Financial Mags...splain to me: Facebook IPO

[TahoeJ]

The one thing I will say, in terms of how facebook is actually taking advantage of their huge userbase, the answer is: not very well. So there's tremendous room for improvement and additional profits to be made in that sense.

On the other hand, as someone who has been part of a tech IPO in the past (and bailed shortly after), I'd look very carefully at how long some of the key figures for innovation and development will be locked into their golden handcuffs.

[Blurred]

Yo Hugh!
I'm thinking about investing in a bar? Know of any good ones to get RICH!?

[OldLarry]

Yo Hugh!
I'm thinking about investing in a bar? Know of any good ones to get RICH!?

lol. clearly, bars>stock market

[Brock Landers]

there's far fewer on the good side than the bad side Brock.


buying facebook stock is buying a user group that they may be able to turn into a big business. or they may not. so comparing it to Google - which had a really good, scalable, way to make money - is stupid.

I was inferring there are companies that fail and companies like those 3 that are legit businesses with staying power that stick around and make money. Thats it. Thats all I was saying.

But you're right, you should probably compare it to a mining company acquisition like you did. Because thats not stupid. Mining companies and facebook make money the same way, right?

What is similar between google and facebook is the possibilities of taking user data and user eyeballs and making money off of it. Advertising. Using the site as a platform for music, video, television, youtube, whatever. Times 900 million interconnected people...if thats not "scalable" then Im not sure what your defenition is.

But then again I dont really care

[TyWebb]

The "right" valuation for a company is the present value of its future earnings. The problem is that those future earnings are impossible to predict. A company's price/earnings ratio represents, to some extent, the market's prediction of the company's future earnings growth. With a price/earnings ratio of over 100:1, the market is predicting that Facebook's earnings will grow tremendously in the coming years.

A p/e ratio of 100+ isn't inherently insane - had you bought Cisco or Microsoft stock at that kind of ratio immediately after their IPOs, you would have made a killing. The long-term question is whether Facebook has that kind of earnings growth in its future. In the short term, it's all about momentum and investor sentiment.

^^ This

Even if you do believe in Facebook's ability to radically drive earnings in the future (I don't), I would argue that there are far better ways to invest an available dollar. This is not about investing in FB, its about the opportunity cost of investing in FB. Much of the near/medium term upside in this stock was already realized pre IPO. I don't know if I'd short the stock (there is just too much retail curiosity), but I wouldn't put new money into it.

[4matic]

FB ipo is borderline fail. Doesn't look like the underwriters have the ammo to hold the ipo price. Monday will be interesting.

[Benny Profane]

What is similar between google and facebook is the possibilities of taking user data and user eyeballs and making money off of it. Advertising. Using the site as a platform for music, video, television, youtube, whatever. Times 900 million interconnected people...if thats not "scalable" then Im not sure what your defenition is.

This is being killed by mobile, the present and future of computers. Ain't no room for ads.

[TyWebb]

Like GRPN I think FB is a turd of a company but they both make shitty shorts

Exactly

I did buy Zynga at 7

[TahoeJ]

So said this shit the lasttime and still can't seem to get Facebook failed at deals and movies. It sells ads and a number of customers aren't convinced those ads are effective - see GM, others. GM is still spending $30million on facebook content... it's not giving Facebook any of that.

I do a lot of business with Facebook at my current company. For certain products, including for some pretty big corporations, their traffic is actually really good. So it all depends.

[systemoverblow'd]

This is being killed by mobile, the present and future of computers. Ain't no room for ads.

There are plenty of ads in apps and on sites on mobile devices. Thing is you can't install ad blockers on phones yet.

[scotia]

I wish Facebook would stop trying to integrate everything. They'd be much better off taking the tabbed approach. If they had mail/search/other ala Google they'd be able to capture a market that wasn't necessarily going to sign up to the social networking.

It seems too simple to me so I can only assume there's some barrier to them doing this.

[retirwntm]

I think FB is pretty stratospherically valued but the nut to me is algorithmic data mining. This is the future of targeted advertising and is worth much much more than paying for a banner and eyeballs. Can FB properly monetize that asset before or will people check out after they figure out that the whole point of them having a place to spew about "Dick drank his third monster energy today. Fuck yeah!". Therein lies the rub. Zuck doesn't give a fuck. He just wants to know all your secrets. So he can sell them to the cool kids.

http://www.forbes.com/sites/reuvencohen/2012/05/11/the-future-of-facebook-mining-the-human-cloud/?feed=rss_home

[AdironRider]

My prediction, they end up like Microsoft. Kill it for the next couple years, then settle in as a ho-hum blue chipper with a 2-3% dividend. Thats long term for me.

The future, I think they take over mobile OS world and keep the core data mining and ad revenue humming quietly in the background.

Let be real, theres a whole lot more than some sponsored links that FB could make money on.

That being said, Im not buying now until, or frankly until it reaches that blue chipper status. Apple isnt even there yet if you ask me (see recent runup and pull back) with to much volatility.

[ICEHOCEY77]

The "right" valuation for a company is the present value of its expected future cash flows/owners earnings

FIFY 12345

[4matic]

My prediction, they end up like Microsoft. Kill it for the next couple years, then settle in as a ho-hum blue chipper with a 2-3% dividend. Thats long term for me.

The future, I think they take over mobile OS world and keep the core data mining and ad revenue humming quietly in the background.

Let be real, theres a whole lot more than some sponsored links that FB could make money on.

That being said, Im not buying now until, or frankly until it reaches that blue chipper status. Apple isnt even there yet if you ask me (see recent runup and pull back) with to much volatility.

Microsoft has returned 20000% since its ipo. I'd take that from Facebook.

And, regarding volatility here's what Uncle Warren says:

Warren Buffett, chairman and CEO of Berkshire Hathaway, sums this dilemma up in one sentence. "Unless you can watch your stock holdings decline by 50% without becoming panic-stricken, you should not be in the stock market."

[4matic]

Let us know that plan for 400x revenue growth, and why you think they can get $200 per person on the planet in 26 years. Or maybe they'll just retain the same retarded P/E

Where did I say that? I didn't.

[jfost]

... I'd look very carefully at how long some of the key figures for innovation and development will be locked into their golden handcuffs.

91 days no?

[philth]

I'm no fan of Nasdaq (being an ex NYSE trader for 15 years) but I find it silly that some of the bankers are puting the blame on Nasdaq technology for the dud IPO. Yes Nasdaq blew it from a technology standpoint and are being laughed at by the rest of the street but the system failures have little to do with the valuation of that shit on a stick of an IPO yesterday.

[spindrift]

MSFT sales 1986 = ~$200 million
MSFT sales 2012= ~$80 billion

Oh, you were just saying you'd take random increases? I would too. I don't expect them.

Assuming 50% yoy growth and a multiple like googles you get 6% a year for this shit on a stick.

I gather you a fan of the Ravi Suria school of analysis?

Scoping out valuations of things where the fog of war is thick is just plain hard. Being unrealistically optimistic about rainbows and unicorns gets you burned. Applying narrow backward looking metrics in a case like this can cause you to miss huge opportunities - which can be arguably just as burned. Time will tell on FB. It certainly told a story to Ravi in a somewhat analogous situation...

[Dave Marshack]

In addition to being an exit for equity holders, it also gives the firm access to cheaper capital going forward. Obviously, equity financing is cheaper than going through the private capital markets, but debt financing is as well. http://libertystreeteconomics.newyor...lic-bonds.html

Not that I'm buying facebook at this kind of P/E. It seems like a great day to buy Apple to me.

You suck because of that apple shit. Facebook is quickly becoming the backbone of the Internet. I see buying stock in fb as a way to buy stock in the Internet. Brick at mortar companies like Kraft or even Disney are nothing like fb, so a comparison is useless.

Facebook investor are not selling out, they are building a war chest of cash, companies and intellectual rights. All that takes cash and borrowing would be stupid when you can raise some cash through an iPo. Facebook is not going the way of MySpace, MySpace is like an ap on fb, such small cheese.

[Benny Profane]

You suck because of that apple shit. Facebook is quickly becoming the backbone of the Internet. I see buying stock in fb as a way to buy stock in the Internet. Brick at mortar companies like Kraft or even Disney are nothing like fb, so a comparison is useless.

Facebook investor are not selling out, they are building a war chest of cash, companies and intellectual rights. All that takes cash and borrowing would be stupid when you can raise some cash through an iPo. Facebook is not going the way of MySpace, MySpace is like an ap on fb, such small cheese.

There was a general store owner in the Old West gold mining/silver mining towns who would, like, totally smile at you as you told the equivalent rap to him about gold/silver as he took your solid cash for the stuff you needed to mine your future.

[Supermoon]

FB ipo is borderline fail. Doesn't look like the underwriters have the ammo to hold the ipo price. Monday will be interesting.

I don't really agree.

If the stock of a company jumps 200% the day of the IPO, that just means the company left a bunch of money on the table when they set the price. An ideal price would only go up or down a couple of percent on opening day, which would mean you basically guessed the value correctly.

Even if the stock drops a dollar on Monday, I wouldn't call it a failure, per se. Just that if was slightly overvalued initially. The long-term prospects of FB don't really have anything to do with the first week or so after the IPO.

[LeeLau]

FB ipo is borderline fail. Doesn't look like the underwriters have the ammo to hold the ipo price. Monday will be interesting.

They got the price at the top of their range. The range already got pushed higher to absurd even by GSA standards. MS did its job and did it well. So there wasn't a Palm or Touchstone type of post-IPO day 1 churn and burn. Maybe that might mean the average buyer/seller of stock aren't such suckers? naaahhh

[LeeLau]

Yup. Like GRPN I think FB is a turd of a company but they both make shitty shorts

Borrows are next to impossible for small lots of FB stock fyi so its all academic. Was quoted a 45% rate to borrow and you had to borrow a big tranche. Went skiing instead

[tex1230]

Borrows are next to impossible for small lots of FB stock fyi so its all academic. Was quoted a 45% rate to borrow and you had to borrow a big tranche. Went skiing instead

Negative45%rebate?
I got google on day 2 for 50bps under gc on 1mm - you probably want to call Morgan Stanley on Monday if you're serious. Fidelity took down a huge position and they normally lend on day 2 through the lead underwriter.