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Facebook Opens And...

edited May 2012 in Off-Topic
Was initially indicated to open at 45, then 42. Opened at 42, climbed to 43 for about a second and has moved under 40 a couple of times.

Zynga down 13% (halted). Social Media etf getting spanked.

Edited: now has broken through 40 and is now nearly breaking 39.

Edited 2: now nearly breaking original offering price of 38.

Edited 3: hit 38 20 minutes into trading. This is not pretty. Anyone want to step in? lol.

Added: Seems to be some defense at 38, but geez, the way it opened I don't know who wants to step in.

Broke 38 very briefly, but now above slightly. Market no likey.

Edited: Now stabilizing under 39, but the amount of selling into the open was pretty remarkable.

Update: CNBC now saying initial fall was due to Nasdaq being "clogged" (lol, and now apparently other technical issues - nasdaq shares down.) Some orders may not have gone through (http://www.zerohedge.com/news/think-you-bought-facebook-think-again), although the sells certainly seemed to go through.

At 38, FB stock was propped up by underwriters who came in to buy.

Back over 40 briefly then under and moving rapidly - 240M shares traded.

11:30 - now moving over 41, but kind of a technical mess at the open. Nasdaq stock now down nearly 5%.
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Comments

  • The first day is not over yet, but so far there is no sizzle to this huge IPO. For those looking to double their FB money in one day, this has to be a major disappointment. With a trailing P/E of 95, and no track record of fast growing earnings, I think this stock is only selling on the cache of its name. Unless the upcoming earnings announcement is a gangbuster, I don't know how this stock will stay up above its IPO price. That said I wouldn't be out there shorting this.

    Most of this week the institutions have been selling toward the end of the day. Will be interesting to see if FB drops below $38 before the close.
  • "The Endangered Public Company" thread (an Economist article) that I posted a bit earlier is relevant to your comments re IPOs generally. Might be of some interest.

  • All of the investment orgasms have already been had by the venture folks and those related to the company from the early days; not unlike eBay IPO's and others. Everyone else must be satisified to just watch and have a cigarette after all of the sounds of pleasure have subsided.
    I'm interested in the other worldly events that affect our holdings.
  • The rich on wall street who got in early will get richer. Anything new?

  • edited May 2012
    Reply to @Kenster1_GlobalValue: Market down yet again, CNBC ("First in BS Worldwide") again stunned that the retail investor nowhere to be found, NASDAQ having all manner of technical issues that should have been prepared for, the world's biggest IPO evuuurr now being spun as a positive after it had to be propped up and there are apparently sell orders from hedge funds coming in now ...not really.
  • Reply to @Kenster1_GlobalValue:

    GSVC (whose manager was on CNBC this morning all excited) is down 16% on the day, SVVC down a "holy ****" 21%.

    "For example, GSV Capital (GSVC), which invests in "high growth" pre-IPO companies, holds 350,000 shares of Facebook. That represents nearly 7% of its $167 million portfolio. GSV Capital also owns shares of Twitter.
    Similarly, the $87 million Firsthand Technology Value Fund (SVVC) boasts 600,000 shares of Facebook, representing about 12% of the total portfolio. Online flash-sales company Gilt Groupe is also among the top holdings in the fund."
  • Reply to @Maurice: Most of this week the institutions have been selling toward the end of the day. Will be interesting to see if FB drops below $38 before the close."

    It looks like it's heading that way.
  • Reply to @scott: i think the underwriters will be supporting $38 as a floor for a couple of days.
  • edited May 2012
    Reply to @fundalarm: I'm guessing there is a significant amount of money being used to defend $38 right now. 38 is being defended like it's "Braveheart" or something.
  • Reply to @Kenster1_GlobalValue: Thank goodness that American Funds and American Century don't seem to be among them.
  • edited May 2012
    Many people apparently still have not gotten trade confirmations and a lot of anger. The battle at 38 towards the end of the day was one of the more epic things I've seen in quite a long time in the markets. That was insane and probably cost a fortune to prop up not once but twice today. How much more money is going to be willing to be spent for that in coming days?

    "Facebook Flop", "Facebook Unfriended", etc - I can imagine the headlines over the weekend.

    SVVC now down 28% on the day. Zynga halted for almost 50 minutes twice, and down 15%.

    This can be spun 18 different ways (and is currently), but it will stand as a real disappointment for those who thought this was going to bring the retail investor back. I mean, I went on a walk this morning and heard other people talking about buying at the open while I was walking, people at the coffee place, people at the drug store, etc. How this played out today probably just scared off more retail investors, but I'm really surprised that it played out this badly.

  • Reply to @scott: i bet the u/w's spent more on defending the stock then they received in the skimpy fees the FB paid for the IPO.
  • http://www.reuters.com/article/2012/05/18/us-facebook-idUSBRE84G14Q20120518

    (Reuters) - For a company that is dramatically upending business strategies and social relationships around the world, Facebook Inc made a surprisingly modest debut on the Nasdaq on Friday as a sky-high valuation and trading glitches capped the stock's rise.

    In late trading, Facebook shares were only a few cents above the company's initial public offering price of $38, after opening 11 percent higher, rapidly heading south to touch their initial price and then rebounding by several dollars.

    {...}

    But the stock debut took place in a weak market, and traders said the smaller-than-expected first-day pop reflected the very aggressive pricing of the offering and a last-minute, near 25 percent increase in the number of shares being sold. Analyst predictions of first-day gains had ranged from 10 percent to 50 percent.

    "The increase in size was a big negative factor for us," said Tim Ghriskey, chief investment officer at Solaris Asset Management, who said he canceled some orders for the shares.

    The IPO price was equivalent to more than 100 times historical earnings, compared with Apple Inc's 14 times and Google Inc's 19 times. For many investors that makes it a risky bet.

    =====

    Nice injection for cash-strapped California:

    "Already, the influx of wealth arising from Facebook's extraordinary growth has helped drive a mini-boom in San Francisco Bay Area real estate, and income tax revenues related to the IPO will cut the state of California's budget deficit by an estimated $2 billion."


  • What do you guys think? A PE of 100 for Facebook is too high?

  • edited May 2012
    Reply to @Kenster1_GlobalValue: Let me say this: might FB become something more over the next decade? Sure. I think it needs to be about more than chatting with people about what you just ate for lunch and more of a "hub".

    That said, I thought it would open in the mid-40's and push maybe mildly over $50. Maybe once the dust settles, it comes down from there. The fact that the underwriters had to defend 38 not once but twice is stunning.

    Technically this was a mess (people still not getting confirmations), PR-wise this is a mess and I'm guessing the retail investors who actually did buy are likely not too excited going into the weekend.

    The story does, at least for Jamie Dimon, take the headlines away from JPM (down again, along with C and AIG and a number of other financials) briefly.





  • edited May 2012
    I'm sure there were some purchases of FB from the High School investment clubs.

    "Like" !!!
  • Reply to @Kenster1_GlobalValue: "Meanwhile Theophilus Hodges, a 36-year-old property manager, stopped into an E*Trade branch in downtown Chicago on Friday morning specifically to open an account to buy Facebook shares, he said.

    "If it wasn't for Facebook I wouldn't be here," he said as he left the branch to go to his bank and transfer money into his new account. "I missed out on Groupon GRPN -6.69% when it went public, so I'm not going to miss the boat this time."

    Journal Community


    Mr. Hodges said he plans to invest $10,000 in Facebook shares—including $4,500 of his own money and $5,500 from his mother."

    http://online.wsj.com/article/SB10001424052702303448404577411903118364314.html
  • edited May 2012
    Reply to @scott: But hey why not right? Didn't Apple and Google surge to over $500 a share? LOL.

    Is everyone saying that Facebook won't monetize and dominate the new future of global social & marketing advertising genre - so to speak - and not be able to rise to a PE of 200 so that investors will be able to make some serious money? :)

    Is Mark Z. not the Steve Jobs of Social Media Networking and who can turn a $38 stock price to $300+?

  • Personally I don't share the bullish viewpoint as the professionals on Facebook. Comparing FB to Google or Apple is like apples (no pun intended) and oranges comparison.

    From article below, "...skeptical advertisers, a young management team about to become amazingly rich, a history of social-network flameouts, deep-pocketed competition and the privacy issue."

    http://online.wsj.com/article/SB10001424052702303879604577408724178786822.html?mod=mktw#printMode

  • edited May 2012
    Broke below 38 a minute ago and it looks like that set off technical selling.

    Edited to add: was under 37 for a while. Some discussion on CNBC that the pre-market trades will be broken if underwriters decide to come in to support 38 again.
  • Reply to @Sven: Sorry, I was actually speaking with a tongue-in-check. I didn't seriously mean to compare FB to say Apple (and they are also very different from a stock valuation perspective - PE 100 versus PE 14).

    Poking fun at the idea that FB will have world domination and the PE will rise further to nose-bleed and oxygen-mask territory.

  • Reply to @Kenster1_GlobalValue: It is interesting to watch on the sideline while the underwriters are complaining on the lack of retailed investors. Maybe people are a lot smarter than they think.
  • edited May 2012
    Reply to @Sven: CNBC continually said that a larger-than-normal portion of the IPO was allocated to retail. So:

    A:) Retail investors puked it up. For a name that everyone was supposed to be excited about, everyone sure sold it in a hurry.

    B:) There's a lot of retail investors who are still holding and are probably pissed.

    C:) Actual allocation to retail is less than being said.

    D:) There may have been a lot allocated to retail for the IPO, but once the stock opened, the majority who wanted shares had them and without buying interest, selling resulted in more selling.

    Maybe a combination of the above or something else.

    The two private equity funds down again - GSV Capital (GSVC) down 36% in 5 days. Firsthand Tech Value (SVVC) down about 34% in 5 days, and that would have been down further had it not announced NAV today.
  • Close to a 10% drop today --- trading at over $34.

  • edited May 2012
    http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/9277128/Banks-move-in-after-shaky-start-to-Facebook-IPO.html

    "Facebook’s banks ended up owning 86% of the social networking site’s $16bn (£10bn) initial public offering after a lacklustre first day of trading in which shares ended marginally up on the opening price."

    "As the first analyst to place a “sell” rating on the company emerged over Facebook’s $100bn (£63bn) mega-float, filings from the company revealed the true extent to which Wall Street underwriters were forced to prop up the shares on Friday.
    A revised S-1 filing made with the US Securities and Exchange Commission disclosed that Facebook’s five key banks ended up owning $13.86bn. Morgan Stanley, its lead adviser, ended the day owning 162m shares, worth £6.16bn, followed by JP Morgan and Goldman Sachs, which ended the day with $3.2bn and $2.4bn holdings respectively. Bank of America Merrill Lynch and Barclays Capital each held $1.04bn stakes.
    A significant proportion of the shares owned by the banks will have been bid for ahead of the float itself, as part of the banks’ underwriting duties, but a smaller proportion will have come from a result of the banks moving into the market on Friday to maintain the price above its $38-a-share opening level."


    http://www.cnbc.com/id/47505908
    "All the buy-side institutions are shorting it. You can get a borrow on it and everyone's leaning all over it. There's no bottom," Rovelli says. "The next catalyst is going to be earnings, which is three months away. So there's no reason to jump in here."

  • Talk to your kids, they are moving rapidly away from FB to other things. Older people will hang on to its use for a while. It is no longer a rocket science concept and navigation through there site is cumbersome, and all improvements disappoint the users to the point they complain and many move on to other things.

    FB at nearly 100 times earnings and dropping! What are you buying? Something that in a year few will be using? Safer to bury your money in the backyard.
  • edited May 2012
    I guess some retail investors who bought in early missed this memo?

    http://www.marketwatch.com/story/morgan-stanley-cut-facebook-view-before-iporeport-2012-05-22

    NEW YORK (MarketWatch) -- The consumer Internet analyst at Morgan Stanley, the lead underwriter for last week's Facebook Inc., trimmed his outlook for the social-networking firm's revenues just days before the deal went live, Reuters reported Tuesday. The report said that the action, which it said was relayed to some of Morgan's major clients during Facebook's pre-IPO road show, came as a surprise to many potential investors so close to the stock's debut. Reuters explained that the cut came after Facebook released an updated prospectus ahead of the share sale that cautioned about revenue-growth challenges presented by a shift to mobile devices.

  • edited May 2012
    The SEC is already investigating the trading mishaps on the opening day of trading. Should the SEC expand their investigation to a lack of disclosure of material facts to the smaller investor, while the big banks and brokers got the news about the bankers estimated earnings cuts? Wall Street continues to be the wild west for the small investor, despite the major financial reform bill passed last year and scandals that unfold decade after decade.

    Article by Henry Bloget: http://finance.yahoo.com/blogs/daily-ticker/facebook-bankers-secretly-cut-facebook-revenue-estimates-middle-133648905.html

    "Reuters' Alistair Barr is reporting that Facebook's lead underwriters, Morgan Stanley (MS), JP Morgan (JPM), and Goldman Sachs (GS) all cut their earnings forecasts for the company in the middle of the IPO roadshow."

    "But, just as important, news of the estimate cut was passed on only to a handful of big investor clients, not everyone else who was considering an investment in Facebook."

    "This is a huge problem, for one big reason:

    Selective dissemination. Earnings forecasts are material information, especially when they are prepared by analysts who have had privileged access to company management. As lead underwriters on the IPO, these analysts would have had much better information about the company than anyone else. So the fact that these analysts suddenly all cut their earnings forecasts at the same time, during the roadshow, and then this information was not passed on to the broader public, is a huge problem.

    Any investor considering an investment in Facebook would consider an estimate cut from the underwriters' analysts "material information." "

    Part of the problem may point directly to the SEC regulations that defines the quiet period and how it is suppose to work. But that quiet period should not be an excuse not to release material information.

  • edited May 2012
    Hi Maurice- Well, what exactly do we mean when we say "small investor"? After all, I'd think that many of the folks here on MFO are "small investors". "Small" does not equal unqualified, ignorant, nor stupid.

    It's pretty hard to believe that many of the so-called "small" investors so frequently mentioned are not of the same breed that thought that they could beat the housing bubble. Hey! Easy money! A quick buck! No experience, thought, judgement, or knowledge needed! Step right up, folks, see the painted lady!

    Mo, you most likely think that because I am a "liberal" (whatever that's supposed to mean) I am of the mindset that "the gummint" should be right there at all times to watch over each and every one of us. No sir, I don't. To me, there's a big difference between sophisticated "professional" financial ripoffs, utilizing disinformation, co-option of regulation, of a size and managed in such a manner as to potentially require taxpayer backup in case of failure, and a plain old carny game like the Facebook IPO.

    An excerpt from a ⇒ Reuters article:

    "As bad as the declines have been, though, a view persists that the stock remains overvalued.

    Monday's closing price of $34.03 implied a 24 percent annual growth rate for Facebook earnings over the next 10 years -- a rate that would rank above 90 percent of the companies in that industry.

    Thomson Reuters Starmine, meanwhile, more conservatively estimates a 10.8 percent annual growth rate -- almost exactly the mean for the technology sector -- which would value the stock at $9.59 a share, a 72 percent discount to its IPO price."


    With investing, nothing's easy. You know that, I know that, and so does every single MFO poster or reader. If investing was easy, there would be no need for MFO.

    Emptors still need to caveat. That's life.

    Regards- OJ
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