FB new low (18.23), down 52% from 38 IPO price
google.com
google.com
But seriously, is there something about Facebook that hit the news that is leading to this drop and is worth discussing? Or is this just to spur some discussion on stock price speculation? If the former, what's the news? If the latter, what's the point?
The importance is that institutions may decide not to participate in future IPOs (or may do so with weak uptake).
"The $38 IPO price is the rate at which Facebook's underwriters will sale shares to their clients."
http://money.cnn.com/2012/05/17/technology/facebook-ipo-fina...
http://www.businessinsider.com/this-is-what-traders-saw-when...
Investors who paid 42 per share at the IPO received shares from the underwriters.
http://seekingalpha.com/article/217235-ipo-offering-vs-openi...
tl;dr: Investors were looking for the IPO pop and then dumping it. Problem is, if everyone follows that idea, there's no upside left.
It was obvious from when FB first started trading on SecondMarket that the "IPO pop" would happen before the IPO. The IPO pop stems from a supply/demand mismatch (lots of people want to get in but are unable to). And because the accredited investors got in before the IPO, the only people left were "retail" investors (and we know how that story ended). Many analysts and investors don't understand that key point, which is why a lot of people were caught with their pants down.
Guess there's something to businesses that generate lots of snarky comments.
(I don't use it so it's easy for me to say)
Bell Labs had great minds, but that didn't mean that the legal entity managed their innovations well ...
I'm sure he meant that they could, in theory, utilize their brilliance towards kickstarting something business oriented to reverse the sentiment. For whatever reason though, Mark seems more interested in Frank Gehry's NASA hanger than actually making money. It's a big fucking revelation to him that people in finance actually care about financials. Who knew?
The whole situation really makes me think how much the current funding model as just a glorified legal ponzi scheme: More users, more funding, more users, more funding, IPO & profit.
I'd say most of the better business minds were the investors and the prudent ones have already sold. I'm convinced Eduardo Saverin is really the genius of the entire group. He sold shares right before the IPO, renounced his US citizenship, and moved to Singapore. He may have been screwed over by Facebook before but he gets the last laugh now that he sold his shares for double what their worth and got to avoid some taxes while doing it :)
In contrast, Mark choose to be more of a Sean Parker - a great creator of free products and, thus far, a fairly lousy businessperson. Companies like Spotify are amazing for users yet that doesn't stop them from losing millions each month in licensing. These companies dig themselves into holes from the very beginning and simply pray the financial problem fixes itself. My opinion and seemingly that of investors is that there is no indication that it will until the model itself is changed. Recent IPOs all tell the same story: that businesses not built with long term viable business models have trouble performing well on the market. Until "free" can work like Google enables it to in more companies, nobody is willing to bet on the hole not getting deeper without the likelihood of a larger round to keep these failing companies afloat.
http://www.forbes.com/sites/tomiogeron/2012/02/01/facebooks-...
That's a bit over 10% of the world's population. They can't really get the growth that's expected with their P/E, especially because of the difficulties that they're having with getting higher returns/user. They can't grow their userbase by that much either.
I agree with your general premise however, that Facebook's primary growth won't be on the user base, but needs to be on the revenue per subscriber numbers. This is going to really test one of the Valley's most recent premises, that building a massive user base will also create a massive business (Twitter, Instagram I'm looking at you...)
[1] http://www.telegraph.co.uk/technology/facebook/8573340/Faceb...
[2] http://www.forbes.com/sites/ericsavitz/2012/05/09/facebook-t...
I don't know if there is an example of a public internet company that was able to transition from being an ad-base business into selling stuff. The closest may be LinkedIn, who's selling recruiter tools and premium memberships. However, LinkedIn had been doing that before the IPO, as a relatively small company.
I'm skeptical that Facebook can pull this off in a reasonable time frame, but shareholders who are psychologically anchored to the IPO price are probably more optimistic.
Which sounds remarkably similar to the way people thought about companies during the dotcom boom: Get the users first, figure out how to make money off of them later. Facebook's admittedly got one key difference from companies during the dotcom heyday, which is that instead of a burn rate it has this thing called 'revenue'. But that aside, at least for a while investors seemed to have fallen back into the old trap of thinking that the monetary value of a user isn't somehow tied to the amount of income they provide.
Maybe Facebook will figure out something else. . . but if nobody's sure what that is right now then it's still an Underpants Gnomes[1] business model.
i'm still waiting for the famous growth numbers to be made public. everyone talks about growth, but FB has not made estimates/target numbers available.
http://uk.reuters.com/article/2012/08/31/uk-facebook-shares-...
Only if you never factor in new information to your decision making.
If you $38 was good with the assumption that there would be a pop to $50 then now you wouldn't buy as it's now clear there won't be a quick pop that gets you to $50.
If I offered you FB stock at $10,000, what would you say? "Too much", I hope.
If I offered you FB stock at $0.05, what would you say? Probably, "Hell, yeah, that's a bargain".
So there's a rational price that the market agrees upon, within certain boundaries. The market seems to agree that the IPO overpriced the real market value of the shares. It's a real time machine that tells us what people think the shares are worth.