Many of the large investors (Accel, DST) selling more shares, valuation of $100 billion for a $1b profit company? Bubble about to pop, smart money is getting out.
To be fair, Acel, DST and others are really small investors, compared to Fidelity, Barclay's, BOA and the likes. Plus, Accel's and DST's business model is to score and more or less get out at the IPO.
DST = (Not sure about AUM, but they have about $1B in Facebook which is a relatively large amount, but they only invested $200m which is a very small amount compared with large mutual funds.)
Compared that to large asset managers and you can see they are very small:
Go to page 23, Accel would be ranked around 480 on the list with just $6B under management. (the numbers listed on that table are in millions, top asset managers have multi trillion dollars under management.)
Also it is worth noting that the companies he mentions like Fidelity are experts at valuing publicly traded companies where Accel etc. are experts at finding small, rapid growth companies.
How can a small-timer realistically bet on FB not being worth its price? Certainly some actor is betting on that they will fail. Is there a Facebook Fail Fund around?
You won't be able to short sell Facebook when it first goes public, but some time later you'll be able to when the stock is easier to borrow.
Facebook options (specifically, put options) will be listed at the end of the month, but those are likely to be overpriced due to underlying volatility. You might want to write call options instead of buying put options, but that's also a risky strategy.
You might want to write call options instead of buying put options, but that's also a risky strategy.
I don't know the original poster, but I would guess by the way he/she is asking that question that they probably do not understand markets well enough to take on the risk of writing a call option.
You are right that I don't fully understand the implications, all I know is that such products are extremely dangerous unless you compose them carefully (iron butterfly, straddle, collar! - whatever that implies). Truth to be told it's not something I'm actively considering.
I just thought that there ought to be a bear fund/product which is positioned against companies like Facebook and Groupon - the question is how easy it's to be a part of it if you don't have 10M+ cash and have regular contact with GS or what have you.
My comment wasn't directed at you in the sense that you should know, rather I was pointing out that writing call options is not for someone looking for a way to short Facebook who is not a sophisticated investor since writing a call option has a theoretical unlimited risk.
Any regular stock broker could help you set up an account and advise you on how to “bet against” companies being actively traded as long as you are allowed to in your specific country.
GS and other investment banks are required for much more complext trades than betting against companies. Usually trades involving illiquid markets.
This is a very bad sign, Facebook expects a big drop in his valuation and they can't raise money that cheap for a long time. The big question is, do first time investors know that Facebook has no confidence in it's own stock.
Does anybody know what happens when Facebook can't sell for it's initial price? There is a real chance, 16Billion and a lot of analysts think they are overvalued.
I think (not a pro at this) all those shares have already been sold via IPO road shows to pension funds, banks, hedge funds and other investment houses. In fact, I read they wanted even more shares than FB offered to sell ("oversubscribed.")
So no major surprises. I doubt they just pick a number and just hope to sell $16 Billion
Are you aware of a recent case where an institutional investor representing "dumb" money (e.g. Pension funds) was successfully sued for bad investments? I am not.
Yeah i's Facebook, but they are already valued so high and they have a lot of risk factors. Nobody has any idea how they can grow further. It's like 2000 all over again, just that "So many users" and "They know so much about us" overtook "It's the internet" as the justification.
Users can also be investors. How many users does Facebook have, who will want to own a piece of it? How many of them are going to worry about valuation?
I think Facebook is going to have good run. I wouldn't be surprised if Facebook goes up to 400 billion. Facebook even has the possibility of making investing in internet companies at ridiculous valuations 'cool'. Wall street must be salivating.
> How many users does Facebook have, who will want to own a piece of it?
hmm, using a product, wanted company's share, and actually owning them are three different things. I think its safe to say if someone buys a stock, they are called "an investor". If that investor did his homework they may not be so keen to buying FB anymore, at any price.
> I wouldn't be surprised if Facebook goes up to 400 billion
... Considering that the new shares are not being sold by The Company but by the existing investors, you are not at all correct.
> More specifically, certain insiders are selling more. Venture capital firm Accel Partners, for example, has increased its number of shares being sold in the IPO from 38.19 million to 49 million. DST group from 26.25 million to 45.66 million, while its Mail.ru affiliate has bumped its number from 11.27 million to 19.6 million.
So the early investors are treating it like a ponzi scheme. they need to make the valuation ever higher based on speculation of future value of Facebook.
This doesn't really have anything to do with valuation. There isn't any more or less equity being created. The early investors are simply deciding to sell more of their existing shares.
