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And then the music stopped

37signals.com

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Re: And then the music stopped

#11

Post by GameDev »

crazygringo wrote: post #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.

Maybe 20% have been sold, also not all that "pension funds and other last-sucker-in-line" will have bought on the all time high. The real number is arguably way lower

But forgive DHH, it is hard to get the numbers right when you are in rage mode about Twitters IPO.

Re: And then the music stopped

#12

Post by magixman »

plehoux wrote: post #5

Those "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!

Agreed and there is plenty of blame to go around and anyone who buys an IPO has to assume a certain risk. Unfortunately for us the fact remains that when the top of the eco-system starts to look shaky it can have reverberations all the way down the line. We should not under-estimate the impact of this.

Re: And then the music stopped

#13

Post by wtvanhest »

This is a typical anti-finance rant, with no substence. The only thing that would have made it worse would be a blantently political statement any of the parties.

So between just these three, some $40 billion has been extracted from pension funds and other last-sucker-in-line investors. While, in the process, soured many on the idea of the public markets and enriched investment bankers hawking the toxic stocks. Hey, at least someone got out while the going was good.

Net out what VCs got which also goes to pension funds before calculating the $40B. Don't mention investment bankers while not also mentioning founders who sold shares and took a far greater percentage of the IPO cash.

Re: And then the music stopped

#15

Post by ChuckMcM »

"So between just these three, some $40 billion has been extracted from pension funds and other last-sucker-in-line investors."

This is incorrect, David takes the change in market cap and then equates that to losses in pension funds. But this does not represent the state of affairs because when companies go public they don't put all of their stock on the market, rather they put a small percentage of the company on the market (called 'the float') and it is those shares IPO investors get to buy. For Groupon this was an notably small percentage of the company (which caused short sellers to complain that there wasn't enough liquidity to short the company).

So lets be generous and say it was 10% of the companies involved then you are looking at a change in value that is 4 billion not 40 billion. Next pensions invest in hedge funds just as much as they do companies, and those hedge funds took a good chunk of that money because they are shorting these companies with questionable valuations. They could be having a great time with the IPO market.

So yes, there are investors who are holding GRPN, FB, or ZNGA who have lost money but it isn't a travesty, and it isn't 2000 again, and it isn't newsworthy. A pension fund might own a big position on Ford (NYSE:F) which they bought at the beginning of the year for north of $12 share and its now worth $9. Doesn't mean the 'music has stopped for Automakers'.

If you look at CalPERS [1] (one of the largest retirement funds at 236 B$) you will see they diversify their holdings pretty well.

[1] http://www.calpers.ca.gov/eip-docs/about/pubs/annual-investm...

Re: And then the music stopped

#16

Post by [deleted] »

wtvanhest wrote: post #13

This is a typical anti-finance rant, with no substence. The only thing that would have made it worse would be a blantently political statement any of the parties. So between just these three, some $40 billion has been extracted from pension funds and other last-sucker-in-line investors. While, in the process, soured many on the idea of the public markets and enriched investment bankers hawking the toxic stocks. Hey,…

[deleted]

Re: And then the music stopped

#17

Post by jiggy2011 »

grey-area wrote: post #10
jiggy2011 wrote: post #2

Not 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-o…

I guess with some of these startups though the ground is so untrodden that's it would be impossible to come up with a way to value them other thinking about things like future monetisation of users.

Without it's users, Facebook is worth very close to $0. With it's users? who knows?

Re: And then the music stopped

#18

Post by mattmaroon »

ChuckMcM wrote: post #15

"So between just these three, some $40 billion has been extracted from pension funds and other last-sucker-in-line investors." This is incorrect, David takes the change in market cap and then equates that to losses in pension funds. But this does not represent the state of affairs because when companies go public they don't put all of their stock on the market, rather they put a small percentage of the company on the…

Critical thinking (especially in regards to finance) isn't what got 37s's blog to a high level of readership. It's more about regurgitating the same ideology over and over.

Re: And then the music stopped

#19

Post by drumdance »

grey-area wrote: post #10
jiggy2011 wrote: post #2

Not 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-o…

Who is "we?" The market can stay irrational for longer than you can stay solvent.

Re: And then the music stopped

#20

Post by netcan »

crazygringo wrote: post #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.

I don't think you'd really consider Zuckerberg an investor at all. Employees & founders in particular are really a different class.

Anyway, you can't be last in line if you're first in. Most of the pre-IPO investors made profits. Most of those that have cashed in those profits, cashed out by selling their shares to post IPO investors.

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