Posted on 05/18/2012 8:13:34 AM PDT by C19fan
I am watching the news before heading off to work and of course all the talk is about Facebook's IPO. Even one of the guys on CNBC was wearing a hoodie. There is all this talk about how tech IPOs have seen a "pop" in price of their new stock on average of 30%-40% on the first day of trading which would place Facebook as worth $50 on day 1 (35% over the IPO price of $38.) Why are Tech IPOs then systematically underpriced? If the Facebook IPO is so oversubscribed then why does Zuckerberg not say to whoever is handling the IPO to jack up the price to say $50 or is the "pop" the "juice" the banks get for handling the IPO?
It’s just another bubble that will ultimately burst and leave a lot of people broke, just like the Dot.com bubble of the late 1990s.
I think the initial dollar amount is a best guess sort of thing. They could open at $38 and two hours later be $20 or $70. All I know is after today there will be five more billionaires and 1000 more millionaires then they will become huge targets for the BHO admin.
It is a site based upon popularity and it may well continue on with the crowd already involved as they age.
But the younger (more sought after) demographic is NOT going to join Facebook “only geezers are on Facebook” they will say - “EVERYONE COOL is on ‘zipwire’” or whatnot - the new social networking site for YOUNG people.
And no - Facebook is getting a huge payout - that the price they sold it at will jump because of interest in the stock because it is in the news does not mean that their initial stock price was too low - just that there is a sucker born every minute - and sheep follow the herd.
That’s the spirit. Unlike the dot.com bust.. FACEBOOK ismactually a proven product already worth billions. NO, this is nothing like the dot.com bubble.
When you buy a Tech stock like Apple, Intel, AMD, Dell, HP and many others, you are buying real estate, manufacturing plants, a plethora of patents and owning a piece of a world-wide market that has grown for decades.
When you buy a share of FaceBook, you own a few sectors on a hard drive somewhere. It’s virtual. And, be forewarned that FaceBook is today, what MySpace was yesterday. For every Amazon.com (which is still growing) there are countless websites (and don’t kid yourself, at the end of the day FaceBook is a website) that have gone belly up.
Your money - do what you want. But, I’m not gonna touch this one with a 10ft pole.
It is neither a boom nor bust company. Right now it is looking like an opening of between 41-42 and I doubt it will spike anywhere near 50 today. As for a bust, this company already has over $3 billion in revenue in less than ten years, that is not a bust. The stock is too richly valued here but to ignore the revenue growth is absurd.
That would be true if there was zero average “pop” but Tech stocks have a systematic large pop up. That is what I find baffling.
Agree. Their ad revenue growth has been declining. I cannot fathom this valuation. It just doesn't hold up under analysis.
Facebook has peaked. In the IPO it will be selling at over 100 times trailing earnings. This requires continued phenomenal growth to make sense. Earnings are down this year. The market is saturated. Young people are becoming bored with Facebook. It is no longer cool. Older people who went on Facebook to see pictures of their grandchildren etc won't use it a lot.
Facebook gets almost 90% of its revenues from advertisements. Advertisers have determined that the money they spend on Facebook doesn't translate into sales and that there are far more efficient uses for their advertising dollars. GM recently said it will discontinue ads on Facebook. Expect other large advertisers to scale back or leave altogether.
Facebook stock is very overpriced.
They certainly are not getting “ripped off”. Zuckerberg and the others will hold enormous quantities of stock, so if it goes up from 38 to $50, they make an additional fortune. The company will make an initial fortune when it sells tons of stock at $38, which means Zuckerberg, etc make an additional fortune through the company.
Their risk is losing some of that money when/ if the stock falls. If they priced it too high, they might meet resistance and that would not be good for the IPO.
You mean like MySpace?
What I’m most concerned about is the timing. Will there be a sudden drop this summer with all the euro madness
Ok...would you consider Facebook comparable to Myspace?
I would.
Newscorp bought it for $580 million.
And sold it for $35 million.
I remember a time when I couldn’t turn on the radio, or look at the web, without seeing or hearing something about Myspace. Now, its too ‘old’.
Very soon, Facebook will be ‘too old’.
I do agree that the next technology will bump Facebook, but right now it doesn’t seem close..Facebook has time to keep redefining itself. Facebook’s business model is way different than Myspace was. Much more of a money making entity.
IMHO, that is an excessive premium for this business, including growth prospects. Irrational exuberrance anyone?
oopsie. > 33 times REVENUE!
The most appealing thing to me about FB is the free advertising. You can post pretty much what you want on FB. If you have a craft or any other type of home business it’s a good way to get your stuff out there.
Current bid is slightly over $39 a share, running very late. The upside is that the revenue from advertising on Facebook clicks are much lower with much higher potential than we saw with Google. With the potential of ad income growth, it is a good short-term play. Cautious on long-term investment, though.
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