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Re: TWTR

#251

Post by encoderer »

YZF wrote: post #233
ChuckMcM wrote: post #198

Earlier quoted context omitted.

I think you fundamentally misunderstand the process but that is ok, its not all that straight forward. The transaction here is between risk takers (venture capitalists and investment banks) and risk pricers (people who buy stock). Nobody is getting "ripped off" as long as everyone is following the rules set down by the SEC. Investors put money at risk. You know that because you've been here on HN a couple of years an…

The underwriters who will make hundreds of millions here... (EDIT, well, many millions at least) What sort of risk are they taking that justifies their rewards and how does it help the economy? And the individual bankers who will take millions of dollars in bonuses home because they get paid for the 12th time and don't get penalized for the 11 others, what sort of innovation did they contribute to the world? I think…

"If Twitter is worth $50 bucks a share why were its investors willing to part with their stock for $26 a share only yesterday?"

http://en.wikipedia.org/wiki/Time_value_of_money http://en.wikipedia.org/wiki/Expected_value

Re: TWTR

#252

Post by clarky07 »

jerf wrote: post #228
clarky07 wrote: post #148

Earlier quoted context omitted.

I don't know if he is, but I would certainly suggest that markets are not efficient. Not even close. Google had a 40 billion dollar swing in valuation in a day last month. Were they really worth 40 billion more that day? Apple lost 300 billion in market cap in a matter of 6 months. Either they weren't worth that much at the peak, or they weren't worth that little at the bottom. There is no way you could ever convince…

You seem to be using a definition of "efficient" that has some sort of moral or intuitive meaning. That's not the relevant definition. It's really something more like "the market will not exhibit large-scale persistent arbitrage opportunities", which is why showing the market is inefficient pretty much by definition requires you to produce a method to consistently make substantial quantities of money by exploiting th…

According to investopedia[1] - An investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments.

At the very least, if not me, Warren Buffett has shown that the market does in fact exhibit large-scale persistent opportunities. You just have to be patient. I don't think "arbitrage" is actually the relevant term here. It has a very specific meaning that isn't simply a stock being mispriced. Really though, the market offers deals all the time.

FWIW, I don't have Buffett's track record, but I currently have 20 stocks in my portfolio most of which I've held for several years. Of those, 19 have made money and 1 has lost a small amount, and on the whole I've beaten the market nicely. I could just be written off as lucky, or as about to lose lots of money, but how do you explain Buffett? He has a track record of consistently beating the market by wide margins for 50 years. Seems like that wouldn't be possible under EMH.

[1] http://www.investopedia.com/terms/e/efficientmarkethypothesi...

Re: TWTR

#253

Post by robterrell »

mathattack wrote: post #243
YZF wrote: post #233

Earlier quoted context omitted.

The underwriters who will make hundreds of millions here... (EDIT, well, many millions at least) What sort of risk are they taking that justifies their rewards and how does it help the economy? And the individual bankers who will take millions of dollars in bonuses home because they get paid for the 12th time and don't get penalized for the 11 others, what sort of innovation did they contribute to the world? I think…

One comment... Google and Facebook each tried to stick it to the bankers in their own ways. In the end both struggled as a result. Google tried to cut out bankers and make them play by special "Just for the Google IPO" rules and rates. By creating a custom-IPO process, they saved on banker fees but wound up leaving an awful lot of money on the table. Facebook went the other way. They tried to grab every last penny on…

Help me understand why Facebook taking every dollar out of the market was a bad thing for them. I understand why Wall Street wasn't happy about it (since they expected a pop they could profit from & had to buy stock to fulfill their obligations... and why should taking a company public be an entirely risk-free profit opportunity anyway?)

But, why was it bad for Facebook? Sure, their stock was below the IPO value for almost a year, but employees almost certainly had their options priced well below the IPO price, right? What other ways can a slightly lowered stock price hurt a company in the year after an IPO? Genuinely curious about this.

Re: TWTR

#254

Post by marincounty »

nine_k wrote: post #102
corford wrote: post #82

Can someone with more clue please tell me that the following cynical thought I keep having is wrong and laughably misinformed (and then explain why)? Twitter's investors (who have plowed hundreds of millions in to a loss making company) decide to sell some of their stock at $26/share (after consulting with banks to arrive at this price). This will make right the losses they've experienced so far and pass the problem…

Well... I can't see a fault in your logic. Maybe you remember the dot-com boom in 1999? It looked somehow similar.

Yea--you're right. We are definetly in bubble.

Re: TWTR

#256

Post by nine_k »

sneaky_ruds wrote: post #177
nine_k wrote: post #158

Earlier quoted context omitted.

Let's calculate. Twitter revenue was $391M for last 4 quarters [1]. Twitter market cap is currently $24670M, or about 63 times the revenue. If Twitter's revenue grows 100% each year (that is, twice each year), it will take 5 years for them to catch their current market cap with revenue : 1 + 2 + 4 + ... + 32 = 63. But what investors are interested in is not revenue, it's profit. Let's imagine that Twitter discovers a…

So your argument is that a company's value should be limited by 1 year's profits? Please start a company so that I may buy it from you.

I projected literally exponential growth of revenue for Twitter. Well, if it does grow exponentially, it won't be bad! Supposedly their costs won't grow as fast, and they'll have some healthy profits.

It will be a quite long-term investment anyway. Like, well, when Forrest Gump invested in AAPL.

Re: TWTR

#257

Post by YZF »

encoderer wrote: post #251
YZF wrote: post #233

Earlier quoted context omitted.

The underwriters who will make hundreds of millions here... (EDIT, well, many millions at least) What sort of risk are they taking that justifies their rewards and how does it help the economy? And the individual bankers who will take millions of dollars in bonuses home because they get paid for the 12th time and don't get penalized for the 11 others, what sort of innovation did they contribute to the world? I think…

"If Twitter is worth $50 bucks a share why were its investors willing to part with their stock for $26 a share only yesterday?" http://en.wikipedia.org/wiki/Time_value_of_money http://en.wikipedia.org/wiki/Expected_value

Yes. Yes. That's not the question. The question is why does an insider who is intimately familiar with all the details of the business and has been following it since it started values it so much less than Joe Plumber who is clueless and buying it today on the stock market. If Twitter is such a good business why would I as an owner want to part with it? What is it going to be doing with the cash it raised?

As Warren Buffer says, in the short term the stock market is a beauty contest. So yeah, Twitter is very beautiful today.

The idea behind the stock market is to have a way for businesses to raise money for expansion (other than getting a loan from the bank) and investors buying into the future profit of this expansion. This is capitalism and it's great. It has turned into this casino pumped by easy money with wild up and down swings where any correlation to the soundness of the business, its prospects or performance are purely coincidental.

Re: TWTR

#258

Post by bolder88 »

lowboy wrote: post #246
bolder88 wrote: post #241

Earlier quoted context omitted.

> When $25b of wealth is being created Woah there. I think this is the fundamental issue. $25b of wealth hasn't been created. It's not free money. It's a scam.

I think you have different requirements on what constitutes "wealth".

If you print some more money is that wealth?

Re: TWTR

#259

Post by YZF »

jmackinn wrote: post #236
YZF wrote: post #233

Earlier quoted context omitted.

The underwriters who will make hundreds of millions here... (EDIT, well, many millions at least) What sort of risk are they taking that justifies their rewards and how does it help the economy? And the individual bankers who will take millions of dollars in bonuses home because they get paid for the 12th time and don't get penalized for the 11 others, what sort of innovation did they contribute to the world? I think…

The undrewriters don't always come out doing so well. Take a look at the Facebbok IPO as an example. They didn't end up selling all of the stock that was issued in the IPO and had to buy up stock back from the market at elevated prices in order to keep the stock from plummeting on the first day. They still made money but not what they expected. As for the insider vs outsider. In order to issue an IPO, a number of sto…

I believe that usually the underwrites have buyers for all the stock prior to the IPO. The only reason they intervene to keep a stock from plummeting is to secure their own profits as they usually get options on the stock as part of the IPO deal. Talk about conflict of interest. Obviously a lot of the buyers are funds managed by other investment banks. Again talk about conflict of interest. What was the story the other day, that GS didn't record a single day of trading loss for an entire year...

That said, most of the money still does end up in the company which can use it to build its business. The process isn't completely broken. But it's very inefficient.

Re: TWTR

#260

Post by hayksaakian »

silverbax88 wrote: post #247
olefoo wrote: post #183

Earlier quoted context omitted.

Yes. Think about all of the paywalled news outlets out there. Think about how many journalists tweet their stories to drive their personal brand. Think about immensely popular twitter accounts and sought after domain experts. Think about the fact that someone who is very entertaining on twitter needs to leave twitter to ( consult, sell t-shirts, produce media, etc. ) if they want to make money. Think about how t.co m…

I don't want to sound dismissive, but this is very similar to the 'eyeballs' strategies that were bandied about prior to 2000. If a million people use a link to go to a paywall site, that's awesome - except as of now the data shows that Twitter users don't become buyers as a general rule. Can they make money? Sure. Can they make money with ads? Sure. Can they make money with massive vertical media funnels? Well...wha…

From using their ad service I can say:

their demographic targeting is razor sharp, you can target followers of specific users, or people within any of the standard demographics. You can also target people by specific interests.

I think this is the AdWords for branding

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