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Facebook trades under $30, down 7%+

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Re: Facebook trades under $30, down 7%+

#51

Post by Cushman »

ryanmerket wrote: post #46
cletus wrote: post #40

There are only two parties hurt by this: 1. The premiere clients of Goldman Sachs and Morgan Stanley who bought into the lie that FB should trade at >100:1 P/E; and 2. Facebook. (1) I don't care about. (2) is the interesting one. You'll note that I don't include the employees in the list of injured parties. They're largely in a lockout anyway (I assume?). Whether it opens at $38 and drops to $30 or starts at $20 and…

How can you say the P/E isn't justified when Facebook isn't monetizing +60% of their impressions (mobile)?

If everyone were valued by how much money they could be making, we'd all be billionaires.

Re: Facebook trades under $30, down 7%+

#53

Post by chucknelson »

cletus wrote: post #40

There are only two parties hurt by this: 1. The premiere clients of Goldman Sachs and Morgan Stanley who bought into the lie that FB should trade at >100:1 P/E; and 2. Facebook. (1) I don't care about. (2) is the interesting one. You'll note that I don't include the employees in the list of injured parties. They're largely in a lockout anyway (I assume?). Whether it opens at $38 and drops to $30 or starts at $20 and…

I would argue that the drop isn't from the market acting rationally at all, but in response to yet more hype supplied by the press, specifically the "how low will it go?" narrative you mention.

Re: Facebook trades under $30, down 7%+

#54

Post by InclinedPlane »

cletus wrote: post #40

There are only two parties hurt by this: 1. The premiere clients of Goldman Sachs and Morgan Stanley who bought into the lie that FB should trade at >100:1 P/E; and 2. Facebook. (1) I don't care about. (2) is the interesting one. You'll note that I don't include the employees in the list of injured parties. They're largely in a lockout anyway (I assume?). Whether it opens at $38 and drops to $30 or starts at $20 and…

The problem is that mobile is just one of their problems. They need to increase their monetization by an order of magnitude per user. This will require them going from a niche advertiser to taking over a significant fraction of all worldwide ad revenue, this is no small feat. They also need to tackle mobile better and respond to all the other competitive threats that will come their way in the next decade.

They have several thousand employees and a few billion in cash now. They need to pivot and scramble like crazy. If they don't they will end up on the wrong side of the inflection point and on a glide slope to obsolescence. I don't get the sense that people inside facebook see things the same way, I think they see themselves as the crowned king of social, and with the IPO they are transitioning to being a value company, which could not be more wrong.

Re: Facebook trades under $30, down 7%+

#55

Post by binarysolo »

betterth wrote: post #32
tedunangst wrote: post #24

Earlier quoted context omitted.

I'd like for someone to explain precisely what Facebook should have done to ensure a big pop. Value the shares at $5? What if their internal projections indicated the company was worth more than that? Picking an artificially low strike price for the options probably would have resulted in people going to jail, not to mention all the employees owing taxes on the difference.

From what I've seen, it was hugely overvalued. Maybe $25-$50 billion, with a share price of $28-$32. Last minute change to $38+ was suicide.

If you wanted to value it at $25-$50B, the share price would accordingly be $12-$24.

Remember market cap = total shares * price. :)

Re: Facebook trades under $30, down 7%+

#56

Post by arturadib »

Alternate title: FB down 20%+ since IPO

You'd be gambling enough already if you bought FB stock at 20x earnings (the tech norm for well-established companies), let alone at 100x.

At 20x, you'd be speculating on FB's ability to sustain its current earnings power in an increasingly competitive and verticalized space. That's a tough proposition, particularly since social graphs are not as much of a competitive moat as people thought (Orkut for example had at some point virtually the entire online population of Brazil engaged with it, virtually none now), and everybody and their mother is investing in a new social network for a different vertical.

Of course, it is entirely possible that FB will not only maintain its market position, but also increase its earnings power five-fold or whatever. In that scenario, they would have squashed most other vertical social networks and found a sustainable business model (they haven't really yet, see [1]).

Again, not impossible, but bear in mind what assumptions the current valuation implies. It's not surprising to see the market re-adjust its valuation after the IPO craze.

[1] http://cdixon.org/2012/05/15/facebooks-business-model/

Re: Facebook trades under $30, down 7%+

#57

Post by awj »

benjaminwootton wrote: post #13
ddet wrote: post #4

FB IPO is bad for the startup world

Agreed. I wonder how much of the current froth is based on people trying to be the next Facebook or Instagram? If Facebook takes off and justifies their early valuation, the startup/angel/incubator/VC world would go into the stratopshere. If it continues to languish, people are going to be much more skeptical in making investments and even starting web based businesses. A lot hinges on this stock price for the rest o…

> If it continues to languish, people are going to be much more skeptical in making investments and even starting web based businesses.

Is the latter part of that really true? Starting a web based business is worlds easier/cheaper than just about any other kind. I see this more as injecting a dose of reality and doing away with the give-things-away-to-get-big-then-monetize-somehow "business plan".

Re: Facebook trades under $30, down 7%+

#59

Post by imcqueen »

cletus wrote: post #40

There are only two parties hurt by this: 1. The premiere clients of Goldman Sachs and Morgan Stanley who bought into the lie that FB should trade at >100:1 P/E; and 2. Facebook. (1) I don't care about. (2) is the interesting one. You'll note that I don't include the employees in the list of injured parties. They're largely in a lockout anyway (I assume?). Whether it opens at $38 and drops to $30 or starts at $20 and…

I would also think that it's easier to build a mobile app/social network that competes with Facebook than it is to build a mobile OS/device that competes with Android/iOS.

Re: Facebook trades under $30, down 7%+

#60

Post by dredmorbius »

ryanmerket wrote: post #46
cletus wrote: post #40

There are only two parties hurt by this: 1. The premiere clients of Goldman Sachs and Morgan Stanley who bought into the lie that FB should trade at >100:1 P/E; and 2. Facebook. (1) I don't care about. (2) is the interesting one. You'll note that I don't include the employees in the list of injured parties. They're largely in a lockout anyway (I assume?). Whether it opens at $38 and drops to $30 or starts at $20 and…

How can you say the P/E isn't justified when Facebook isn't monetizing +60% of their impressions (mobile)?

Well, neither is anyone else.

If there's money on the table, it's because everyone in the field has failed to figure out how to grab it.

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