And then the music stopped
37signals.com
And then the music stopped
1–10 of 70 posts
Re: And then the music stopped
#2Not sure what the lesson is here, other than "shares sometimes drop in value".
I think most people understand that shares in tech startup IPOs are a fairly high risk business.
Re: And then the music stopped
#3Did anyone here actually purchase shares of Facebook, Groupon or Zynga? I never read one positive thing saying that their share prices would go up, it was always the opposite. I just assumed people who took a bath on those stocks were less tech-savvy investors trying to be "hip" with fresh IPO stock.
Re: And then the music stopped
#4Not sure what the lesson is here, other than "shares sometimes drop in value". I think most people understand that shares in tech startup IPOs are a fairly high risk business.
"I think most people understand that shares in tech startup IPOs are a fairly high risk business."
That's not clear ...
Forget about the multitude of analysts who were way off the mark (Lou Kerner, for example, called for $200B Facebook) for a moment. Representative Fattah, congressman from PA, did an interview with CNBC and clearly didn't recognize the risks of Facebook.
Re: And then the music stopped
#5Those "pension funds and other last-sucker-in-line investors" are to blame for not doing good diligence.
FB, Zinga, etc. cannot be accused of not leaving money on the table.
Updated: The OP did not accuse anyone, it's just my feeling toward those IPO. Big funds, with high management fees are to blame!
Re: And then the music stopped
#6Did anyone here actually purchase shares of Facebook, Groupon or Zynga? I never read one positive thing saying that their share prices would go up, it was always the opposite. I just assumed people who took a bath on those stocks were less tech-savvy investors trying to be "hip" with fresh IPO stock.
That's you. Lots of people pumped Facebook and got in expecting an IPO pop. For example, even the bearish analysts believed in the pop: http://www.youtube.com/watch?v=H9Twxv1V50s
Short conversation on the matter: http://cl.ly/image/0K2D072E1T0w182K0L0o
Re: And then the music stopped
#7> some $40 billion has been extracted from pension funds and other last-sucker-in-line investors
Correct me if I'm wrong, but that would only be true if everyone in all the companies had sold all their shares.
I don't know what percentage of shares in Facebook, Zynga and Groupon became publicly availably post-IPO, but does Zuckerberg's continued stake in Facebook make him a "last-sucker-in-line" as well? I doubt it.
Re: And then the music stopped
#8Each of these are different / unique cases. Perhaps only Facebook actually fits the 37 Signals narrative (that of a company overvalued because people were too optimistic about potential). Zynga and Groupon both had great revenues and from that perspective were deserving of their valuations. However Zynga is losing customers because they didn't innovate in their space and Groupon's financials were misleading in the first place.
Re: And then the music stopped
#9[deleted]
Re: And then the music stopped
#10Not sure what the lesson is here, other than "shares sometimes drop in value". I think most people understand that shares in tech startup IPOs are a fairly high risk business.
The intended lesson is restated at the end, in case you missed it:
Or we could...start valuing stocks based on fundamentals.
Valuing stocks on putative future profits based on users, or on comparative values based on other inflated stocks, or based on the price someone paid for some fraction of their shares last week, is not really a solid way to try to calculate value for investors. It's a difficult problem and no-one can claim to have a definitive solution, but the methods used to value Instagram, FaceBook, Groupon, etc do not stand up to a lot of scrutiny.
Of course you could argue that it's too soon after an IPO to judge the possible profits of FaceBook (for example) and the right price for them, but given the current valuation of FaceBook ($44B?) and their current revenue and profits vs users, I'd say they have farther to fall, esp. when employees start to sell shares soon.