7 ms·

Facebook to Set I.P.O. Price Range at $28 to $35

37 points by sew 14y ago

pixelcort 14y ago
In case anyone else as confused about what an IPO road show entails, here is a description I found: http://moneycentral.hoovers.com/business-information/--pageid__1960--/global-msn-index.xhtml http://moneycentral.hoovers.com/business-information/--pagei...
- PaperclipTaken 14y ago
  To me, this link is broken.
- lanstein 14y ago
  Here is the road show preso: http://facebook.retailroadshow.com/launch.html http://facebook.retailroadshow.com/launch.html
nirvana 14y ago
Why oh Why is the headline about the stock price? Apple's price is $585ish right now. Apple is not 10 times more expensive than Facebook would be-- only a bit more than 5 times as expensive. Facebook's price range is around $86B. It seems a lot of people want to buy a car for a "monthly payment they can afford" and car dealers have long sold people terrible terms and terribly overpriced cars by structuring the "monthly payment" lower so the person thinks the car is cheaper. Its amazing people fall for this. Yet people react the same way to stock prices and NYT is putting the stock price in the headline? How about "Rather than the $100B expected, Facebook is set to IPO at around $86B". And more importantly-- and relevant to anyone who might want to buy the stock-- what's that work out to as a PE[1]? Doesn't appear anywhere in the NYT article that I could see. So, is $86B expensive? Cheap? We don't know. [1] On a trailing twelve months basis. I'm sure its in the prospectus, and anybody with financial literacy will look it up before buying the stock, but I still bet that a lot of people will say "$35? I can afford $35!" or "I've got $3,500 in my brokerage, I'll buy 100 shares! Can you imagine what those 100 shares will be worth when Facebook catches up to google and is priced at $350 a share?!" I don't think Facebook will be worth $860B+ in the next decade.
- CyrusL 14y ago
  Because Facebook hasn't split it's stock in a while, so talking about price per share has a common meaning for everyone that owns shares. I would imagine the majority of people who own Facebook shares know exactly how many shares they own and not an exact percentage of the company.
  - deleted 14y ago
    [deleted]
- walru 14y ago
  As the phrase goes, a fool and his money are soon parted. Along the same mindset are people who want to wait for a split to get in. I always chuckle a little inside when I hear that and then try to educate on why that's not necessarily a good thing. Back to Facebook. I haven't looked at the financials, but regardless of what they are it's safe to say the share price will rise quickly due to the reason you stated, and that's of course why they did it. A lot casual investors will see this as a way to fund their child's college education and jump in as soon as they can, no matter what the mark-up. Who knows, maybe this is the next MSFT or AAPL. We'll see where everything settles after the irrational exuberance of the IPO hits. I don't think this will be another GRPN or ZNGA. Even though they were both rather popular, neither of them had the number of eyes on them that Facebook does. This is set to be the most oversubscribed IPO in as long as I can remember.
  - gbog 14y ago
    > Who knows, maybe this is the next MSFT or AAPL. Or the next bubble? Seriously, if you are young enough there is nothing easier and more compelling than leaving Facebook, and Facebook cares a lot about having young people. Why is it so easy to leave? Because youngster do not like their past, they do not like to see themselves as kids. It took a very long time for me to be able to look at a picture of my younger self without instinctive rejection. Only when you are on the "other side" of life that you value past pictures of your life. Why was Instagram so successful? Some other may hvae said it but still, what strikes me the most is why so many people did use Instagram app to share pics instead of Facebook app. It can't be solely based on UI diffs. It is more because Facebook is perceived as an archive where everything goes if anyone is interested, a trashcan if you will. I'll not bet a cent on FB. Moreover, we HN readers should not put all our eggs in the same bag, our work, interests, knowledge, passions are anchored to technologies, let's anchor our bank accounts to some other place.
jstalin 14y ago
Looks like a stock price of $31.50 would give facebook a P/E ratio of around 60. For comparison, GOOG is 18.5 and AAPL is 14. More financials are available from the updated S-1: http://sec.gov/Archives/edgar/data/1326801/000119312512208192/d287954ds1a.htm http://sec.gov/Archives/edgar/data/1326801/00011931251220819... And it looks like Q1 2012 net income was actually lower than Q1 2011. Oops!
- CyrusL 14y ago
  Oops misread OP
  - rob08 14y ago
    That's why its compared to the same quarter last year (Q1 2011) and not sequentially
- debacle 14y ago
  The net income is marginally different and the gross revenue is almost 50% more. I don't think you're giving it a fair assessment. Also, Google's IPO P/E was ~80, and shortly after IPO the P/E shot up to 160, so again I don't think you're giving Facebook a fair assessment.
SkyMarshal 14y ago
Anyone know why FB isn't doing something like Google's OpenIPO for their IPO? http://en.wikipedia.org/wiki/OpenIPO http://en.wikipedia.org/wiki/OpenIPO
- nl 14y ago
  It's not at all clear that OpenIPO produces the best outcome for anyone. It was certainly sub-optimal for Google.
jonursenbach 14y ago
So how can us normals get in on this?
- ChuckMcM 14y ago
  If you mean "How can I buy stock at $25 and sell it right away to the general public for $35 to $50 on the same day?" Then the answer is, "Sorry, you can't." If you mean "How can I create a company that will allow me to sell a future interest in the company for way more than I put into it?" Well that answer is "Play the tech startup game." During the Dot-Com bubble a company often had a 'friends and family' plan where if you had a family member working there or knew someone you could participate in some small way in the IPO. I know families that no longer talk to each other (even now over a decade later) because of that 'opportunity' so I'd approach it with caution if offered.
- mynameishere 14y ago
  Well, you could try buying it through your broker. Trick question?
- sew 14y ago
  See http://dealbook.nytimes.com/2012/05/03/small-investors-may-get-to-own-a-bit-of-facebook/?hp http://dealbook.nytimes.com/2012/05/03/small-investors-may-g...
tobias3 14y ago
That would be approx. $94 per active user. I know there have been social networks which went over the counter at that price before, but looking at them now I would not touch this stock with a ten foot pole. I certainly can't think of any way to extract that much money from my account. Ads? I know that this reflects not the current status but future expectation, but I cannot imagine any way how Facebook can fulfill those expectations. They have nothing, which when taken away would make users hurt. Other social networks stand in line.
- lftl 14y ago
  Definitely not buying FB at this price, but the only argument I can see justifying the price is as more a long term valuation of them as a tech company. In other words, in the same way the Google is clearly no longer "just" a search engine, FB has the talent and resources necessary to be more than a social network. That's definitely a gamble on valuation, but I can vaguely see someone justifying the price in that respect.
- runako 14y ago
  Put another way, Facebook is expecting to be able to create $94 of cash for each of its current active users over the future to eternity, discounted by an appropriate factor. That doesn't seem outlandish: it's $0.80/mo per user of value over 10 years. If they add users, it's less. If they add/extend their product offerings/partnerships/etc., the numbers seem a lot more achievable. That said, I'm not buying the IPO because it seems fully valued already.
- wavephorm 14y ago
  There is no way each of their users can possibly be worth that price. They've done a good job at hyping up the company, but from an investment standpoint, it's dead meat. They really need to pull a rabbit out of their hat at this point -- some feature that would make 10%+ of their "consumers" to pay money for a product they offer.
ComputerGuru 14y ago
I suppose (judging by the comments here and in previous threads) everyone on HN w/ a brokerage account will be shorting FB's stock as soon as it comes out, then? It's a pretty safe bet that it's being overvalued, but I fear the hype of FB stock amongst the common man is going to keep the price artificially high for a little longer than it would normally. Might not be until the release of the first or second quarter results that people see what a farce it is.
- porlw 14y ago
  I believe that FB is way overpriced, but as Keynes said: “The market can stay irrational longer than you can stay solvent.” ...so shorting it is still risky.

37 points by sew 14y ago

In case anyone else as confused about what an IPO road show entails, here is a description I found: http://moneycentral.hoovers.com/business-information/--pageid__1960--/global-msn-index.xhtml http://moneycentral.hoovers.com/business-information/--pagei...

PaperclipTaken 14y ago
To me, this link is broken.
lanstein 14y ago
Here is the road show preso: http://facebook.retailroadshow.com/launch.html http://facebook.retailroadshow.com/launch.html

nirvana 14y ago

Why oh Why is the headline about the stock price? Apple's price is $585ish right now. Apple is not 10 times more expensive than Facebook would be-- only a bit more than 5 times as expensive. Facebook's price range is around $86B. It seems a lot of people want to buy a car for a "monthly payment they can afford" and car dealers have long sold people terrible terms and terribly overpriced cars by structuring the "monthly payment" lower so the person thinks the car is cheaper. Its amazing people fall for this. Yet people react the same way to stock prices and NYT is putting the stock price in the headline? How about "Rather than the $100B expected, Facebook is set to IPO at around $86B". And more importantly-- and relevant to anyone who might want to buy the stock-- what's that work out to as a PE[1]? Doesn't appear anywhere in the NYT article that I could see. So, is $86B expensive? Cheap? We don't know. [1] On a trailing twelve months basis. I'm sure its in the prospectus, and anybody with financial literacy will look it up before buying the stock, but I still bet that a lot of people will say "$35? I can afford $35!" or "I've got $3,500 in my brokerage, I'll buy 100 shares! Can you imagine what those 100 shares will be worth when Facebook catches up to google and is priced at $350 a share?!" I don't think Facebook will be worth $860B+ in the next decade.

CyrusL 14y ago
Because Facebook hasn't split it's stock in a while, so talking about price per share has a common meaning for everyone that owns shares. I would imagine the majority of people who own Facebook shares know exactly how many shares they own and not an exact percentage of the company.
- deleted 14y ago
  [deleted]
walru 14y ago
As the phrase goes, a fool and his money are soon parted. Along the same mindset are people who want to wait for a split to get in. I always chuckle a little inside when I hear that and then try to educate on why that's not necessarily a good thing. Back to Facebook. I haven't looked at the financials, but regardless of what they are it's safe to say the share price will rise quickly due to the reason you stated, and that's of course why they did it. A lot casual investors will see this as a way to fund their child's college education and jump in as soon as they can, no matter what the mark-up. Who knows, maybe this is the next MSFT or AAPL. We'll see where everything settles after the irrational exuberance of the IPO hits. I don't think this will be another GRPN or ZNGA. Even though they were both rather popular, neither of them had the number of eyes on them that Facebook does. This is set to be the most oversubscribed IPO in as long as I can remember.
- gbog 14y ago
  > Who knows, maybe this is the next MSFT or AAPL. Or the next bubble? Seriously, if you are young enough there is nothing easier and more compelling than leaving Facebook, and Facebook cares a lot about having young people. Why is it so easy to leave? Because youngster do not like their past, they do not like to see themselves as kids. It took a very long time for me to be able to look at a picture of my younger self without instinctive rejection. Only when you are on the "other side" of life that you value past pictures of your life. Why was Instagram so successful? Some other may hvae said it but still, what strikes me the most is why so many people did use Instagram app to share pics instead of Facebook app. It can't be solely based on UI diffs. It is more because Facebook is perceived as an archive where everything goes if anyone is interested, a trashcan if you will. I'll not bet a cent on FB. Moreover, we HN readers should not put all our eggs in the same bag, our work, interests, knowledge, passions are anchored to technologies, let's anchor our bank accounts to some other place.

jstalin 14y ago

Looks like a stock price of $31.50 would give facebook a P/E ratio of around 60. For comparison, GOOG is 18.5 and AAPL is 14. More financials are available from the updated S-1: http://sec.gov/Archives/edgar/data/1326801/000119312512208192/d287954ds1a.htm http://sec.gov/Archives/edgar/data/1326801/00011931251220819... And it looks like Q1 2012 net income was actually lower than Q1 2011. Oops!

CyrusL 14y ago
Oops misread OP
- rob08 14y ago
  That's why its compared to the same quarter last year (Q1 2011) and not sequentially
debacle 14y ago
The net income is marginally different and the gross revenue is almost 50% more. I don't think you're giving it a fair assessment. Also, Google's IPO P/E was ~80, and shortly after IPO the P/E shot up to 160, so again I don't think you're giving Facebook a fair assessment.

SkyMarshal 14y ago

Anyone know why FB isn't doing something like Google's OpenIPO for their IPO? http://en.wikipedia.org/wiki/OpenIPO http://en.wikipedia.org/wiki/OpenIPO

nl 14y ago
It's not at all clear that OpenIPO produces the best outcome for anyone. It was certainly sub-optimal for Google.

jonursenbach 14y ago

So how can us normals get in on this?

ChuckMcM 14y ago
If you mean "How can I buy stock at $25 and sell it right away to the general public for $35 to $50 on the same day?" Then the answer is, "Sorry, you can't." If you mean "How can I create a company that will allow me to sell a future interest in the company for way more than I put into it?" Well that answer is "Play the tech startup game." During the Dot-Com bubble a company often had a 'friends and family' plan where if you had a family member working there or knew someone you could participate in some small way in the IPO. I know families that no longer talk to each other (even now over a decade later) because of that 'opportunity' so I'd approach it with caution if offered.
mynameishere 14y ago
Well, you could try buying it through your broker. Trick question?
sew 14y ago
See http://dealbook.nytimes.com/2012/05/03/small-investors-may-get-to-own-a-bit-of-facebook/?hp http://dealbook.nytimes.com/2012/05/03/small-investors-may-g...

tobias3 14y ago

That would be approx. $94 per active user. I know there have been social networks which went over the counter at that price before, but looking at them now I would not touch this stock with a ten foot pole. I certainly can't think of any way to extract that much money from my account. Ads? I know that this reflects not the current status but future expectation, but I cannot imagine any way how Facebook can fulfill those expectations. They have nothing, which when taken away would make users hurt. Other social networks stand in line.

lftl 14y ago
Definitely not buying FB at this price, but the only argument I can see justifying the price is as more a long term valuation of them as a tech company. In other words, in the same way the Google is clearly no longer "just" a search engine, FB has the talent and resources necessary to be more than a social network. That's definitely a gamble on valuation, but I can vaguely see someone justifying the price in that respect.
runako 14y ago
Put another way, Facebook is expecting to be able to create $94 of cash for each of its current active users over the future to eternity, discounted by an appropriate factor. That doesn't seem outlandish: it's $0.80/mo per user of value over 10 years. If they add users, it's less. If they add/extend their product offerings/partnerships/etc., the numbers seem a lot more achievable. That said, I'm not buying the IPO because it seems fully valued already.
wavephorm 14y ago
There is no way each of their users can possibly be worth that price. They've done a good job at hyping up the company, but from an investment standpoint, it's dead meat. They really need to pull a rabbit out of their hat at this point -- some feature that would make 10%+ of their "consumers" to pay money for a product they offer.

ComputerGuru 14y ago

I suppose (judging by the comments here and in previous threads) everyone on HN w/ a brokerage account will be shorting FB's stock as soon as it comes out, then? It's a pretty safe bet that it's being overvalued, but I fear the hype of FB stock amongst the common man is going to keep the price artificially high for a little longer than it would normally. Might not be until the release of the first or second quarter results that people see what a farce it is.

porlw 14y ago
I believe that FB is way overpriced, but as Keynes said: “The market can stay irrational longer than you can stay solvent.” ...so shorting it is still risky.