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| Facebook IPO: an anatomy of Wall Street overreach | Facebook IPO: an anatomy of Wall Street overreach |
| (5 months later) | |
| The day of Facebook's first day of trading as a public company brought with it a strange perspective: the highest manifestation of a social media bubble and its ugly aftermath, all in the span of a few hours. Who would have thought that Facebook's much-hyped IPO – in its bold $16bn size, the apotheosis of uncontrolled, frothy, capitalist ambition – may have been just the thing needed to bring Silicon Valley high spirits back down to earth and send ambitious techies snuggling back into their hoodies? | The day of Facebook's first day of trading as a public company brought with it a strange perspective: the highest manifestation of a social media bubble and its ugly aftermath, all in the span of a few hours. Who would have thought that Facebook's much-hyped IPO – in its bold $16bn size, the apotheosis of uncontrolled, frothy, capitalist ambition – may have been just the thing needed to bring Silicon Valley high spirits back down to earth and send ambitious techies snuggling back into their hoodies? |
| The day opened with crowds awaiting Facebook's debut in New York's Times Square, waving at cameras. Gleeful Facebook employees, with sugar-plum dreams of newly-minted fortunes, crowded with smiles behind CEO Mark Zuckerberg at the company's Menlo Park headquarters. The Wall Street Journal created a Zuckerberg Wealth-O-Meter ($20bn at the latest count) and the New York Times revealed the subtle-wealth secrets of 1,000 new millionaires created by the IPO. | The day opened with crowds awaiting Facebook's debut in New York's Times Square, waving at cameras. Gleeful Facebook employees, with sugar-plum dreams of newly-minted fortunes, crowded with smiles behind CEO Mark Zuckerberg at the company's Menlo Park headquarters. The Wall Street Journal created a Zuckerberg Wealth-O-Meter ($20bn at the latest count) and the New York Times revealed the subtle-wealth secrets of 1,000 new millionaires created by the IPO. |
| Just to play a concise version of the parlor game that went around the stock markets, Facebook's market value at $104bn – with $3.7bn of profits – would have made Facebook worth more than: internet megastore Amazon.com; global beverage behemoth PepsiCo; petro-giant Total; BHP Billiton; and McDonald's. It was not far off the valuation of JP Morgan Chase, an international bank with $1tn in assets. Over the previous weeks, one brief glimpse of Mark Zuckerberg in a hoodie, heading to an investor meeting, launched the kind of press coverage we've hardly seen since the Beatles. JP Morgan itself, one of the company's banks, flew the Facebook company flag next to the stars and stripes of the United States, and papered its headquarters with Facebook signs. | Just to play a concise version of the parlor game that went around the stock markets, Facebook's market value at $104bn – with $3.7bn of profits – would have made Facebook worth more than: internet megastore Amazon.com; global beverage behemoth PepsiCo; petro-giant Total; BHP Billiton; and McDonald's. It was not far off the valuation of JP Morgan Chase, an international bank with $1tn in assets. Over the previous weeks, one brief glimpse of Mark Zuckerberg in a hoodie, heading to an investor meeting, launched the kind of press coverage we've hardly seen since the Beatles. JP Morgan itself, one of the company's banks, flew the Facebook company flag next to the stars and stripes of the United States, and papered its headquarters with Facebook signs. |
| One was tempted to caption many of the pictures, media packages and general euphoria with a single sentence: "On the sixth day, He created Facebook." It was a vision of capitalist paradise, all the richer because Zuckerberg openly disdained the money-waving bankers and investors of Wall Street. What could possibly go wrong? | One was tempted to caption many of the pictures, media packages and general euphoria with a single sentence: "On the sixth day, He created Facebook." It was a vision of capitalist paradise, all the richer because Zuckerberg openly disdained the money-waving bankers and investors of Wall Street. What could possibly go wrong? |
| The popping of this culturally focused Facebook bubble – if not the financial one – was decisive. A few hours later, the scene was decidedly more morose. | The popping of this culturally focused Facebook bubble – if not the financial one – was decisive. A few hours later, the scene was decidedly more morose. |
| The IPO was delayed three times on the Nasdaq exchange because of technical difficulties. Facebook's stock price began a determined move downward – until its 33 banks rushed to buy up shares to avoid embarrassing the company. Zynga, the publicly traded company that makes Farmville and contributes 12% of Facebook revenues, took the aftershocks from Facebook's struggle strongly: its stock fell so fast that its trading was halted. Financial television pundits turned tail and suddenly cautioned against putting faith in an irrational frenzy about Facebook. | The IPO was delayed three times on the Nasdaq exchange because of technical difficulties. Facebook's stock price began a determined move downward – until its 33 banks rushed to buy up shares to avoid embarrassing the company. Zynga, the publicly traded company that makes Farmville and contributes 12% of Facebook revenues, took the aftershocks from Facebook's struggle strongly: its stock fell so fast that its trading was halted. Financial television pundits turned tail and suddenly cautioned against putting faith in an irrational frenzy about Facebook. |
| The bubble giveth, and the bubble taketh away. What brought Facebook's prospects down – at least, on its first day of trading – was the simple fact that the relationship between a company's stock price and its true value has always been an uneasy one. It is more so for this strange breed of social media leaders – Facebook, LinkedIn, Groupon, Zynga – which appear in front of millions of people but have relatively little in revenue to show for it. | The bubble giveth, and the bubble taketh away. What brought Facebook's prospects down – at least, on its first day of trading – was the simple fact that the relationship between a company's stock price and its true value has always been an uneasy one. It is more so for this strange breed of social media leaders – Facebook, LinkedIn, Groupon, Zynga – which appear in front of millions of people but have relatively little in revenue to show for it. |
| Facebook, as the leading social media company of our time, tested the limits of whether investors are willing to pay anything to participate in the popularity of social media – the way they filed like lemmings to invest in hapless dotcoms like Pets.com in the late 1990s. With Facebook as their avatar, other social media companies have sought high valuations: Instagram recently sold for $1bn, and the most recent estimate on the scrapbooking site Pinterest was $1.5bn. | Facebook, as the leading social media company of our time, tested the limits of whether investors are willing to pay anything to participate in the popularity of social media – the way they filed like lemmings to invest in hapless dotcoms like Pets.com in the late 1990s. With Facebook as their avatar, other social media companies have sought high valuations: Instagram recently sold for $1bn, and the most recent estimate on the scrapbooking site Pinterest was $1.5bn. |
| What happened was a decisive statement. Wall Street is trying to capitalize on the financial hype by sending out companies like Facebook, LinkedIn, Zynga and Groupon public before they are mature enough to sustain the pressure of being publicly-owned companies. But what Wall Street wants and what Wall Street gets, these days, are two very different things. | What happened was a decisive statement. Wall Street is trying to capitalize on the financial hype by sending out companies like Facebook, LinkedIn, Zynga and Groupon public before they are mature enough to sustain the pressure of being publicly-owned companies. But what Wall Street wants and what Wall Street gets, these days, are two very different things. |
| Regular investors – just normal Americans – bought 20% of the Facebook IPO. They are usually known derisively as the "dumb money". They have wised up a bit, perhaps, in the decade since the dotcom bubble. Most of the hype, and the expectation of vast riches, came from Wall Street bankers and professional investors – another sign, perhaps, that the finance industry is trapped in its own bubble, out of touch with American sentiment. | Regular investors – just normal Americans – bought 20% of the Facebook IPO. They are usually known derisively as the "dumb money". They have wised up a bit, perhaps, in the decade since the dotcom bubble. Most of the hype, and the expectation of vast riches, came from Wall Street bankers and professional investors – another sign, perhaps, that the finance industry is trapped in its own bubble, out of touch with American sentiment. |
| For Facebook, the first day of trading was mildly embarrassing – no big "pop". It closed on the day moving down: the stock closed at $38, the exact prior price set by the underwriters. As a metaphor, this was irresistible: after all the excitement, talk, euphoria and disappointment, Facebook ended the day right where it started. | For Facebook, the first day of trading was mildly embarrassing – no big "pop". It closed on the day moving down: the stock closed at $38, the exact prior price set by the underwriters. As a metaphor, this was irresistible: after all the excitement, talk, euphoria and disappointment, Facebook ended the day right where it started. |
| Comments | |
| 57 comments, displaying first | |
| 18 May 2012 10:04PM | |
| You call it overreach I call it stupidity,or mass hypnosis. | |
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| 18 May 2012 10:15PM | |
| Its unfortunate that Facebook's stock symbol is FB, just one letter short of FBI. | |
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| 18 May 2012 10:16PM | |
| There is an alternative. Its called the physical world - the one you and your friends actually inhabit. | |
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| 18 May 2012 10:31PM | |
| I don't think the fact that the general public bought less stock than Wall St is a sign that Wall St is "out of touch" with American sentiment in this regard. I'm not sure if even matters. Most people won't have heard of half the Fortune 500 companies, but that doesn't mean they're not successful, viable businesses. | |
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| 18 May 2012 10:38PM | |
| I'll give the investors a simple observation from a simple soul - my teenage daughter doesn't use Facebook as much as she used to. But I'm sure they all know better. | |
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| 18 May 2012 10:41PM | |
| Busted. Probably true. | |
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| 18 May 2012 10:44PM | |
| Heidi Good article - concise and balanced and timely ( I didn't follow the dive of Farmville... embarrassing) | |
| You shou;ld send it to every UK Media airhead and the empty paper bags that listen to them. If you took your news from them, apparently FB lauch was exciting, surprising and had ....like... big numbers in it and everything! | |
| I got moderated for being very very harsh on Pinternet. Perhaps you can throw some of your light on this particular bubble - as I believe it to be even more....er...... interesting, than FB fantasies.. We'll see. | |
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| 18 May 2012 10:46PM | |
| Hey Grauniad - it's actually bailout, not "bale out"! Unless there's some sort of enforced hay removal scheme that I'm unaware of. | |
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| 18 May 2012 10:49PM | |
| Great article. I guess it's at least a credit to the underwriters that they nailed the price. It was hilarious watching Zynga today. They make horrible "games", their past was basically making malware, I hope the descent continues. | |
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| 18 May 2012 10:53PM | |
| If I was zuckerberg I'd cash in right away - imagine losing $1 bn just by monday evening! If this is above $20 by the end of the year I'd be amazed. | |
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| 18 May 2012 11:03PM | |
| Before trading, Facebook's bankers were ready to count their profits in billions. By close, they'd had to bale out their own IPO | |
| The insanity of Neo-liberalism can be summed up thus: | |
| The ceaseless desire to intensify and expand the market, in the belief that all of society is a market and that every human activity can be turned into a transaction. Everyone and everything is a commodity from which profit can be obtained. | |
| It would seem this debacle today was the epitome of this madness. | |
| I hope these greedy bastards all lose a bundle. | |
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| 18 May 2012 11:05PM | |
| Goodness, youve reached some mighty quick conclusions. I get the sense you had already written most of this before the bell had even rung thus morning. I would never buy a Facebook share in a million years, but given the extraordinary turmoil in the markets this week, I think FB hasnt done that badly... It may go wrong for them, but it may go right. I recall reading similar articles to yours when Google floated in 2004. The people who wrote those articles have egg on their faces now, while the people that invested then have made a mighty good return | |
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| 18 May 2012 11:15PM | |
| and what's ironic about such CIFs is that these doomsayers reaching such quick conclusions are the same people who will be complaining about their perception of short-termism in markets too. | |
| Clearly this is a matter of do as I say, not as I do. | |
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| 18 May 2012 11:24PM | |
| Wake up and smell the tulips. | |
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| 18 May 2012 11:40PM | |
| Good article. If you ain't growing something, digging it out of the ground or making something, you ain't making money. An advertising company cannot make more than the company it advertises and this is true of macro econonics too. Either these virtual economy pundits have something to learn or they were cynically hyping the 'dumb money' up to the point where they could cash-in and leave the 'dumb' investor holding the pink elephant - as has happened in all the great economic collapses. The 'smart' money always gets out in time. Betcha this was the plan. A pox on the virtual economy! | |
| PS Tried Facebook - found it pretty dumb. | |
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| 19 May 2012 12:18AM | |
| An advertising company cannot make more than the company it advertises and this is true of macro econonics too. | |
| Huh? Have you heard of a company called google? What about the main us television networks? | |
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| 19 May 2012 12:36AM | |
| The problem for social media companies is a simple one: the very reason they win us over as users is because they're fun to use and allow us to do our own thing. The big brands that pay for the profits that even lead people to dream of a value of $104bn want it to be precisely the opposite; they want to be able to funnel ads and monetise it all. Fair enough they're companies. | |
| Facebook seems to have become so ubiquitous that it doesn't face a mass exodus like MySpace but the more Facebook has become infested with ads and more just another impersonal website full of stuff you don't want to read, the more precarious its hold on us is. I was at uni when Facebook started becoming popular amongst students and the thrill of it was (funny to say this) its privacy that could be used to do stuff amongst an extended group of friends. Soon there were the useless ruddy apps, then the ads etc. Then Twitter meant you could do the same with likeminded people whoever they were, although with less privacy. Now Twitter's started to cash in... etc. | |
| OK so everyone won't leave Facebook, too many photos, addresses etc, but it won't be the portal into people's lives like the moneymen hope. The early adopters and geeks will get bored and try and do it better, just like the Facebook guys did before they started worrying about how to charge Coke to associate itself with statuses saying we're thirsty. | |
| The more a website like Facebook chases profit, the worse it becomes, rather deliciously ruining its profitability. | |
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| 19 May 2012 1:51AM | |
| MZ CASHED IN..........HE SOLD BILLIONS IN STOCK TO BANKERS AND INVESTERS WHO THOUGHT THEY WERE GOING TO MAKE A KILLING RESELLING.....THEY DIDN"T........AND THEY WON'T.......................THE FAD MAY JUST BE OVER | |
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| 19 May 2012 3:05AM | |
| This is the first real test of whether a site built on the premise that its services are "free" can be monetised and consistently turn a profit. Just viewing activity on the first day of trading is about buyer sentiment. It's the quarterly accounts that will be a proper basis on which to judge viability as a business. | |
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| 19 May 2012 3:05AM | |
| The cult of FaceBook. All the smiling faces; just after they drank the cool-aid; this is a very American experience since the mid-70's Jonestown mass suicide etc. You can replace Jim Jones with Mark Zuckerberg for an equivalent. It's basically the same thing. These people are believers; and facts and reality have nothing to do with it. FaceBook is an updated form of mass hypnosis; the same kind of mass hypnosis and conditioning The Peoples Temple used to recruit and maintain their members, is similar to the addictive hypnosis of social media which hypnotizes its users in its own way. People are addicted to FaceBook, and are hypnoitized into constantly updating posts, and picutures etc..it's creep really.. | |
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| 19 May 2012 3:19AM | |
| The fact that the price of the IPO didn't jump up after trading opened indicates that the underwriters were quite correct about the value that the open market would place on the shares. Their job was to get FaceBook the maximum amount of capital from this stock issuance. They had about $1 bill in cash available to support the price at $38/ share. And, it worked. They raised $16 bill that is available to support the continued growth and development of the company. | |
| JOB WELL DONE !!! | |
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| 19 May 2012 3:21AM | |
| I was born and raised and live in in the SF Bay Area, currently San Francisco- and FaceBook, and Twitter, employees are noticeable. They wear their FaceBook baseball caps, and their FaceBook sweatshirts, and hoodies with the FB logo..so proudly. It is a religion really they dont believe in anything else but money. What else would you call this? Dont ask them a question about politics, or art or anything, because they dont know, and dont care..etc.. | |
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| 19 May 2012 3:23AM | |
| The whole market is crashing so FB chose a poor day to open. | |
| The banks and institutions have to buy under their investment policies as its a top 100 company. | |
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| 19 May 2012 3:31AM | |
| These are the people selling facebook stock today | |
| http://abcnews.go.com/Technology/wireStory/facebook-ipo-selling-stock-16380405#.T7cFaJ9Yumg | |
| Facebook Inc. sold 180 million of its shares in its initial public stock offering. Another 241.2 million came from existing stockholders, including the company's earliest investors and CEO Mark Zuckerberg. | |
| Even after the IPO, Zuckerberg remains Facebook's single largest shareholder, with 503.6 million shares. And he will control the company with 56 percent of its voting stock. | |
| The IPO sold at $38 per share, generating $6.8 billion for Facebook and $9.2 billion, collectively, for existing stockholders. | |
| Here's a look at early Facebook Inc. investors who sold stock in the IPO, how much money they gained and how many shares they still own. Most of the social network's early funders never publicly disclosed how much they invested in the company. | |
| — Mark Zuckerberg | |
| Number of shares sold: 30.2 million | |
| Value: $1.15 billion | |
| Number of shares still owned: 503.6 million | |
| — James Breyer and Accel Partners, where he's a partner | |
| Year invested in Facebook: 2005 | |
| Number of shares sold: 49 million | |
| Value: $1.86 billion | |
| Number of shares still owned: 152.3 million | |
| — Peter Thiel, managing partner at The Founders Fund and PayPal co-founder | |
| Year invested in Facebook: 2004 | |
| Amount invested: $500,000 | |
| Number of shares sold: 16.8 million | |
| Value: $640 million | |
| Number of shares still owned: 27.9 million | |
| — DST Global Ltd. and affiliates, a London-based investment firm focused on Internet companies, founded by Russian investor Yuri Milner | |
Year invested in Facebook: 2009 and late 2010 | |
| Number of shares sold: 45.7 million | |
| Value: $1.74 billion | |
| Number of shares still owned: 85.6 million | |
| — Goldman Sachs and affiliates, investment bank and one of the IPO's underwriters | |
| Year invested in Facebook: 2011 | |
| Number of shares sold: 28.7 million | |
| Value: $1.09 billion | |
| Number of shares still owned: 37.3 million | |
| — Elevation Partners, private equity firm focused on media and technology and affiliates | |
| Year invested in Facebook: Undisclosed | |
| Number of shares sold: 4.6 million | |
| Value: $176 million | |
| Number of shares still owned: 35.5 million | |
| — Greylock Partners, Silicon Valley venture capital firm and affiliates | |
| Year invested in Facebook: 2006 | |
| Number of shares sold: 7.6 million | |
| Value: $289 million | |
| Number of shares still owned: 29 million | |
| — Mail.ru Group Ltd., Russian Internet company | |
| Year invested in Facebook: 2009 | |
| Number of shares sold: 19.6 million | |
| Value: $745 million | |
| Number of shares still owned: 36.8 million | |
| — Mark Pincus, Zynga Inc. CEO | |
| Year invested in Facebook: 2004 | |
| Number of shares sold: 1 million | |
| Value: $38 million | |
| Number of shares still owned: 4.3 million | |
| — Meritech Capital Partners, venture capital firm focused on late-stage investments | |
| Year invested in Facebook: 2006 | |
| Number of shares sold: 7 million | |
| Value: $266 million | |
| Number of shares still owned: 33.4 million | |
| — Microsoft Corp. | |
| Year invested in Facebook: 2007 | |
| Amount invested: $240 million | |
| Number of shares sold: 6.6 million | |
| Value: $249 million | |
| Number of shares still owned: 26.2 million | |
| — Reid Hoffman, co-founder of LinkedIn Corp. and affiliates | |
| Year invested in Facebook: 2004 | |
| Number of shares sold: 942,784 | |
| Value: $36 million | |
| Number of shares still owned: 3.8 million | |
| — Tiger Global Management, New York-based investment firm | |
| Year invested in Facebook: Undisclosed | |
| Number of shares sold: 23.4 million | |
| Value: $889 million | |
| Number of shares still owned: 30.4 million | |
| — Other, smaller stockholders are offering another 70,504 shares | |
| Value: $2.7 million | |
| Source: Facebook and Associated Press calculations | |
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| 19 May 2012 4:57AM | |
| Pricing for an IPO is not an exact science. It is often lamented that when shares rocket upward upon being listed that the company and selling shareholders sold too cheap, with all those extra gains going to those who speculated upon it rather than to those who actually built the business. In the case of Facebook, it appears that the company and its selling shareholders hit the maximum price they could get on the nose. As for me, I choke on the idea of buying shares in a company valued at 25X revenue or 90X earnings, but if I had the opportunity to sell one at that price, well, that would be another story. | |
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| 19 May 2012 5:00AM | |
| Zuckerberg said in a radio interview a couple of years ago that he would only go public with the company when it stopped growing exponentially. This is naturally because the company didnt need the money to grow itself and he would get more money for himself later by waiting. | |
| This has now happened, and we can be sure from his own assessment that the company has indeed now peaked. | |
| I thought this was strange at the the time. What incentive has anyone to invest? He is explicitly only doing the IPO to make himself richer. This is HIS analysis of the situation. You would normally want to invest in a company when it needs the money to grow right? | |
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| 19 May 2012 6:17AM | |
| Decisions and revisions Which a quarter will reverse Dodgy techi IPOs Written off with a curse | |
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| 19 May 2012 7:29AM | |
| Dumb fucks -- Zuckerberg, 2004 | |
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| 19 May 2012 7:47AM | |
| If you ain't growing something, digging it out of the ground or making something, you ain't making money. | |
| Telecom company ? | |
| Transport company ? | |
| Insurance ? | |
| Hotels ? | |
| Shops ? | |
| Electricity, gas, water suppliers ? | |
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| 19 May 2012 8:06AM | |
| How long before other major advertisers follow GM's lead & cancel their accounts with FB due to the fact that the advertising just isn't working? | |
| How much will the share price be worth then? | |
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| 19 May 2012 8:42AM | |
| A social network site is like a pub. We go to new ones because they're fun, and because our friends go there. We don't go there for advertising. So by definition, IPOs are the forerunners of doom for these sites. They now have to show shareholder value, and they can only do that by adding more advertising - so we'll move elsewhere. | |
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| 19 May 2012 8:55AM | |
| The IPO was an unmitigated disaster. | |
| First trading was delayed by some sort of system glitch. It doesn't start trading until 11.32am EDT - ie two minutes after European trading stops. Interesting glitch, huh? | |
| Then the | |
| After that point the price bumps along at $38 for most of the day. At no point does it ever drop below $38. | |
| Here's my entry for the "no shit, Sherlock" award : the market is a lie, it's crooked, and it's designed to separate fools from their money. | |
| Al Capone was bootlegging milk in Chicago (no, really!) when he met a Wall Street banker at a party. After talking with the banker about what he did, Capone said "I'm in the wrong racket". Too right. | |
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| 19 May 2012 10:40AM | |
| Don't you mean anatomy of a Wall Street reach around? Being as Free Market Capitalism is all about genital stimulation of the few for their own benefit, using the money of the Masses to fund their addiction. | |
| The boardroom carousel is just one big circle jerk as well, with a small group of individuals, mainly men, all thrashing away furiously on each other and congratulating themselves on a job well done. | |
| On a day when another headline stated that Greece exiting the Euro would mean potential doom forever for UK Plc, we have in contrast one of the largest displays of Executive Relief ever seen on a first day floatation for a dozen(?) people. | |
| Facebook does nothing, it produces/manufactures/mines/creates nothing, it is not physical, yet it is 'worth' $104bn. | |
| OK boys prepare yourselves, I've got a fresh litre of baby oil with the seal still on and I've warmed my right arm up. | |
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| 19 May 2012 11:24AM | |
| Facebook's stock price began a determined move downward – until its 33 banks rushed to buy up shares to avoid embarrassing the company. | |
| Too bad for the SMEs going bust for lack of capital to invest in competitive new products. The banks haven't got any money to lend to them, they're spending it on important stuff like saving facebook's face. | |
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| 19 May 2012 11:29AM | |
| The difference is, the pub doesn't take all your personal details down, and sell them out the back door to whoever wants them. | |
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| 19 May 2012 11:42AM | |
| It's all gambling: the house is bust and the punters won't leave the tables because 'they can feel their luck is about to change'. All economic theory is just the touts trying to balance the probabilities and alter chance. Nobody *knows* what is going to happen, but the global financial system is being run by gambling addicts who are obsessively trying to collect as many points/zeros/dollars as possible. It's like little kids in the playground with football cards or marbles or Pokemon.... just a fad...and fb will be forgotten in a few years time. Kinda sad really, a guy who makes nothing other than a virtual habitat for the terminally banal becomes one of the richest people in the world.... and he'll do nothing good with all that money, nothing of lasting value, nothing to make his brief time on this planet 'worth' anything at all. Still, I guess he can join the other rich people and hang out in their vacuous lives. I feel sorry for him and the rest of them who count value only in currency. I'm off to weed my vegetable patch, hug my dogs and be with my family - and I wouldn't exchange that for all the shares, stocks, derivatives, credit default swaps and currency in the world. | |
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| 19 May 2012 11:44AM | |
| Facebook has no income beyond advertising. More and more people are using facebook from a mobile. I don't have a smart phone, so i don't know if advertising appears on them, but it would be too small to read anyway. Advertising is so prevalent and in-your-face that virtually everyone filters it out without noticing. Facebook has peaked. Fergus Blackburn's post shows the insanely high numbers of shares Facebook has been divied up into. | |
| Conclusion ? If you bought shares in Facebook, you need your head looking at. | |
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| 19 May 2012 12:03PM | |
| If you buy shares directly not hard to work out that there are a lot of companies with a longer track record of growing profits and dividends, established markets and physical assets in which a reasonable and prudent person would reasonably prefer to invest------ Unilever, P&G, J&J, most utility companies, Shell, GSK, BT all spring to mind. | |
| And that if, if you want to punt rather than invest, you'll probably do better spreading your money over 20 biotechs and mining ventures. One of them may strike gold whilst 19 go belly up. | |
| What is hard to work out is: | |
| Who, exactly, has coughed up today's $16 billions of 'investment' in this overhyped overpriced piece of ephemera? Whether holder of unit trusts have been stumpfed with a slive? Will it become part of any index-- in which case tracker funds will be impelled to buy, at holders' peril? Who the hell has got so much money to waste in times of such global uncertainty? | |
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| 19 May 2012 1:26PM | |
| Graun - check your facts! Putting aside the fact that Facebook is almost certainly overvalued at $100bn you seem to think that the reason it listed is because of banker's overreach. Now I know it's always good for articles to blame bankers for everything, but actually it's the regulator which pushed Facebook into an IPO because of their rules about mandatory public ownerships for companies with more than a certain number of shareholders. Zuckerburg has resisted for years now because he hasn't wanted to cede control of the company to external shareholders - hence the split between voting and non-voting shares in the IPO. | |
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| 19 May 2012 2:11PM | |
| As a metaphor, this was irresistible: after all the excitement, talk, euphoria and disappointment, Facebook ended the day right where it started. | |
| very fitting indeed, because after all the excitement, talk, euphoria and disappointment on Facebook, your day ended right where it started, alone in front of your computer. | |
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| 19 May 2012 3:28PM | |
| The regulator didn't push Facebook to IPO. It meant there was no difference in terms of transparency in not doing an IPO. Zuckerberg chose to IPO to generate funds for the company, safe in the knowledge his preference shares maintain control of the company (which is his problem with public listings). | |
| All the regulator did was force Facebook to file considerable information on it's finances - quoting the NYTimes: | |
| Securities regulation requires a United States company with 500 or more shareholders of record to begin filing reports, including audited financial information, with the Securities and Exchange Commission four months after the year it exceeds this threshold. | |
| Twitter is carefully managing it's shareholder count to avoid it CNN Money reports. | |
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| 19 May 2012 3:34PM | |
| " Facebook IPO: an anatomy of Wall Street overreach Before trading, Facebook's bankers were ready to count their profits in billions. By close, they'd had to bale out their own IPO" | |
| Not really. The bankers and deal makers got their commissions and that is why the banks seem to be in existence. Any losses the bank or others elsewhere suffered as a consequence of the hyped up IPO is borne by the Pension funds, Mutual Funds and hapless bank shareholders all of who are when you remove the label the Joe Public. | |
| So rejoice not unless you are either a banker or a deal maker. | |
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| 19 May 2012 4:49PM | |
| I worked in the so-called dot.com boom at no point did any of us developing the sites felt they would be successfull (could never work out where their revenue would come from.................... )this Social Media boom is set to go the same way all hype and no reality | |
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| 19 May 2012 6:07PM | |
| The comparisons with Google and Amazon don't work. | |
| Google and Amazon do useful things. It is difficult to imagine life without Google (or something very like it), or Amazon (ditto). But Facebook? I left a few months back and only remember its existence when it is mentioned in the press, or some site asks me to 'share on Fbook'. | |
| Most users over about 30 seem to use it like Friends Reunited (remember that?) & to post photos of their children, or their holiday, and visit the site infrequently. When the heavy users - (teenagers and under 25s) finally decide it is uncool, or when it is replaced by the next big thing, which it certainly will be, Facebook will evaporate like morning mist on a hot day. | |
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| 19 May 2012 6:33PM | |
| with $3.7bn of profits | |
| $3.7bn of revenue (turnover) and $1bn of earnings (profits), you appear to not know the difference between the two. | |
| The real story here is that $16bn of Facebook shares were offered yesterday at $36, but after two times in the day when the share price was going to drop lower than the IPO price the underwriters had to step in and buy shares to keep the price up, at the end of the day three quarters of the public shares ($12bn) ended up in the hands of the underwriters supporting the $36 price. So, of the $16bn shares put up for sale yesterday, Morgan Stanley bought $6.16bn of them, JP Morgan $3.2bn, and Goldman Sachs $2.4bn. | |
| Only a quarter of the float was actually sold. This was not according to plan, far from it. | |
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| 19 May 2012 6:36PM | |
| After that point the price bumps along at $38 for most of the day. At no point does it ever drop below $38. | |
| That's what underwriters do, they guarantee the price of the IPO. | |
| Morgan Stanley, JP Morgan, Goldman Sachs and the rest of the syndicate got it badly wrong. | |
| You don't underwrite those kind of figures unless you believe you won't have to pay them out, but they ended up spending $12bn supporting the $38 price. Ouch! | |
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| 19 May 2012 7:28PM | |
| It personally think that while this may be a bust for Facebook, it's a high five for the thinking investor. The lessons of the dot.com era have been taken to heart and investors are not accepting glam for solid assets. Zuckerberg and his people get their money, but people who are investing in their futures refuse to take the shaft. | |
| Good article. | |
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| 19 May 2012 7:38PM | |
| Agreed FishingGenet. There is business going on at Amazon and Google. Facebook has crazy subscription numbers (1 out of 8 people in the world use it), but so what? Where is the revenue that supports the craziness? As stated by another poster, Zuckerberg stated he would go public when the company was no longer growing exponentially. Looks like investors took his word for it. | |
| Don't get me wrong, Facebook is successful, but built on a core compentency that can potentially be recreated or be deemed unfashionable, and there is nothing more fickle than public opinion. | |
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| 19 May 2012 9:01PM | |
| Before trading, Facebook's bankers were ready to count their profits in billions. By close, they'd had to bale out their own IPO | |
| At close I distinctly heard someone shout Bail out the Greeks, not the Geeks....Doh! | |
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| 19 May 2012 11:21PM | |
| Oh dear, it sounds like there are going to be a lot of angry investors who are going to be turning up with torches and pitchforks at Zuckerberg's house (which they can find courtesy of Google Map). How awful if it were all to turn violent and be put on You Tube. If it were, I think I might even have to sign up for Failbook, just so that I could click on LIKE!!! | |
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| Comments on this page are now closed. | |
| Facebook prepares for risks and rewards in its future | |
| 4 Feb 2012 | |
| Facebook's share offer will create new billionaires and millionaires – but analysts worry about its capacity for growth and many users fear for their privacy. | |
| 22 May 2012 | |
| Facebook shares tumble as underwriters desert stock | |
| 2 May 2012 | |
| Facebook IPO set for 18 May | |
| 18 May 2012 | |
| Facebook IPO reaps huge rewards for founders as buyers watch and wait | |
| 18 May 2012 | |
| Facebook's IPO and the new tech bubble | |
| Would you buy shares in Facebook? | |
| 15 May 2012 | |
| Facebook raised the target price of its IPO on Friday to $34-38 a share – up from $28-35 – in response to strong demand, and in spite of some public scepticism, with 62% of active investors polled saying the stock is overvalued. Would you invest in Facebook? | |
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| Before trading, Facebook's bankers were ready to count their profits in billions. By close, they'd had to bail out their own IPO | |
| The day of Facebook's first day of trading as a public company brought with it a strange perspective: the highest manifestation of a social media bubble and its ugly aftermath, all in the span of a few hours. Who would have thought that Facebook's much-hyped IPO – in its bold $16bn size, the apotheosis of uncontrolled, frothy, capitalist ambition – may have been just the thing needed to bring Silicon Valley high spirits back down to earth and send ambitious techies snuggling back into their hoodies? | |
| The day opened with crowds awaiting Facebook's debut in New York's Times Square, waving at cameras. Gleeful Facebook employees, with sugar-plum dreams of newly-minted fortunes, crowded with smiles behind CEO Mark Zuckerberg at the company's Menlo Park headquarters. The Wall Street Journal created a Zuckerberg Wealth-O-Meter ($20bn at the latest count) and the New York Times revealed the subtle-wealth secrets of 1,000 new millionaires created by the IPO. | |
| Just to play a concise version of the parlor game that went around the stock markets, Facebook's market value at $104bn – with $3.7bn of profits – would have made Facebook worth more than: internet megastore Amazon.com; global beverage behemoth PepsiCo; petro-giant Total; BHP Billiton; and McDonald's. It was not far off the valuation of JP Morgan Chase, an international bank with $1tn in assets. Over the previous weeks, one brief glimpse of Mark Zuckerberg in a hoodie, heading to an investor meeting, launched the kind of press coverage we've hardly seen since the Beatles. JP Morgan itself, one of the company's banks, flew the Facebook company flag next to the stars and stripes of the United States, and papered its headquarters with Facebook signs. | |
| One was tempted to caption many of the pictures, media packages and general euphoria with a single sentence: "On the sixth day, He created Facebook." It was a vision of capitalist paradise, all the richer because Zuckerberg openly disdained the money-waving bankers and investors of Wall Street. What could possibly go wrong? | |
| The popping of this culturally focused Facebook bubble – if not the financial one – was decisive. A few hours later, the scene was decidedly more morose. | |
| The IPO was delayed three times on the Nasdaq exchange because of technical difficulties. Facebook's stock price began a determined move downward – until its 33 banks rushed to buy up shares to avoid embarrassing the company. Zynga, the publicly traded company that makes Farmville and contributes 12% of Facebook revenues, took the aftershocks from Facebook's struggle strongly: its stock fell so fast that its trading was halted. Financial television pundits turned tail and suddenly cautioned against putting faith in an irrational frenzy about Facebook. | |
| The bubble giveth, and the bubble taketh away. What brought Facebook's prospects down – at least, on its first day of trading – was the simple fact that the relationship between a company's stock price and its true value has always been an uneasy one. It is more so for this strange breed of social media leaders – Facebook, LinkedIn, Groupon, Zynga – which appear in front of millions of people but have relatively little in revenue to show for it. | |
| Facebook, as the leading social media company of our time, tested the limits of whether investors are willing to pay anything to participate in the popularity of social media – the way they filed like lemmings to invest in hapless dotcoms like Pets.com in the late 1990s. With Facebook as their avatar, other social media companies have sought high valuations: Instagram recently sold for $1bn, and the most recent estimate on the scrapbooking site Pinterest was $1.5bn. | |
| What happened was a decisive statement. Wall Street is trying to capitalize on the financial hype by sending out companies like Facebook, LinkedIn, Zynga and Groupon public before they are mature enough to sustain the pressure of being publicly-owned companies. But what Wall Street wants and what Wall Street gets, these days, are two very different things. | |
| Regular investors – just normal Americans – bought 20% of the Facebook IPO. They are usually known derisively as the "dumb money". They have wised up a bit, perhaps, in the decade since the dotcom bubble. Most of the hype, and the expectation of vast riches, came from Wall Street bankers and professional investors – another sign, perhaps, that the finance industry is trapped in its own bubble, out of touch with American sentiment. | |
| For Facebook, the first day of trading was mildly embarrassing – no big "pop". It closed on the day moving down: the stock closed at $38, the exact prior price set by the underwriters. As a metaphor, this was irresistible: after all the excitement, talk, euphoria and disappointment, Facebook ended the day right where it started. |