Andreessen Horowitz Sells a Third of its Facebook Shares | Hacker News Reader

Andreessen Horowitz Sells a Third of its Facebook Shares

allthingsd.com

54 pointsuladzislau47 comments

There's no value to A16Z's investors for A16Z to hold shares in publicly traded companies. If the investors want to, they can buy shares directly and not through a VC firm.

The value to these investors is access and expertise in selecting private companies, not holding shares in public ones.

point well made, though, there may be U.S. tax reasons that would influence the timing of sales (e.g. offsets in their portfolio)

Facebook is about 4x over fair value, so it's a pretty decent sale. It's too bad for the public investors that bought that shit up though. There should probably be a basic financial test that people should have to pass before they get access to a brokerage account. At some of the prices I'm seeing stock clearing, it's obvious that the buyers have not actually read any financial reports.

Something like a basic written comprehension test on a random 10-K filing would efficiently and cheaply filter out those who are, and aren't, qualified to manage their own money. In fact, I'd wager that it'd probably reject a whole bunch of finance/eco/accounting majors as well.

If you don't know your balance sheet, from your income statement, from your FCF, from your capex, then you probably don't have any business buying or selling financial assets. To anyone who says that this is an unfair statement, I have no knowledge of airplane mechanics, and hence, I probably have no business repairing airplanes. The same reasoning applies to investments.

Bogus analogy. You have no business repairing airplanes because you may endanger lives. People should be free to squander their money in their folly if they so choose. Otherwise outlaw lottery, gambling and horse-racing as well.

Why not outlaw lottery, gambling and horse-racing?

People misallocating capital is just as dangerous as an airplane mechanic misplacing a bolt on a Cessna. Both actions end up, in the long run, with people dying.

Most societies do try to control gambling because of the social problems it causes.

However this has nothing much to do with misallocating capital (after all, if they're misallocating it in gambling, why do you think they'd be smart enough to do any better if not allowed to gamble?) If you truly want to try allocating that capital better than the former owners of the money, buy shares in gambling companies.

Society already outlaws or regulates many things to prevent people from hurting themselves.

People are not capable of fully understanding all possible choices in a fully unregulated system, and even less able to consistently act rationally in their, or anyone's best interest.

It is the responsibility of any lawmakers, engineers, experts etc. to design our systems to be safe, transparent and to set the occasional boundary where reasonable.

So what if you know your balance sheet, income statement, FCF, capex, when you are analysing Enron or Lehman Brothers?

If you are so sure Facebook is overvalued, how big is your short position? Guaranteed win right?

Can you guarantee Microsoft won't swoop in to buy Facebook at 5x over "fair value"?

I think we have reached the point where is conventional wisdom that "professional" fund managers struggle to outperform index funds, so you can mock the financially illiterate, but I hope your investment returns regularly outdo monkeys throwing a dart.

I own puts. Outdoing index funds is easy. Investing is just like any other job. You do something cheaply than sell it for more. If the vast majority of fund managers are below average, than so to are the vast majority of doctors, lawyers and engineers. Investing isn't a special industry. Most surgeons are actively bad for their patients as compared to the average. Most engineers are bad for their projects compared to the average. Most lawyers are bad for contracts compared to the average. That's just how the world works.

This sounds like protecting people from themselves. I disagree and believe people should have easy access to buying shares, if its a disaster only themselves are to blame.

Also it is not the same as repairing an Airplane. If you lose all your money you only hurt yourself and your family. (And thats the way it should be, people should loss if they are stupid with their finances.)

"Who cares if millions of people take bad loans that they have no chance of repaying? That's their own fault, they should know better."

And yet, look at how deeply the entire world was affected. People need to be protected from themselves for the well-being of society.

Also, are you Ayn Rand or something? Your only point of argument here is that people should be given more opportunity to ruin the lives of their family at the hands of a system that has most likely willfully manipulated and taken advantage of their lack of experience (including convincing them that it was a good idea in the first place). Have some compassion.

You make an interesting counterpoint. I was assuming the person led themselves to buying shares of their own free will and not enticed by a bank or other power with malicious intent.

I think in your example the banks should really have been punished more as it was their doing that caused the crisis by misleading millions of people.

The banks were pushed to do it by the feds.

It's so much comforting to know that the unwashed masses can look up to people such as you or the "experts" to protect them (with compassion) from themselves or from those who seek to manipulate or take advantage of them, such simpletons that they are. Makes it a better world.

Actually my assertion is that the "experts" are doing the manipulating, and the "unwashed masses" don't have the proper protection in our aggressively capitalist system. Can you put forth an actual argument though, something more than vague sarcasm?

I get what you are saying, but I think your analogy would rather be this (to remove the flaws in the parallel) -

> I have no knowledge of airplane mechanics, and hence, I probably have no business flying in airplanes.

TLDR Nothing to interesting, they got in relatively late and are now selling a part to give it back to investors while still keeping the majority of their shares, so this has nothing todo with them not trusting in Facebooks vision any longer.

But if they still believed in FB's vision, why would they dump so much stock? 1/3 sounds like a lot to me.

Maybe they need to liquidate part of their holdings to:

1/ Return some capital to investors

2/ Start up a new fund to invest in other things?

They would've sold their entire stake if they didn't believe FB would grow anymore.

What a ridiculous supposition. The truth is we can't read anything into this except that is a very significant percentage of his FB holdings.

If they don't believe in FB's vision, why would they retain 2/3rds of their Fb holdings? What a silly comment.

Because they believe in Facebook's vision 33% less than they used to?

Because dumping enough stock reduces the price so waiting a a week or more between sell offs is a good idea.

Obviously nobody js going to remember you saying this a week from now when they don't in fact unload another block of Fb, or reconcile the comment against Fb's price next week. It's just typical message board BS, is the bet I'm willing to place.

> If they don't believe in FB's vision, why would they retain 2/3rds of their Fb holdings? What a silly comment.

It wasn't a comment; it was a question.

What's silly is to respond with a fact-free retort that provides no value whatsoever to the discussion.

Although I'm no investing expert, it's my long-held understanding that investors don't hold onto stocks that they expect to go down, and investors don't sell stocks that are expected to rise.

Currently Facebook is generally recommended as a "buy" or a "strong buy", and price targets are around $60. It's possible that Andreessen's motivations had nothing to do with their expectations of the stock's performance (versus other stocks that they may have set their sites on) but I tend to doubt it.

Their fund has a termination date. They don't want to be forced to sell on that date.

Good Timing. No data to back what I'm saying, but I don't see FB going up any further. The time spent by me (almost none) and my other non-techie friends has decreased drastically on the website and I still don't see a very effective monetization strategy.

They still have two billion dollar opportunities that they are sitting on:

1. An Adsense competitor 2. Video ads

These are not wild predictions of possible revenue streams. Facebook has already launched these features to select partners and when they are launched to the public, their stock will jump a lot more.

I am waiting for a good explanation as to why they haven't started an Adsense competitor yet; seems like it would be a goldmine

The only explanation I've seen that makes any sense to me, is that their ad systems are still immature. They haven't figured out how to properly monetize their own platforms fully just yet, much less the rest of the Web.

Which also helps to explain why they get rated so poorly on return-on-investment when it comes to ad spending.

I'd say the last year has been a substantial break-through for Facebook in terms of pushing their ad systems forward and getting wide adoption of it (including finally getting mobile to spit dollars). Maybe a couple more years of developing their advertising platform and they'll get there.

I also think there's a general underestimation of how good the Google ad system is overall, and how hard it is to compete with.

Facebook's game is to show that they can act on the grand old online media promise: that they first get loads of users, then later they can turn on the revenue streams and the cash comes pouring in.

Facebook is living up to this promise with the way they turned on mobile ads and they are now bringing in over a billion dollars annually. I think they want to maximize on that opportunity first, then turn on another revenue stream after mobile ad growth starts to slow. If they pull this off, they will be Wall Street darlings

For Google, AdSense solved the problem of limited inventory, i.e. there were just that many searches for "digital camera" and AdSense provided an opportunity to boost the inventory of potential ad venues to people who don't actively search.

What value would a third-party ad placement program provide to Facebook, who's already sitting on trillion+ ad displays per day, and has no shortage of inventory?

The issue I see with their ability to execute on those ideas though - I think facebook home's epic flop is a good indication of the quality of innovation to expect from FB going forward.

The issue with Home was that it was just too early to launch. They thought they could launch a beta product and get some feedback before iterating, but they severely underestimated users' needs for things like folders; which seems obvious in retrospect.

I think it will turn out to be a successful product as it evolves and integrates with more services.

I would say they still have a year or two's growth left if they don't come up with something new. Even though the growth is slowing down, I think they are improving the way they make money (more/better ads on Mobile for example). This would only result in better revenue and profits.

Total value of said sale?

Andreessen Horowitz owns .25% of facebook. A quick calculation shows that the sales value at yesterday's close is around $100M.

Since they know who you are, and since the central banking database knows how much money you have in what bank accounts, and since they know who your friends are, it is no problem to demographically calculate that you could reasonably get a heart attack now. Of course, you made quite a few strange large purchases just before you died, but only your friends would know that these were strange. Your balance is pretty much gone. You seem to be no longer keeping them up to date on what you are doing? Facebook is simply a gold mine, because any money that you are holding in bank accounts forms collectively a bounty on your head.

"A pyramid scheme is an unsustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment"

"By selling some of its holdings, she said the firm is able to return cash to its investors."

welp

The amount that you misunderstand what you're talking about is staggering.

The point is they're not that confident the stock will go up much more. Sure, you could look at it as spreading risk.

If that were true, they would liquidate much more aggressively. I don't know how much total value in shares they have left, but if you're a venture investor, your goal isn't to tie up all your money in ventures that have already broken through; your goal is to find the next one. If all they wanted to do is go long on stocks, they could do that without all the venture investing.

If they started to liquidate quickly, so would everyone else - and they'd piss off their co-investors too if they didn't do it fully planned out. Regarding going long on investments in a different way - that won't bring them the same return.

By selling holdings and not returning cash from new members this scenario is clearly not a pyramid scheme.

The quote from the article makes a comparison to a pyramid scheme impossible.

Are you trolling?

I would strongly disagree with this. Using a pyramid scheme is hardly a good analogy with the current financing system we have.

Its a pyramid scheme when it doesn't work well & a company when it succeeds if I understand your logic correctly?

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