I have very little sympathy for those people that lost money on this stock. For months, there were articles about the overvaluation of FB ($100 billion number was thrown around quite often). Here in the office, we had discussions around that, and though everyone agreed FB is a valuable company, 100$ billion was an insane number, considering their revenues were more or less public for a while. And then the IPO happened, at 100$ billion and ... they dropped.
And the crazy thing is that you certainly don't buy stock if you dont expect the value to rise. Did these people really think that we would decide fb is REALLY worth 200b they were going to 2x their investment? The opinions were either: way too high or ehhh, I guess it could be right. That doesn't make me feel like a stock is undervalued and I will make money from it. No idea what these people were doing beyond buying a ticket on the hype rollercoaster.
Completely agree, the revenue figures just do not backup the valuation. Having said that, its getting close to a realistic number right now.
Good company, great idea, amazing traction...just show better revenue and the valuation will follow. Good on them for having a successful IPO though, a lot of fuss has been made about it but i'm sure deep down inside they know they got the better end of the deal.
If anyone actually is interested in a trade here...
The option market was pricing in about a 12% move. Today we got a 15% down-move. This means that anyone who was short puts either has to cover or they have to sell stock to reduce risk.
Normally what happens after earnings events is that the implied volatility gets crushed as the event risk goes away. However because the options market is feeling a bit of a squeeze, the IV remains elevated... this was the case this morning, but less so right now.
So the trade? If you want to buy the dip, I would look at cash-secured put sales. Specifically the Sep 21 put sale for about $1 or higher.
If fb heads under 21 bucks then you will be assigned with a basis in the 20s. From there you can roll to covered calls or just hold onto the stock at these levels.
Put sales make sense if you are bullish stock and bearish volatility, and as IV continues to fall as the event risk goes away, your position will be in an advantage.
I'm actually rather interested in what many of those fancy words mean. I'll end up searching around, but beyond that, are there any decent resources you would recommend for someone with only a basic understanding of the market?
Terrible play. The only reason prices held up is because of the illustrious stock circuit breaker precluding shorting today.
To buy the dip, put on a "covered call" position by buying the stock and serially selling weekly calls at a higher price (for example, sell the august 3 calls at 25 strike for 30 cents). Continue to sell weekly calls and collect vol until it reaches your target.
The advantage here is that most brokerage firms will let you do this type of trade without requiring extra margin abilities
With a P/E of 123.25 I think it's still got a long way to fall. Still I expect that will take a while. I think FB is reasonable prospects and I would be happy to buy FB with a P/E of 20, but the people don't want to sell anywhere near that price so it's looking like a long slow decline.
P/E only carries meaning for stable companies that aren't growing. If a company is investing for the long term, then their P/E might look terrible but they may be laying a base for huge profits in the future. Of course they might also be throwing money into a hole in the ground, but looking at the P/E ratio isn't going to tell you which of those are going on.
NB. Amazon's razor thin profit margins are what would worry me if I had a pile of AMZN stock, not their P/E ratio.
Amazon's revenue is over 10x that of Facebook, and it's earnings are low at the moment because they've been expanding like crazy. However, Amazon is a leader in several large and quickly growing industries (retail goods, e-books and other digital goods like music, and "cloud" services). Do Amazon's activities warrant a market cap that's about twice their current annual revenue? That's a pretty easy bet to make. Do facebook's activities warrant a market cap that's over twenty times revenue and is on the same scale as the entire global advertising industry?
So whose fault is it exactly that priced this so poorly?
Personally, I think this was a fraudulent deal by GS/Morgan Stanley -- Given all the criminality in banking thats been painfully obvious for years - I think this was a deliberate over valuation to allow them to dump shares immediately make a ton and let the stock drop.
Knowing that even though they did this, Facebook was not going to go under or have their actual business affected.
I can't believe that there is not a hell of a lot of WTF thoughts and anger on the inside of FB at this. Does anyone know the sentiment of FB employees over all this, especially employees who have a sizable amount of stock?
>"Personally, I think this was a fraudulent deal by GS/Morgan Stanley -- Given all the criminality in banking thats been painfully obvious for years"
Please point me to a link that shows all of the banks and employees that have been charged with crimes.
>"I think this was a deliberate over valuation to allow them to dump shares immediately make a ton and let the stock drop."
A stock trade is a two way transaction. A holder of shares doesn't get to just "dump" stocks; someone has to be on the other end of the deal. For every seller there is a buyer. Why would they want the stock to drop, rather than have it go through the roof, allowing them to cash in at a higher price? That makes no sense.
>"Knowing that even though they did this, Facebook was not going to go under or have their actual business affected."
Have you stopped to consider that Facebook's business model is the real problem here? Probably not. It's far easier to go along with the anti-bank populist sentiment.
>"Does anyone know the sentiment of FB employees over all this, especially employees who have a sizable amount of stock?"
If they are to be angered at anyone, it should be at the Facebook insiders who dumped their stock.
>"I hope you don't actually think that the lack of being charged with crimes means no crimes were committed."
For the most part, yes, I do. I believe the justice system works.
You don't think there are politicians out there just itching to perp-walk some of these bankers? That there aren't some hot-shot DAs dying to make a name for themselves? It happened with Enron, Worldcom, Tyco. The public is frothing at the mouth to put some of these guys on trial.
So why haven't they? Because, like it or not, there hasn't been as much legal malfeasance as some would like to believe. Sure, if you look hard enough you'll find rogue employees doing bad things. That's a fact, and I won't deny it. You'll find the same in any large institution, be it government or Google. But this idea that the banks are directed from the top down to defraud people on a mass scale is complete and utter nonsense. Sorry.
We, as the public, like to create a narrative for why these massive deleveragings happen every so often. The reality is these cycles occur naturally when credit overextends. Suddenly we start blaming the bankers for people taking out loans they can't afford to pay back.
The banks and bankers have been taking an absolute beating for years now. The US essentially legalized the concept of buying a house and heads-I-win-tails-the-bank-loses. They've been forced to shoulder massive loan write-offs, simply because people refuse to pay back money they agreed to via contract. Every media outlet on the planet demonizes them. Stop and ask yourself: when has the mass media been right about anything?
Oh well. It can only go on for so long. Banks act as the bellwether for the economy; until they're making money again and lending resumes the economy will stay in the doldrums. You don't promote wealth creation and economic growth by stiffing creditors and putting the owners of capital in jail.
>"You appear to be in denial about whats really been going on in finance."
Nope, I have a pretty solid understanding of what's "really going on" in finance. In fact, part of my job involves me entering contracts based on LIBOR. How has the LIBOR "scandal" affected you?
You talk about not knowing what's going on, but then point to a documentary (albeit a good one) as evidence for your conspiracy theory about Facebook: it's not just a mediocre business that's incredibly overpriced for the value it offers. Rather, it's a large scale conspiracy by the evil bankers to screw over Saint Zuckerberg and make a couple million dollars extra!
Come on. Occam's Razor. This stuff isn't as complicated as you think.
>"But with that said, I think that you're naive when it comes to the motivations and actions of entities like the Fed and Goldman Sachs."
I question your wisdom when you refer to the motivations of huge enterprises like GS and the Fed, with thousands of employees, like they have a singular view.
As far as my naivete, well, I have friends that work for the Bank of Canada (a central bank...scary!) as well as on Bay and Wall Street inside big investment banks (though not GS, unfortunately) They're just regular guys punching the clock. Not evil.
But, judging by your understanding of how the stock market and IPO system works, it's pretty clear you have very little sense of finance, let alone how banking or the Federal Reserve system works. The fact that you cited Inside Job as your source reveals where you get your information from. Don't worry, you're not alone. There's a whole sub-culture out there that refuses to accept the fact that there is no banking conspiracy, that the Fed's motivations are clear and their actions are documented. 90% of the goings on in the financial world can be explained simply and logically. Big banks are out to make money, and how they do so is pretty straight forward. The Fed guys are academics, not evil geniuses. Have you ever listened to Bernanke's talks? The guy is as meek and nerdy as they come. Is that a clever ruse?
I hang around enough forums to know that it's very unlikely that you're willing to have your mind changed. If I'm wrong, I'm open to debating whatever (in another forum of course) If not, let's just agree to disagree.
Before MS/GS were appointed, the tech press was already talking about a $100bn valuation - Do they know what they are talking about? no. Are they to blame? no.
The final go ahead to the pricing of a company going public is down to the shareholders/board/CFO; not the banks. Banks are great escape goats, but not the reason why FB had a ridiculous valuation.
I'd suppose that if the stock is worth $20, and becomes $20 after a few months, the employees don't really care. It's the independent investors who were shafted for the most part.
Buy on bad news it says.
Every time i see such a huge drop for the FB stock i think to myself: Should i buy now - i never did.
And every time i see the next rock bottom i am glad i didn't.
I do believe though that FB has the potential for a lot more revenue just because they own the channel to their gazillion users. They just haven't figured out a good way, yet.
They may say buy on bad news, but following that philosophy might have lead you to buy Enron and any number of companies where the bad news wasn't just temporary but a sign of real underlying problems.
You're also falling prey to anchoring bias. Because Facebook stock has previously been twice as much as it is now, it seems 'cheap', and a good deal.
What you really need to consider is the net value of Facebook as a company (by assessing its long term money making potential), and deciding whether its currently under or over valued.
I personally would never consider buying shares in FB because of the weird voting structure/rights. When I buy a piece of the company I want the corresponding votes to have my say in making sure that company is run in my best long term interests.
If you're not buying a significant share and are 'just investing' in a company's potential, you should actually feel more confident knowing that the company is firmly steered by the hands that created it and made it successful.
But I want to be able to make that decision. There's nothing stopping me from re-electing Zuck as CEO every year and letting him do his thing.
However, if he starts doing crazy things, or I think there's a better candidate for the job, I want to be able to vote to chuck him out. 1 share 1 vote!
Really? Because the first time it went to the high 25s (its first rock bottom), if you had bought it you could've sold it in the 30s for a gain of 20-30% depending on where you sold it.
This is really only the second "rock bottom" its hit. The first one was a good place to make a trade, and when this one settles, it might be a good place too.
Is it said that? You should had bought Nokia, RIM or companies in the past like Silicon Graphics(once it started going down like crazy) or SCO.
FB is a scam to make their founders rich, a pyramid scheme in witch the money that enters is always from new people that believe are going to be rich with the "new thing"(social media), not from the real world.
FB is a billionaire business that does not know how to make money.
The first part of your comment was insightful. The rest was ridiculous. Facebook will be used by a large portion of the online world for at least the next ten years. It will make money. (It does make money, just not more than they're currently spending to grow the company.) The question is how much money they will make.
Call me old-fashioned if you like, or maybe simply insufficiently in tune with the times - but I'd argue that bringing in less money than you spend is the very definition of not making money.
Is it really so hard to see the real value a service like Facebook provides? I’m personally not a fan of Facebook (but found it to be tremendously useful for quite a few things in the past) but I know several people who find it very useful. At its worst it’s a silly diversion (ála Reddit or Hacker News, though certainly not worse than those), at its best it’s a rich communication infrastructure tailor-made for certain kinds of relationships.
Social networks are here to stay. They fix many of the shortcomings of older ways of communicating. Facebook has shown that it’s possible to make money with that. Their current numbers are most certainly not an invalidation of the business model or service, it’s more that they might have wanted too much.
Social networks are a sound idea. Facebook has a competent implementation of a social network. Maybe it’s not enough to rule the world – but I think it’s enough to make some money and be a healthy business (though Facebook seems to want more).
"If you need VC money, you just missed the last train."
That's not true if you have a business that can sustain itself for a few years. There's a ton of VC money still there (the stock market, real estate, bonds etc aren't as appealing as one would imagine) but it's most likely going to be very picky.
This posting is a great advertisement for Google Finance. I hadn't realized it had been improved so much. I may well move over from other sites and begin using it more often now.
I haven't noticed any big changes the last five years I've been using it. Other than the whole google facelift its been the best finance tool I've used. Maybe I haven't noticed any new features but what would you be talking about?
Its been a few years since I last checked, but having 'real-time' quotes is better than 15-minute delayed, which I seem to remember it was before. As well as the graphical overlay of the news bulletins on the share ticker graph is good too. Just seems to provide more timely information now, including overseas listings, than it did before. Won't replace my primary broker site, but good if I don't want to login to check a price or two.
Real-time price data represents trades which execute on
the NASDAQ and NYSE exchanges. Volume information, as
well as price data for trades that don’t execute on
those exchanges, are consolidated and delayed by 15
minutes (NASDAQ), 20 minutes (NYSE).
I too feel victim to the Facebook IPO. My attempt to recoup the loses was through an iPhone app called "Facebroke". Apple rejected it in less than 1 hour stating "We found that your app contains content that is defamatory or offensive that would be considered objectionable by many audiences". I had to settle with a much tamer version of the app.
http://bit.ly/MPNrlo
Why? Goog PE is 18. Aapl 13. Facebook... 122. 10-times fold!!
Don't get me wrong: Facebook is making profits, but the majority of stockholders will keep on looking at PE. Until it remains in such absurd range, you will keep on seeing it in red.
This stock belongs in less than 10 dollars space. Then when its get there at $6, buy it for a +$2 pop.
That P/E is especially worrying because of the scale FB already works in. They just don't have all that many people left to grow with, especially people that are in any way attractive to advertisers. The growth is going to have to be with better monitizing their existing users while trying to keep down expenses, not typical for a very high P/E company.
So, where's the surprise?!