Discussion in 'Business & Economics' started by Syzygys, May 21, 2012.

1. ### SyzygysAs a mother, I am telling youValued Senior Member

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I am going to follow FB's stock movement in this thread, just like the GRPN one.

It debuted at $38 on Friday, the price moving between$45-38, settling just above $38. Right now just a day later it is already below$34. The IPO was a success, rising the most money for the company (the goal of any IPO), but giving investors not much extra profit. There were also technical glitches, but that is a different issue.

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Well, it has been the worst IPO in the last 10 years. The stock is at $30, it is getting to$20 much faster than I thought. Sooner or later it should get a bounce, a $3-4 jump, even if just temporary... Edit: It is already below$29 and still falling... Supposedly $30 was some kind of technical support... Last edited: May 29, 2012 9. ### quadraphonicsBloodthirsty BarbarianValued Senior Member Messages: 9,391 Nah, Facebook was already rolling in cash. They did the IPO so that various parties that they had previously bought out with stock could cash in and get their money. 10. ### joepistoleDeacon BluesValued Senior Member Messages: 22,882 I realize I am in the minority, but I would not be surprised to see a FB price of$9/share. I think $9/share would be a fair price for the stock. People seem to think this stock will grow at 25% per year, and I just don't see it. 11. ### SarkusHippomonstrosesquippedalo phobeValued Senior Member Messages: 7,783 ^ I'm with you. I rounded to$10 but think even $8 is a fair price at the moment, given their current business model. The business was (and still is) clearly overvalued, in my opinion. The IPO valuation was at a multiple of 100x prior year profit - which is an order of magnitude more than most other companies around. The last time we saw this was at the height of the dot.com bubble. They currently make sales of c.$4bn and make $1bn of profits - which while good margin serves to highlight one major issue that they'll face: how do they grow profits sufficiently to give investors a return, at least in the short-term? At the moment, even if they gave back their entire profit as dividend, this is a 1% return. My current account gives me more than that! With the money raised from the floatation they're going to need to come up with some profit-making schemes and quickly, before the buzz wears off and the shareprice drops: at a more reasonable multiple of 20 (still high compared to other companies) this equates to$8/share, which I think is still generous.

They've already spend $1bn buying Instagram... which is a free-to-use system and has c.30m users, and is characterised as a company that has "lots of buzz but no business model"... and any growth will undoubtedly be from the same users who also use Facebook. And how does Facebook make its revenue at the moment: advertising. Yet it makes 1/10th of Google's, despite having 2x the page-views. And the difference is clear: Google is like a high-street, and you get advertising depending on which shops you stop in front of, even if it is the library. Facebook is more like a party, where the walls are plastered with adverts. And now they seem to be heading down the phone market... not just the software, but the actual physical side of the phone market... trying to challenge Apple. Their concern seems to be that if they don't do it then Facebook will just be another App on someone else's hardware. Basically I don't think Facebook yet has a business model that equates to anywhere near a$100bn valuation, and it may struggle to ever do so.
Anyone investing now is investing in potential... and hope. And that's never really a good basis for investing.

14. ### SyzygysAs a mother, I am telling youValued Senior Member

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Their main value is the searchability of the user base's taste. That is worth a lot for advertisers, for more effective (targeted) advertisement.

15. ### SarkusHippomonstrosesquippedalo phobeValued Senior Member

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Well, they hit a new low yesterday, at $26.83 /share, but then rebounded to close at$29.6/share.

16. ### SyzygysAs a mother, I am telling youValued Senior Member

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That rebound was market related, the S&P 500 rallied 20 points (Dow +170 points). Today it should be down again, because the futures are down like hell...

As I mentioned earlier, the original planned IPO range was 28-35, so around here at 28 the price should see some stability...

Last edited: Jun 1, 2012

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$26.33 at 6:30pm BST Still heading downward. 18. ### quadraphonicsBloodthirsty BarbarianValued Senior Member Messages: 9,391 That stuff helps, but if you think about it for, like, 8 seconds you'll realize that searchability is useless unless you actually have a big user base to search. That's why the user base itself is their main asset. 19. ### quadraphonicsBloodthirsty BarbarianValued Senior Member Messages: 9,391 You are failing to account for all of the other bad economic news (Europe, unemployment, etc.) in the time between the IPO and today. You should be taking the initial IPO price and then deflating that by some factor (based on the DOW or some index fund or something) if you want to estimate the "correct" present value. 20. ### quadraphonicsBloodthirsty BarbarianValued Senior Member Messages: 9,391 Sure, but the private pool wasn't big enough to cash out entire enterprizes that had been bought with FB stock. It was big enough for the individual employees, but that's about it. You don't seem to understand how the rule in question works. When you hit 500 shareholders, all that happens is that you are subject to various accounting and disclosure rules. You do not have to go public. However, the rules you are subject to are very similar to those that apply to public companies, so there's little reason not to go public at that point, if you are profitable. We know that they had plenty of cash at the time they made the decision to pursue an IPO. We also know that they bought Instagram for$1 billion in cash in the interim.

LinkedIn is a very different beast. You don't use it very often, but when you do, you get an entire new job out of it. So people are very dedicated about keeping their profiles up-to-date, etc. But there are not a lot of eyeballs to sell ads to, no.

21. ### SyzygysAs a mother, I am telling youValued Senior Member

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80% of Facebook clicks are done by bots

Well, that sure didn't help the stock's price, down to almost \$22...

http://www.pcmag.com/article2/0,2817,2407871,00.asp

"The company said it discovered the problem several months ago in preparation for the launch of the new Limited Run. "We noticed some very strange things. Facebook was charging us for clicks, yet we could only verify about 20 percent of them actually showing up on our site," Limited Run said in a blog post."

Last edited: Jul 31, 2012
22. ### superstring01Moderator

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I'm having trouble being surprised by this. Facebook is not yet the "real deal" and I wonder if its investment model, including other areas of development, are robust enough. Eventually FB will fade. We'll see if they have any other tricks up their sleeves. I wonder what heads will roll from this.

~String