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TWTR

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Re: TWTR

#261

Post by joslin01 »

nerfhammer wrote: post #237
adventured wrote: post #194

Earlier quoted context omitted.

No it's exactly what caused the massive asset inflation across all major assets in the US economy in the last four years. Look up the perfect correlation between the S&P and the Fed's pomo shots, and its balance sheet expansion. But don't take my word for it. Recently the US Treasury conveniently wrote a paper admitting that the Fed was responsible for spurring the asset inflation. The dollar has lost 97% of its valu…

QE myths: http://business.time.com/2013/09/18/taper-tantrums-3-myths-a...

Alright, since you can't speak for yourself or rebuttal with anything more meaningful than "This is nonsense.", I'll respond to the article.

1.) Quantitative Easing is printing money -- "This is because when the Fed buys bonds from banks it does so by crediting those banks’ accounts at the Fed with reserves that didn’t exist before. But it’s misleading to call this process “money printing” because it doesn’t actually do anything to increase the amount of money in circulation. In fact, in our monetary system, most money is created by private banks and not the Federal Reserve. When a bank lends you money on your credit card, that’s “printing” money."

They say it's misleading to call it "printing money" because all they do is increase the amount a private bank can lend out. Apparently it's not their fault for putting in the extra reserves, it's the private bank "printing the money."

2.) Quantitative Easing will eventually lead to inflation: "If the government literally began printing money and started mailing out new $100 bills to citizens, that would lead to price inflation." --- Apparently, using their own example above, people getting lent more money and using that lent money is not inflation. The author is purposefully evading the core argument and instead paints a ridiculous definition of inflation (direct inflation). It doesn't take a genius to see that more reserves = more money to lend = more money to spend = more money in circulation.

3.) Quantitative Easing is responsible for recent stock market highs --- Point isn't pertinent to the discussion and quite frankly, I don't care. The stock market is driven by people who decide to buy or sell. When more people buy, prices go up.

------

So, what are your thoughts?

Re: TWTR

#262

Post by icebraining »

downandout wrote: post #242

Bottom line: this company is extremely overvalued at the moment. It may or may not grow into that valuation, but for the next several years, it will be nothing more than a speculative play. The fact that the company priced itself at a much lower valuation shows how irrational the current market value is.

If you can't tell if it'll grow into the valuation, you can't really claim it's overvalued. The fact that you (or the company) don't see reasons to value it so high doesn't make it true.

Besides, there's no reason to believe that Twitter itself choose the price based on their own valuation of the company.

Re: TWTR

#263

Post by SideburnsOfDoom »

bolder88 wrote: post #241
pbreit wrote: post #188

Earlier quoted context omitted.

Hard to determine which part your most concerned about. When $25b of wealth is being created, there are going to be some folks making money. And you might not think some of those folks earned their take. First, you're too fixated on "loss-making". IPO companies are almost by definition loss-making. IPOs are fundraising events. Growth companies use money to invest in the business for growth, not profits (yet). Second,…

> 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.

Could you explain why you think that IPOs are scams that don't actually create wealth? Or is it just this one?

Though I'd rather say that an IPO serves to acknowledge the worth already created by the company before the IPO?

Re: TWTR

#264

Post by bicknergseng »

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…

Recently I've been thinking about Kickstarter et al as a tech sector replacement for the stock market. What form or function does the stock market lay for companies that can be replaced with a more direct consumer/business to company investment? Is the instability and irrationality that speculation and large investment groups bring to the stock market necessary for funding/investing?

Re: TWTR

#265

Post by minimax »

giarc wrote: post #248
ceejayoz wrote: post #179

Earlier quoted context omitted.

Shorting is selling a stock you don't own. You have to purchase it back (called "covering") later. If it goes down, you keep the difference between what you sold it for and what you had to repurchase it at. If the price goes up, though, you still have to buy it back. As a share's price technically has no upper limit, you could wind up in the situation where you sold a share for $10, intended to purchase it back at so…

Do you have/Do you get to set limits on it? For example, automatically buy back if it reaches $15?

Yes that's called a stop loss order.

Re: TWTR

#266

Post by Tyrannosaurs »

pfortuny wrote: post #61
Tyrannosaurs wrote: post #24

Earlier quoted context omitted.

The owners of Twitter prior to the flotation have basically sold a chunk of what they owned on the stock market. To do that they needed to put a value on those shares. Determining that price is pretty tricky but through one mechanism or another they settled on $26 a share. The fact that people are now willing to buy them for $46 a share suggests that they basically sold them at too low a price (arguably $20 a share t…

I understand what you mean by "they lost out a fair bit of money". However, that is not exactly true. They have failed to gain that (admittedly huge) chunk of dollars but they have lost nothing: the have the same money they started with and they never had any more than that . You only lose when you start with X and end up with X-Y, for positive Y. They have probably missed the opportunity to gain more but that is the…

Agreed, I should probably have said "there is a feeling they might have missed out on a lot of money".

It's not clear cut but the share price hitting $46 suggests that they could have floated successful at a higher price.

Re: TWTR

#267

Post by lowboy »

bolder88 wrote: post #258
lowboy wrote: post #246

Earlier quoted context omitted.

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

If you print some more money is that wealth?

Yes, because it could be exchanged for other goods and services. You could buy gold or land (if you printed enough money). Is that not "wealth" to you?

Re: TWTR

#268

Post by abat »

slapshot wrote: post #151
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…

The banks sold at $26 to their institutional clients ("building the book"). The banks didn't hold the stock at $26 themselves.

But the banks also got an option to buy an additional 10M shares at $26 in the next 30 days. By keeping the price low, the banks made a $500M profit on top of their fees.

The banks are triple dipping on the IPO: the fee (3.25%), their options on 10M shares, and their ability to limit IPO access to clients that give them profitable business.

That said Twitter extracted some sweetheart loans from their underwriters and the fee is much lower than the usual 7%, so it's definitely a two way game where both sides are trying to take advantage of the other.

Re: TWTR

#269

Post by lowboy »

SideburnsOfDoom wrote: post #263
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.

Could you explain why you think that IPOs are scams that don't actually create wealth? Or is it just this one? Though I'd rather say that an IPO serves to acknowledge the worth already created by the company before the IPO?

I think bolder88 has a problem with the idea that an IPO creates intrinsic wealth, or somehow increases the overall "wealth" of the entire system (either global or within a given country).

Yup, and now the word "wealth" is just a random series of letters when I read it.

Re: TWTR

#270

Post by minimax »

giarc wrote: post #249
scotch_drinker wrote: post #163

Earlier quoted context omitted.

If you buy a stock at 10 and it goes to zero (the bottom limit), all you lose is your $10. If you short a stock (thinking it's price will go down), there is no upper limit on how far it can go up. If it continues to go up, you're going to lose the amount of money at which you eventually "buy to cover". For example, if you hold your short until the price is $100, you lose $90.

Could you not hold forever?

No. As the value of the position (price times size) approaches the cash balance in your brokerage account, your broker will close out your position (buying back the shares) using the funds in your account. This is known as a "margin call."
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