Facebook IPO

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

  1. Syzygys As a mother, I am telling you Valued Senior Member

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    12,671
    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.

    My prediction is that because the stock is way overvalued, it will be under $20 in 2 years or less...

    For info on the IPO:

    http://dealbreaker.com/2012/05/facebook-ipo-goes-nowhere-in-exciting-fashion/
     
    Last edited: May 21, 2012
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  3. joepistole Deacon Blues Valued Senior Member

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    The price decline we see today was expected. Personally I am not a fan of Facebook. I have been there; seen it; have a Facebook account and family that use it; but I am not impressed. I wouldn't be suprised if your prediction should turn out to be correct.
     
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  5. Buddha12 Valued Senior Member

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    With little else than an income from advertising companies to earn it money, I really can't see that company doing well for very long. It seems every year or so another company comes along like facebook and everybody goes crazy over how it is the best thing going just like facebook now. Without much actual income, other than advertising, I see it going to be going down in value not up unless there's something that it does to earn more income than its now doing.
     
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  7. Michael 歌舞伎 Valued Senior Member

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    I thought Facebook made their money data-mining people's personal details and then selling that information on to companies who use it one way or another? I don't have a FB account - although, I have thought about opening one because so many people have asked me to (more so 2 years ago not so much now).

    Will FB be worth <$20 in 2 years? Is that $20 today's money or $20 including inflation? Some people, like BillyT, think the next two years might see a lot of inflation. So$20 would be equivalent to around $12 in today's value.
     
  8. Syzygys As a mother, I am telling you Valued Senior Member

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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. quadraphonics Bloodthirsty Barbarian Valued Senior Member

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    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. joepistole Deacon Blues Valued Senior Member

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    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. Sarkus Hippomonstrosesquippedalo phobe Valued Senior Member

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    ^ 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.


    Anyhoo - $28.17 as at 8:31pm BST
     
  12. quadraphonics Bloodthirsty Barbarian Valued Senior Member

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    Joke's on them, though - even if they do do that, they'll still end up just another app on someone else's hardware. They'll just also be multiple billions of dollars poorer from having dumped a ton of money into developing, producing and marketting their phone before they fail.

    Even if the phone succeeds, most of their user base will always be on other platforms, and so they'll have to continue to support those and ensure that they're just as good as FB on their own platform - negating any edge for their proprietary platform. It's just silly.

    I'd thought they'd come up with some novel way to embed adds in their mobile site, to boost mobile revenues. That would have been a pretty good move. This whole pie-in-the-sky hardware idiocy is just that.

    Their problem seems to be that they imagine that Facebook is a technology company that produces value by innovating new tech. They aren't. They're a social network, and their main value and attraction is the existence of their large user base.
     
  13. Syzygys As a mother, I am telling you Valued Senior Member

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    Not really. FB shares were already traded privately. The reason they went public was that they passed the 500 share holders number and they HAD TO go public. Zuckerberg never wanted to.

    The rolling in cash is also questionable, until we see the quarterly numbers. They did make a nice profit in the last quarter, but we don't know the cost. Running a huge website like that costs a pretty penny, and they had years of unprofitability.

    The original IPO price was to be 28-35, but the underwriters went higher seeing the interest. Again, they did well for the company, they raised the most money available, but that is not necessary good for the investors.

    A good comparison would be LinkedIn, and FB actually is way better business-wise as LNKD. The valuation of LNKD is almost $100 with a P/E of 600!!! Even users say they only use it 1-2 times a year...
     
  14. Syzygys As a mother, I am telling you Valued 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. Sarkus Hippomonstrosesquippedalo phobe Valued 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. Syzygys As a mother, I am telling you Valued 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
  17. Sarkus Hippomonstrosesquippedalo phobe Valued Senior Member

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    7,783
    $26.33 at 6:30pm BST
    Still heading downward.
     
  18. quadraphonics Bloodthirsty Barbarian Valued Senior Member

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    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. quadraphonics Bloodthirsty Barbarian Valued Senior Member

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    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. quadraphonics Bloodthirsty Barbarian Valued Senior Member

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    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. Syzygys As a mother, I am telling you Valued 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. superstring01 Moderator

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    12,110
    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
     
  23. Read-Only Valued Senior Member

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    10,296
    Facebook's heyday is over. Their IPO was a huge flop and apparently they are not above ANY dirty trick to try and increase their profit in order to save face (pun intended) when it's time to report quarterly earnings.

    They have faced tremendous critisim over their abuse of personal information, shady "terms and conditions" and confusing (on purpose) security settings. They are fading fast and will eventually go the way of Enron and other shady, double-dealing companies.
     

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