don't think that would stand.

True. But in this analogy, I hardly think you can claim "everyone loses".

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

#125

Post by theorique » Wed, May 23, 2012, 8:57 PM UTC

grey-area wrote: post #119

theorique wrote: post #100

Earlier quoted context omitted.

anyone placing a limit order should know that they might get a vastly different price than the one they expected If you place a limit order at (e.g.) $100, your order should be filled at or below $100 - no exceptions. The order will stay around until it is either filled, manually cancelled, or expires (at end of day or at a prescribed time). A market order can be filled at an arbitrary price because you are communica…

Sorry this wasn't very clear. I meant that you might not get what you expected (though it will conform to the rule you set, if it completes). Stocks can be very volatile and a limit order only controls movement one way, so it doesn't protect you from (say) a huge drop in stock price just after your order.

That makes sense.

You're absolutely right that there's nothing to protect you from downside if your (long) limit order price gets hit prior to a major nose dive in the price.

(Short sale equivalent: if your short limit order gets hit prior to a major rise in the price)

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

#126

Post by Maven911 » Thu, May 24, 2012, 3:10 AM UTC

glesica wrote: post #105

uptown wrote: post #102

Earlier quoted context omitted.

"anyone placing a limit order should know that they might get a vastly different price than the one they expected" I don't think you understand limit orders. http://www.sec.gov/answers/limit.htm

I think you misunderstood his comment, though admittedly the word "expected" was probably unclear. He said "might". In other words, if the market price is $38 and you place a limit order at $40, you may get $38, you may get $39, you may get $40. So if the price is moving (upward) quickly, you will get a price in the range you implicitly specified, but you may not get the price you had hoped for.

I dont think that long (buy) limit orders are ever meant to be used that way, you would place a long limit order below the market price and it usually ends up being executed at that price even if the stock nose dives a lot more

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

#127

Post by netcan » Thu, May 24, 2012, 12:30 PM UTC

tomkarlo wrote: post #121

wcarss wrote: post #99

Earlier quoted context omitted.

I don't generally disagree with what you said, and I'm largely just taking an opportunity to go on a rant. I have to ask -- is the stock market system really "the least worst option we have"? From an interpretation of "have" being "that is implemented and running", sure, but that's just tautological. It seems easy to conjure up systems where speculation isn't rewarded like this[1]. It just tends to mean no more insta…

Making investment less illiquid greatly increases the cost of capital, for a lot of reasons. It means you can't act on information that comes to light after the initial purchase. It also means you can't liquidate if an alternative, but better, investment comes along later (which increases the real option value you're losing by making any given investment.) Increased cost of capital means less investment, less growth,…

It is a cost/benefit like anything else. Imagine a market where a position must be held for at least one week.

Sure, there is some efficiency in capital allocation lost but how much of a cost is that really? As I understand it its a loss inasmuch as daily stock price fluctuations reflect the actual underlying of a company: not much.

What do you have on the benefit side? For one thing, you won't have the flood of people betting on whether or not Facebook will "pop."