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Facebook trades under $30, down 7%+

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

#61

Post by dredmorbius »

bdr wrote: post #18
gamble wrote: post #8

Earlier quoted context omitted.

The early investors made out like kings, but I doubt Facebook's employees are in a cheery mood as they watch their options sink underwater and their vested paper wealth dissipate while waiting for the lockup period to end.

I'm skeptical that FB would be higher today if it had IPOd lower.

It would be higher relative to the IPO price.

Among other things, this means that employee options would still be above water. Rather more motivating than underwater options after years of death-march hours.

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

#62

Post by ma2rten »

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…

Honest question: Why do you think that a share price of $30 is appropriate? Facebook still has a P/E more 6 times that of Google or Apple. To me (I don't understand a lot about the stock market), $30 sounds just as arbitrary as $38.

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

#64

Post by cube13 »

chucknelson wrote: post #53
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.

I disagree. While the market hasn't been acting too rationally in general over the last few years, FB dropping like a rock is actually a fairly rational response to their circumstances.

FB made less money in Q1 2012 than in Q1 2011. That was reported by them before the IPO. FB blamed it on the fact that more users are accessing Facebook through their mobile clients, which don't get them as much advertising money. Normal response to these kinds of reports is for the stock price to drop.

There's also the fact that they were horrendously overvalued in the first place. Facebook is quite possibly the most mature tech company to ever IPO. They already have their sources of income. They have arguably saturated their target market(1/6th of the human race has created accounts), and really don't have that much farther to grow, without seriously monetizing their current users. Unfortunately, as FB and all the other social network companies have found out, it's difficult to get more money out of your users without growing the user pool. Facebook can't grow their userbase exponentially, which really puts a lot of doubt on their future growth potential.

My gut feeling is that the IPO was not driven by Facebook needing the money(which would be normal), but that all the private investors and VC funds wanted to get out. They wanted as much money as possible, which would explain the high valuation.

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

#65

Post by waterlesscloud »

il wrote: post #29
benjaminwootton wrote: post #13

Earlier quoted context omitted.

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…

I don't think the possibility of a $50B exit vs a $100B exit will make any difference for most angel investors.

What will make a difference is that neither Instagram or Pinterest would get anywhere near as much of a valuation today as they did a month ago.

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

#67

Post by jamesbressi »

stonemetal wrote: post #58

I know everyone keeps pointing to the 100:1 P/E but with 900 million active users that is more than 100 bucks per user. Is the average FB user worth 100 dollars to FB?

If your math is right, then yes I think anyone would agree that the mind share of each active user on FB is worth even more than $100 bucks.

But, the problem is they have not proven they can monetize those users efficiently and effectively yet.

I remember when everyone questioned how Google was going to monetize on their traffic and they figured it out and hopefully FB will too.

The one interesting thing that is a big difference between Google and FB though is that Google had "traffic" and FB has a group of people hanging out so to speak. You would think that FB has the better potential to maximize monetization of customers, but how remains to be seen.

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

#68

Post by st0p »

chucknelson wrote: post #53
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.

If the market would have acted rationally, FB would never have IPO'd at 38 per share given their profits. Being valued at 105 billion dollar when your profit is only around 1 billion a year is insane, especially when you also account for the highly volatile nature of social networking (FB might be replaced by something we've never heard about in a couple of years)

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

#69

Post by astrodust »

LargeWu wrote: post #15
unreal37 wrote: post #9

Can anyone explain why they are down 7%?

I think a better question is why are they only down 7%

As Facebook stands, they're doing okay. The stock might be over-valued, but that's the environment we're in now.

To get that stock going up they'll have to increase their market share and the only way to do that is to start acquiring big social networks, something they don't seen prepared to do, or diversify.

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

#70

Post by tatsuke95 »

bignoggins wrote: post #41
MisterBastahrd wrote: post #37

Earlier quoted context omitted.

FB's IPO is based on imaginary numbers. 900 million users? How many actual users. Seems to me that the suits REALLY wanted to make this a $100B company regardless of how much worth it actually had. There's only so much you can glean out of a social network where the vast majority of the time people are talking about how their day went. I think that some people fundamentally misunderstand the difference between Facebo…

It's 900 million monthly active users. Say what you will about FB but they don't use vanity metrics.

>It's 900 million monthly active users

This number has always irked me. How many of those are unique? And I don't mean unique accounts, I mean actually unique people.

I did some work in the social gaming space. We would routinely discover people with 5, 10, sometimes 20+ Facebook accounts that would be logged in and actively used in order to "game" social gaming mechanics ("add 10 friends!", "log in 10 days in a row and get a prize!", "complete these offers to get game currency!"). There are businesses on the internet that can get your page thousands of "likes" in the span of hours, by using multiple accounts.

Having a single account was the exception. And even though this was against FB's terms of use, I don't recall anyone, ever, getting banned for it. What would Facebook's incentive be to do so?

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