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2. The bond and equity markets are based on sound regulation, transparency, and quarterly statements. Facebook has none of those things when it operates in the

by dhh 16y ago

2. The bond and equity markets are based on sound regulation, transparency, and quarterly statements. Facebook has none of those things when it operates in the dark of the secondary markets. 3. Again, these premiums are based on outstanding shares traded under the transparency of the public stock market. See Secondary Suckers for a nice take on the perils of the secondary market: http://www.homethinking.com/brontemedia/2010/09/17/secondary-suckers/ http://www.homethinking.com/brontemedia/2010/09/17/secondary... 4. Do you have their P&L handy to back that up? If the valuation was so wonderful and they were raking in the profits, then taking series E funding three months ago doesn't make much sense.

smallchou 16y ago
Do YOU have their P&L handy to back up YOUR statements about how they have no idea how to monetize their users? Or is that only a valid critique of people who are arguing with you?
tptacek 16y ago
Maybe the equity markets. The bond markets not so much.
jbarham 16y ago
> The bond and equity markets are based on sound regulation, transparency... Presumably subprime mortgage backed securities are the exception that proves the rule...
- patrickk 16y ago
  The stock market is well regulated but the bond markets a lot less so, hence that's where Wall Street makes big profits (when times are good.) They make serious profits as 'market makers' (standing between buyers and sellers) with bonds.
  - grandalf 16y ago
    You view the bid/ask spread as an indicator of poor regulation? Not actually true. The spread reflects the willingness of firms to compete as market makers. More firms competing means a smaller spread. The spread also reflects the risk associated with the market maker holding inventory. The more perceived risk, the bigger the spread.
- dantheman 16y ago
  Exception that proves the rule means that since their is an exception a rule must exist. For instance - Tonight we got an exception and are allowed to stay out till 11pm, would imply that there exists a rule that forbids them staying out that late. Hence the exception proves the rule.
brm 16y ago
Point of order... It wasn't a series E, it was $120 million in purchases on the secondary market http://techcrunch.com/2010/06/28/elevation-invests-another-120-million-in-facebook-as-that-ipo-looks-more-distant/ http://techcrunch.com/2010/06/28/elevation-invests-another-1...
- vessenes 16y ago
  This is an extremely important point, germane to the conversation.. The $120mm was not a funding round -- it was liquidity for founders. Huge difference, and it invalidates much of dhh's original analysis.
  - deleted 16y ago
    [deleted]
  - mapgrep 16y ago
    Does it? DHH seemed to be saying that if Facebook had profits and cash flow they wouldn't need outside sources to provide liquidity. So the important part as far as DHH's point is that Facebook needed cash - whether the "liquidity" came with or without dilution, the point is Facebook needed it.
grandalf 16y ago
These are all valid points, but they are logically equivalent to saying "I don't understand why anyone pays $12 for a Ke$ha album". You may not agree on the worth of the album or of the shares, and nobody is forcing you to buy either one. That some people do consider it a good price is enough to result in a market price for both, on the basis of which many decisions are made.
- jrep 16y ago
  Well, no, it's like saying "I don't understand why anyone pays $12,000 for a Ke$ha album." If the price was broadly reasonable, there would be no argument. But if the price gets outlandish, then someone needs to call B.S. And yes, this happens now and then for ordinary, exchange-traded companies. Usually, it results in the exchange suspending trading for the company for a bit. Sometimes, it requires someone to call B.S. In an ordinary, regulated market, one or the other of those actions restores sense, gets the price back somewhere within shouting distance of reasonable.
  - grandalf 16y ago
    Not true, b/c as far as I know nobody is buying Ke$ha albums at $12K, while there are many investing in FB, hence the notion of a market price. Not sure what phenomenon you're referring to in your second paragraph.
  - hofo 16y ago
    Actually I don't understand why anyone buys a Ke$ha album at any price...

by dhh 16y ago

smallchou 16y ago

Do YOU have their P&L handy to back up YOUR statements about how they have no idea how to monetize their users? Or is that only a valid critique of people who are arguing with you?

tptacek 16y ago

Maybe the equity markets. The bond markets not so much.

jbarham 16y ago

> The bond and equity markets are based on sound regulation, transparency... Presumably subprime mortgage backed securities are the exception that proves the rule...

patrickk 16y ago
The stock market is well regulated but the bond markets a lot less so, hence that's where Wall Street makes big profits (when times are good.) They make serious profits as 'market makers' (standing between buyers and sellers) with bonds.
- grandalf 16y ago
  You view the bid/ask spread as an indicator of poor regulation? Not actually true. The spread reflects the willingness of firms to compete as market makers. More firms competing means a smaller spread. The spread also reflects the risk associated with the market maker holding inventory. The more perceived risk, the bigger the spread.
dantheman 16y ago
Exception that proves the rule means that since their is an exception a rule must exist. For instance - Tonight we got an exception and are allowed to stay out till 11pm, would imply that there exists a rule that forbids them staying out that late. Hence the exception proves the rule.

brm 16y ago

Point of order... It wasn't a series E, it was $120 million in purchases on the secondary market http://techcrunch.com/2010/06/28/elevation-invests-another-120-million-in-facebook-as-that-ipo-looks-more-distant/ http://techcrunch.com/2010/06/28/elevation-invests-another-1...

vessenes 16y ago
This is an extremely important point, germane to the conversation.. The $120mm was not a funding round -- it was liquidity for founders. Huge difference, and it invalidates much of dhh's original analysis.
- deleted 16y ago
  [deleted]
- mapgrep 16y ago
  Does it? DHH seemed to be saying that if Facebook had profits and cash flow they wouldn't need outside sources to provide liquidity. So the important part as far as DHH's point is that Facebook needed cash - whether the "liquidity" came with or without dilution, the point is Facebook needed it.

grandalf 16y ago

These are all valid points, but they are logically equivalent to saying "I don't understand why anyone pays $12 for a Ke$ha album". You may not agree on the worth of the album or of the shares, and nobody is forcing you to buy either one. That some people do consider it a good price is enough to result in a market price for both, on the basis of which many decisions are made.

jrep 16y ago
Well, no, it's like saying "I don't understand why anyone pays $12,000 for a Ke$ha album." If the price was broadly reasonable, there would be no argument. But if the price gets outlandish, then someone needs to call B.S. And yes, this happens now and then for ordinary, exchange-traded companies. Usually, it results in the exchange suspending trading for the company for a bit. Sometimes, it requires someone to call B.S. In an ordinary, regulated market, one or the other of those actions restores sense, gets the price back somewhere within shouting distance of reasonable.
- grandalf 16y ago
  Not true, b/c as far as I know nobody is buying Ke$ha albums at $12K, while there are many investing in FB, hence the notion of a market price. Not sure what phenomenon you're referring to in your second paragraph.
- hofo 16y ago
  Actually I don't understand why anyone buys a Ke$ha album at any price...