Skip to comments.Was the Facebook Deal Overhyped? (0.6% Gain)
Posted on 05/18/2012 1:18:23 PM PDT by Red Badger
With Facebook shares trading close to their $38 offer price and revelations that retail investors got a larger-than-expected slice of the $18.4 billion IPO, market watchers are questioning whether the social networks debut was overhyped not just in the media, but in the investor community.
Buy-side anticipation of a huge Day One price pop was high, and yet as of lunch time on Friday, Facebook shares hadnt crested $45.
Experienced bankers say that with a new issue of this size, moving the shares beyond the single-digit percentage range can be tough, and that Morgan Stanley [MS 13.35 -0.11 (-0.82%) ], the lead bookrunner on the deal, has done an admirable job at keeping the stock trading in relatively stable condition.
GM [GM 21.18 -0.43 (-1.99%) ], for instance, which was an $18.1 billion IPO, only traded a few percentage points above its new issue price on its first day of trading late in 2010. Prior to the first day of trading, bankers said they didnt expect a more than 10% upsurge on day one, given the deals size.
However, with anecdotal reports that some institutional investors got more shares than they were expecting, and new revelations that, according to two people close to the matter, the retail allocation of Facebook IPO shares was more than 20 percent, marking an all-time high for a new issue, some market participants are wondering whether the investor excitement toward the deal was overplayed earlier this week.
(Excerpt) Read more at cnbc.com ...
Is it wrong that I want it to plummet on Monday?
“Wrong” is a strong word, “unkind” might be more appropriate. :)
All those insiders needed someone to sell to today...
Shades of the dot-com bubble!
Monday moring will be very interesting for FB...
0.6% per day x 250 trading days per year = 150% per year.
How the hell does Facebook make that kind of money?????
Traders in a down economy are not hopping on this band wagon as would have years past, then what do I know.
The Facebook IPO was way over-hyped. It was even over-hyped by several shows onFox Business Channel that focused on how over-hyped it was.
Ads ? No Ads so sad
After today’s poor showing, I’d expect Monday to be a sell at the bell...........
Exactly. Everybody bought at the bell, computerized trades, then waited for the pop-up price that never went anywhere. They were expecting it to double in and hour............
Not so much hype as obsession. I say BFD. If it goes up, it goes up. If it goes down, it goes down.
It is what it is. Anyone who invests more than they can afford to lose is a fool or very lucky.
Ads and eyeballs............
Underwriters bought Facebooks stock to keep it from falling below the IPO price ?
It’s the karma of being associated with Obama.
If so, we’ll buy more.
We didn’t buy very many shares today. But I think there will be steady FB use and thus a steady increase to the shareholders.
We bought today not looking for a quick buck, but because we think the business will remain profitable.
BUT FOR, the underwriters, FB would have tanked today.
Too many shares and way overpriced.
It’s only VHT activity in the markets ,, no retail customers ... don’t know how long they can pretend..
Warren Buffet said he could not value the company, therefore he would not buy the stock, Berkshire-Hathaway, that is..........
Actually I think that means it was right on target. People had expectations it would go psycho up, but that’s .com thinking, that’s two booms ago. In normal times when an IPO stays at about the price they opened at that means that the folks who set the open price got it right, you don’t normally expect them to triple in price in 2 hours like in the 90s, that was crazy time.
Selling YOUR personal information; not on ads.
Facebook is going to have a problem as it really doesn’t sell anything. People comparing it to Ebay, Microsoft or Cracker Barrel fail to see one very important ingredient.
How the hell does Facebook make that kind of money?????——
As Onyx posted, the underwriters had to step in to support the initial offering price of $38, or it would have tanked. Not a good sign. The $38 price was considered ‘conservative’ yesterday. By Monday it may be considered ‘speculative’.
How can anybody invest in a corporation that has no real product or service to sell, and is basically valued as the sum total of its parts, i.e., servers/real estate/office furniture? It may be a fad that people get tired of in a couple of years..........
It may be a fad the passes thru the populace like the hula-hoop, stacked heels and mood rings...........
I agree. If demand was such that the stock would have closed today at $100/share (for example) then Zuckerberg and his partners would have lost the opportunity to get that price for their shares, rather than the $38 IPO price they did get. Of course, that would have thrilled the speculators who bought it at the IPO price. Conversely, if the IPO price had been significantly higher than the collective buyers and sellers had thought it was worth, the price could have fallen well below the $38 level. Zuckerberg, et al, would have been thrilled to get top dollar for their privately held shares, but those who bought at the IPO price and took losses would be less than thrilled.
Of course, the underwriters might be long some stock now in an effort to keep that last scenario from happening. If they are supporting a stock whose value they misjudged, they could eat some heavy losses. It's called capitalism.
So the question hangs in the air. How does FB make moeny? There are no adds so it sells information it mines about the subscribers? It seems that would not last that long nor be that valuable or profitable.
I suppose I’m just too ignorant.
Seems to me this all follows the LFABFTM pattern....
Looking for a Bigger Fool Than Me
I think they found it.
So it was valued correctly. What’s the problem?
A contrarian view:
A stock that trades sideways is priced right.
A stock that is trading up, is under priced till it trades sideways.
A stock that is trading down, is over priced till it trades sideways.
There was more hype on this IPO than anything I have ever seen. Corporate investors made 2-3 bucks a share by 1400 then bailed. If the little guy thinks this was his big chance, he was right. Your big chance to lose your ass.
Had it not been for the underwriters stepping in to support the price, it would have gone down...........not sideways......
Well that’s a fine conspiracy theory but I deal only in facts. And the facts are that IPOs are SUPPOSED to stay relatively close to the initial set price.
As for “no real product or service” that’s like 90% of the companies we have. Anybody that’s ad supported, meaning almost all the internet companies and most of the entertainment industry, are the same. There’s lots of stuff that may be a fad.
Then the underwriters have a value proposition that makes the position attractive to them. Therefore, the stock is
“worth” what they are willing to pay for it.
I’m sure that there were some individuals in this whole IPO who bought the stock for the sole reason that it was Facebook’s IPO and they just wanted to say they got into the deal. Is their desire to own the stock any more hype than the portfolio manager who buys more stock to protect a larger investment?
The business world is littered with the corpses of .com companies that went bust...........only a very few have actually made a go of it. I can’t see FB being a good long term investment. If someone who bought it didn’t make any money on it today, they probably won’t............
There’s a fine line between ‘investing’ and ‘gambling’. Those who cross it are usually not happy once they have done so..........
The business world is littered with corpses period. 4 out of 5 non-restaurant businesses go under in the first 5 years (restaurants it’s even worse).
FB has 900 MILLION users world wide. 3 entire Americas. Even if they do start to falter it’ll take a long time for that to unwind. They’re at least a good midterm investment. Between advertising and game cash they actually get a pretty decent chunk of change per user. They have at least as good a revenue stream as google did when they IPOed.
They’ve never gotten a penny from me. Now they may have sold my personal info, but that’s a whole ‘nother story.....
So? The list of companies I’ve never given any money to that still make money because of me is epic and huge. FB, Google, Yahoo, various radio stations. That’s the way ad revenue industries work. Doesn’t mean there’s anything wrong with the business. Yeah because of the game cash FB CAN make money from the users, but even people who don’t play the games generate ad hits. It’s not a new concept, some of the biggest entertainment empires in the world (America’s broadcast TV networks) were built on this and while it’s not working too well for them anymore there’s still plenty of companies making plenty of cash by selling other people’s eyeballs.
“How the hell does Facebook make that kind of money?????”
Advertising...until advertisers figure out that Facebook ads are inneffective.
I don’t know, I imagine that Facebook ads could be very effective if you have the right product. A lot of young people are addicted to shopping on line.
The same could have been said of google at the time it hit the market, or yahoo. The problem was that people got almost all they asked for in the ipo which rarely occurs. So people or institutions who placed orders of 500,000 shares expecting only to get 100,000 shares actually got the full amount. The problem then is that they dont actually have the capital required to make the transactions so they had to sell right away, which basically was like a barrier not allowing it to go up. Iactually think next week will look much better since it was able to survive all the mass sellings from people who couldnt afford what orders were placed. Im an engineer tho, what do i know...
Sounds to me like they priced it exactly right. The company reaped all the money from the offering - that’s the idea.
You can buy 10,000 likes on your facebook page for $200. See the scam, you bloody morons.