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FB down 8% at opening
- verelo 14y agoI looked at the market cap of linkedin ($9B) and then compared it to Facebook (~$92B). I know the two companies are different, but i feel that 10x value is a little out of wack...just my opinion. I wouldnt buy yet.
- ollerac 14y agoFacebook has over 900 million active users as of May 2012. [1] LinkedIn has maybe 23 million active users. [2] [1] http://en.wikipedia.org/wiki/Facebook http://en.wikipedia.org/wiki/Facebook [2] http://www.quora.com/LinkedIn/How-many-active-users-does-Linkedin-have http://www.quora.com/LinkedIn/How-many-active-users-does-Lin...
- brianobush 14y agoyes, definitely a size difference. However, linkedin has a revenue model that seems more robust.
- CamperBob2 14y agoLinkedIn users actually have money, though.
- adventureful 14y agoGoogle IPO'd with very similar financials, at a $23 billion valuation. The value placed on FB was absurd to the extreme.
- debacle 14y agoGoogle had half of the revenue, but was asking for 1/5th of the valuation. In short, they were prudent.
- nikcub 14y agoGoogle got a list price that was 50-100% less than their target price. They tried to play the banks and got played back. FB did the exact opposite.
- jan_g 14y agoSo, if I understand you correctly, the owners' goal is to set the IPO price as high as possible and then to hell with the future stock price? I was always under the impression that the owners' goal is long-term growth of stock value, but of course I'm not an economist ...
- nikcub 14y agono different to raising a Series A or B. Facebook have so much cash now that they will likely never go back to the market again. They raised an extraordinary amount of money at a very large valuation. They also have over 50% of voting control with one person so don't need to really deal with shareholders. The only single downside is employee option values and incentive packages. Edit: to add to that, there is also a strong school of thought amongst investors that companies and CEO's who track daily, monthly, quarterly etc. stock fluctuations (ie. short term) are a lot less effective than those who ignore the short-term movements. Facebook said as much in their S1, and Zuck in his letter, that he won't be following the stock or dealing with the market, but will rather focus on building the company long-term.
- jan_g 14y ago>to add to that, there is also a strong school of thought amongst investors that companies and CEO's who track daily, monthly, quarterly etc. stock fluctuations (ie. short term) are a lot less effective than those who ignore the short-term movements. Facebook said as much in their S1, and Zuck in his letter, that he won't be following the stock or dealing with the market, but will rather focus on building the company long-term. Yes, this is much closer to my thinking and that's why I called you out on your argument.
- zerostar07 14y agoSo is it expected that facebook will deflate to $23B or will they up their profits to live up to their value?
- bcl 14y agoReally? Do we need this on HN? If you want to watch the FB price bounce around go do it on Google Finance or wherever.
- creativityhurts 14y agoIt's not only about the bouncing price itself but it's interesting for some of us to observe the evolution of the biggest "startup" out there after its IPO.
- baq 14y agocall me when it's around $10 with P/E at a reasonable level.
- tedunangst 14y agoWhy would the price matter if the P/E is reasonable?
- jwoah12 14y agoI think he's implying that if the price drops to $10, the PE would be at a reasonable level.
- baq 14y agoexactly - and that's assuming their profits keep growing.
- tedunangst 14y agoI'm just used to seeing it phrased "at $x the p/e would be...". Not a big deal, but HN has dialed the financial illiteracy up to 11 recently.
- AndrewDucker 14y agoLooks like FB priced it perfectly - they made the maximum money they could out of it. Was it not obvious in advance that FB was being priced such that the shares would be either flat, or decrease? The original investors have made themselves a fortune - and frankly anyone who invested heavily in a corporation at a P/E of 100:1 didn't think about it well enough.
- ollerac 14y agoCompanies are allowed to carry high P/E ratios because they've recently undergone a period of exponential growth and people believe they can continue to execute at the same pace. Amazon (amzn) is the perfect example of a stock that continually exceeds people's expectations while carrying a high P/E ratio -- and the stock has responded accordingly. From listening to Zuckerberg I think he's a true capitalist, more interested in creating long term value than making a quick buck. I'm sure he's not excited that some very hopeful people who believed in his company are hating him right now because his stock (temporarily) seems over-priced.
- richardw 14y agoProblem is, when you hit 1 billion users, you've run out of "exponential growth" headroom. All you can do is multiply that by 6.5ish (therefore, linear growth), and even finding new sources of revenue doesn't get you exponential anytime soon. Certainly, most future growth will come from extracting more cash from the pool of users (or people selling to them), not growing the pool.
- ollerac 14y agoI agree that most future growth will come from extracting more cash from their current pool of users, but I can imagine a situation in which new sources of revenue would lead to exponential growth. The world economy has never seen anything quite like Facebook before -- that's why it's so exciting. They could become Google/Netflix/LinkedIn/Zynga combined. I'm not saying they will, but they've got the prerequisites: 1 billion active users.
- ollerac 14y agoFacebook is a story stock [1] if I ever saw one. According to the WSJ it's the most traded IPO of all time. I imagine a lot of people who use FB but know nothing about stocks are buying and selling it. I expect it'll take a while before people start to settle into similar expectations about how it's going to perform in the long run. Everyone's looking at Mark Zuckerberg right now. If his team continues to execute at the pace of a startup the stock will go higher. However, if he starts to show signs that the pressure is getting to him (think Google's failed attempts at social or Nflx's Qwikster snafu or the past 10 years at msft) the stock will fall. [1] http://www.investopedia.com/terms/s/storystock.asp http://www.investopedia.com/terms/s/storystock.asp
- TomGullen 14y agoWhy anyone would buy FB at over 100 P/E is beyond me. The general sentiment of the buyers is that "Facebook COULD earn a lot of money". When has that sort of line ever worked for startups? If a startup says something like that, everyone asks "Well why haven't you yet then?" Small businesses/startups on Dragon's Den get laughed out the room when they try and broker a price based in part on the 'potential' of their business. Why is it different for Facebook?
- gruseom 14y agoAmazon, of course. They were widely laughed at too. I remember the favorite joke of the people who used to ridicule them: "we lose money on every transaction and make it up in volume".
- rosenweiss 14y agoIf you look at their latest numbers, you will see that the joke was not far from the truth. Once the growth phase is over, reality bites in, hard.
- deleted 14y ago[deleted]
- IsaacL 14y ago"When has that sort of line ever worked for startups?" When pitching to every tech VC and angel investor ever. It's assumed that "home-run" startups are going to be chasing large potential markets. http://www.bothsidesofthetable.com/2011/12/27/should-startups-focus-on-profitability-or-not/ http://www.bothsidesofthetable.com/2011/12/27/should-startup...
- majani 14y agoThe 'Dragons' are mostly value investors, not growth investors. They want high cashflow investments in which they can share the dividends.
- fear91 14y agoDown to -10.50% That was... fast
- nicholassmith 14y agoDropped another 3% in the 4 minutes since you posted.
- twp 14y agoNow -12.5%... will trading cease if it drops 13% as Zygna did on Friday?
- nikcub 14y agotrading doesn't cease just because a stock drops. they ceased on Zynga because the bots got out of hand and caused a flash crash. these safety measures have been in place since the big flash crash of a few years ago. FB looks more like an orderly sell off
- 1234the1234 14y ago...until it breaks 30.
- sanxiyn 14y agoTwo years ago. http://en.wikipedia.org/wiki/2010_Flash_Crash http://en.wikipedia.org/wiki/2010_Flash_Crash
- trotsky 14y agothat's 10% in five minutes, but it doesn't count moves while the market is closed.
- joezydeco 14y agoIt's passed -13% and still trading. Does the breaker only apply to stocks that are below some threshold value? Of is FB getting an exemption?
- edvinasbartkus 14y agoIs it really unexpected? http://www.businessinsider.com/facebook-stock-drop-2012-5 http://www.businessinsider.com/facebook-stock-drop-2012-5
- nikcub 14y agoNo. I am a FB bull yet I took a bet on Friday that the S&P would outperform FB over next 12 months.
- 1234the1234 14y agoI wonder how late in the day until NASDAQ freezes it.
- nikcub 14y agofor a moment it appeared to have a lot of support at $34 but it just blew straight through that. down 14%.
- nicholassmith 14y agoLooks like NASDAQ fixed their platform glitches then.
- loverobots 14y agoJPM might have lost a lot of money here, they bought at $38 to support the IPO price. Oh well, watch those credit card and checking fees, they have to make up for this. FB is worth $40 to $50 billion and that's in a good day.
- creativityhurts 14y agoIt's somewhere at -13.35% right now. I don't think that's unexpected at all given the valuation.
- veyron 14y agoI literally tried to submit this exact thing about an hour ago and it prevented me from posting a duplicate. I had to dig out http://news.ycombinator.com/item?id=4002633 http://news.ycombinator.com/item?id=4002633 to post it. What exactly is the rule regarding duplicates?
- koenigdavidmj 14y agoWhen you post a duplicate, it ignores your post and instead upvotes the other post. For a few weeks, anyway.
- veyron 14y agoI posted the link half an hour before this post. Why did this post go through? My post, same url, was considered a duplicate of a post from last friday.
- jstalin 14y agoDown 20% from its peak on Friday. Oopsie!
- stdclass 14y ago-13,37% nice!
- krigath 14y agoApple's P/E ratio is 13.12 [1]. Facebook's P/E ratio is 107.66 [2]. The P/E ratio[3] is: market price per share / annual earnings per share This basically means that Apple makes as much profit as their are valued at in 13.12 years, whereas it would take Facebook 107.66 years to afford to buy themselves. That doesn't make any sense, and if we assume that their P/E ratio should be roughly the same, their stock price should be around [4] 33.54/(107.66/13.12) = 4.09 USD Edit: Google's P/E ratio is 18.32, and if Facebook were to have the same P/E ratio its stock price would have to be 5.71 USD [5]. [1] http://www.google.com/finance?q=AAPL http://www.google.com/finance?q=AAPL [2] http://www.google.com/finance?q=NASDAQ:FB http://www.google.com/finance?q=NASDAQ:FB [3] http://en.wikipedia.org/wiki/PE_ratio http://en.wikipedia.org/wiki/PE_ratio [4] https://www.google.co.uk/search?q=33.54%2F(107.66%2F13.12) https://www.google.co.uk/search?q=33.54%2F(107.66%2F13.12) [5] https://www.google.co.uk/search?q=33.54%2F(107.66%2F18.32) https://www.google.co.uk/search?q=33.54%2F(107.66%2F18.32)
- is74 14y agoIt makes sense if you believe that the profit will go up dramatically in the not too far future. And it looks like many people think so.
- phreeza 14y agoTo be fair, Google also traded at a P/E well over 100 in the early post-IPO days. http://ycharts.com/companies/GOOG/historical_data/pe_ratio?start_month=5&start_day=21&start_year=2004&end_month=5&end_day=21&end_year=2012 http://ycharts.com/companies/GOOG/historical_data/pe_ratio?s...
- borism 14y agoAMZN: P/E 178.42 as of now
- rosenweiss 14y agoHugely overvalued, of course. Having wiped out competition, there is no room left for them to grow.
- outside1234 14y agothe interesting thing to watch will be 1) is it correct to price your IPO to reap maximum gain for the company or 2) is there enough positive PR benefit in leaving some value on the table to under price it and have it pop slightly.
- richardw 14y agoI'd go with 1. The only people you help with 2 are the bankers and whoever they deem to be worthy of stock at the IPO. I'd rather help the investors who have been with the company for years.
- nicholassmith 14y agoAs a side note (and yes, they could be unrelated) but Zynga has lost around 7.40% of it's value this morning: http://www.google.co.uk/finance?client=ob&q=NASDAQ:ZNGA http://www.google.co.uk/finance?client=ob&q=NASDAQ:ZNGA
- aliston 14y agoZynga's lock up period ends next month too... kinda sucks for employees with options.
- dh 14y agoGuess Morgan Stanley cannot support the high price past the first day
- brazzy 14y agoNo suprise, because their support came in the form of a Greenshoe Option, which is an instrument specifically tailored towards the first day.
- calc 14y agoLooks like somebody (Morgan Stanley again?) keeps trying to create a floor around $34, and every time it goes under that it goes into freefall. The technicals don't look good either.
- brh_jr 14y agoI don't know if it was possible, but something told me to short that stock on Friday. Oh well. I think this will be a disaster in the immediate future
- gfodor 14y agoNo, it wasn't possible.
- ralfd 14y agoAt what point should we buy?
- WiseWeasel 14y agoThe lowest point.
- nextparadigms 14y agoAt $5.
- WiseWeasel 14y agoI think $5 would be a steal and $7 would be reasonable; I doubt we'd get the chance to pick it up for any less than $10, however.
- nanospider 14y agoThis is unfortunate. Yes the company maximized their IPO take. But at the end of the day the ones who got screwed were the retail investors who bought into the media hype. This will hurt tech IPOs in general.
- throwaweee 14y agoThe difference between Google and FB IPOs: I remember having a discussion with another programmer friend of mine, after the Google had had their IPO. At the time the friend was working in the networking software area, and had not much clue on the Internet side. The topic was Google vs. Microsoft. I was telling him that Google is going to beat MS. His response was but Google is just search! Anyway, the reason I mention this is that for GOOG IPO, some very smart Alexes of the world were not cued into to the buzz. Apart from Internet enthusiasts and professionals. Now move forward Facebook IPO. The other day, my young, just-out-of-teens, female cousin was announcing on FB, that she has pre-ordered some buy. To cut the story short the fools were already in ! PS: Not to disrespect my cousin. Using the 'fools' word in the context of those famous sayings regarding fools entering the market, just at the time of the bubble
- MisterBastahrd 14y agoTo me, Facebook's social network is extremely overvalued. When I search on Google, they are getting first party accounts of subject which interest me, which turn out to be pretty good in the ad space. When I (or my friends) post on Facebook, Facebook gets my demographics, but I am more likely to talk about friends or family than try to find a product or a domain of knowledge. Ads work better when I know a lot of specific things about you. As much as people post on Facebook, I have a hard time believing that Facebook knows much more about people than some locations and general demographics. And this is why Google+ is so maddening. They have no clue how to build a social network and they aren't even trying. The people who use it are mostly techies who use it as their third social network after Facebook and Twitter. Circles was a neat idea, but wasn't promoted sufficiently. The vast majority of the time I personally use Google+, it's for the hangouts, which are great. But even that part of the site is fragmented. There's hangouts (which has the most features), and hangouts with extras (which doesn't, but you can name a hangout and keep a static link). Meh. The state of social networking is very much up in the air right now. Seems to me that there's a lot of value being wasted by not appreciating what people actually want, and turning that into value.
- billions 14y agoInvestors that felt privileged to own FB weeks pre-IPO thought the stock would go viral because everyone was talking about it. Fortunately, FB users and TDAmeritrade users are completely different demographics and even small time investors know not to confuse social clout for economics.
- Monotoko 14y agoHmm... it's interesting to watch. I know a friend who put almost his life savings into this, I told him it was crazy and I told him this would happen listing reasons. But he seemed sure it would climb...
- saket123 14y agoJust to add LinkedIn is trading at 617 P/E. https://www.google.com/finance?q=NYSE:LNKD https://www.google.com/finance?q=NYSE:LNKD
- chucknelson 14y agoHaha, this should be the response to every "really, invest in a company at 100+ P/E?!" comment.
- nostromo 14y agoI wonder what recently hired employees have for their strike price. It must feel terrible to be underwater the day after IPO, if that's the case for anyone. I was at Amazon after the dot com bubble burst, and it was very hard for managers (who mostly had already done very well) to keep morale up amongst the later hires. Of course, the people who stayed are all doing quite well now -- but it took a decade of patience.
- teej 14y agoFacebook hasn't issued stock options since 2007. They now issue restricted stock units (RSUs) which don't have a strike price. You cannot be underwater with RSUs.
- Drbble 14y agoIt's only hard if they refused to award more options or RSUs after IPO.
- Drbble 14y agoOnce a stock option vests, its future value is irrelevant, since one can simply buy the stock at market price if the option is underwater. The option only offers a small hedge against volatility.
- MaysonL 14y agoInteresting that while Facebook tanks [-11 %], Apple pops [more than 5%]. Any connection?
- debacle 14y agoUnlikely.
- dangero 14y agoI feel like I'm reading a global warming deniers thread and the evidence provided is the current temperature outside. Time will tell. What happened today doesn't actually mean anything in the long run.
- deleted 14y ago[deleted]