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Facebook sinks to record low, 43% below IPO price, as doubts grow
- tome 14y agoZuckerberg's true genius was in selling a company worth so little for so much.
- joering2 14y agoI beg you NOT to buy until P/E is at an average rate!! its better NOT to make money, than to lose some!
- akavi 14y agoThat's a curious position to have on a website focused on entrepreneurship. Pretty much every YC company risks money (vasts quantities for some) in the hope of making money.
- montyhall 14y agoThe difference is they are risking other people's money.
- fpgeek 14y agoNot really. The opportunity cost relative to whatever else the founders could be doing is substantial (especially compared to the typical YC investment they get).
- jlgreco 14y ago"Pretty much every YC company risks money" Ideally intelligently.
- waynepan 14y agohttp://www.google.com/finance?q=amazon http://www.google.com/finance?q=amazon P/E: 285
- ceejayoz 14y agoAmazon has a long history of sacrificing short-term profit in favour of long-term infrastructure development, though.
- saryant 14y agoMoreover, no one is seriously questioning the long-term stability of Amazon or its revenue model. A stark contrast with the situation Facebook finds itself in.
- sachingulaya 14y agoBecause they had an awful quarter from an EPS perspective. Their revenue growth increased. I'm not sure what point you're trying to make with this.
- kiba 14y agoStock price aside, I am not sure how facebook is cool to me. It is a complete blank. Google is doing exciting and important things like building self-driving AI, google glasses, google fiber and android. However, I don't really consider Google + by itself, "cool".
- rayiner 14y agoI don't know if it's cool to you, but it's been amazing for me. My family is from Bangladesh, I grew up in DC, went to college in Atlanta and grad school in Chicago. I have family in Australia, Canada, and Germany. Facebook lets me see the cute pictures my aunt posts of my baby cousins in Australia, and easily share Romney gaffes with my college friends in Atlanta. It's way cooler for me than, say, a self-driving car (I live in the city and have no need for one).
- chunkyslink 14y agoWell the things you describe as good about Facebook could be replaced with say email or Google Plus and you would still get to do all those things. Google are doing a lot of things that can't be replaced with competing services. What would you replace self-driving AI, google glasses and google fiber with? I think Google are in a different league altogether than Facebook which is just a glorified noticeboard.
- _pius 14y agoWell the things you describe as good about Facebook could be replaced with say Email or Google Plus and you would still get to do all those things .... Facebook is just a glorified noticeboard. What would you replace self-driving AI, google glasses and google fiber with? Taxis, AR iPhone apps, and DSL? Ridiculous, yes, but no more so than saying Facebook could just be replaced by e-mail. Heck, you could even claim that e-mail itself is "just a glorified noticeboard" or a fancy version of the Postal Service. You can glibly disparage nearly any innovation this way if you want.
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- SeanDav 14y agoI really don't know why this is newsworthy. The only reasons anyone bought Facebook shares were:- The bigger fool theory i.e. I can unload these for a profit to an even bigger fool. Blind greed and/or blind stupidity.
- koglerjs 14y agoIt's newsworthy because (I suspect) many of us think we're watching the pop of a bubble. At least, that's what I'm thinking.
- Suraj-Sun 14y agoI think this sums it all up, "The stock, down 6.2 percent at $21.71, still trades at more than 40 times forward earnings, versus Google Inc's 15."
- frankienwafili 14y agoIt should have been a red-flag to everyone when Facebook was trading at (if I recall correctly) over 100x earnings at one point. I mean sure it has a lot of potential and what not, but even for goliath that is Facebook, the valuation was pretty unreasonable.
- koglerjs 14y agoCrash imminent.
- soup10 14y agoI bet Zuck is starting to regret spending $1B on Instagram right about now. Still... Facebook has a very strong monopoly on the social graph, and the eyeballs of most computer and smartphone users. There's significant value there if they can look beyond simply optimizing advertisements. How about taking a page out of google's book and getting into search? They could call it Facebook+ :D
- jonknee 14y agoIt was a mostly stock deal, so probably not.
- nostromo 14y agoIt was $300m in cash and the rest in stock, valued at ~$30 a share. The current value of the deal is more like $800m.
- JeanTouman 14y agoThank god for the cash.
- duaneb 14y agoFB is not losing any money - investors are. $1B is still a drop in the bucket for facebook.
- ojbyrne 14y agoThose investors probably include every single person who works at facebook.
- encoderer 14y agoIt's in Facebook's interest for those shareholders to be long-term investors. The real damage I suppose is that, if it continues to drop, they'll certainly be a number of newish hires that have their option grants underwater. Not practically a big deal because there's certainly a cliff to their vesting, but underwater options aren't much of a retention tool.
- staunch 14y agoProbably for the best. FB just doesn't justify the $100 billion valuation so many people wanted. It does justify the valuation it has now though. A little cold water getting splashed on Silicon Valley is just what the doctor ordered. The system is working.
- drgath 14y ago> It does justify the valuation it has now though. At $40bn, I dunno. FB's revenue & profits are pretty close to Yahoo's, whose market cap is at $20bn (though much of that is in assets). So, just guesstimating here, with no growth FB can probably justify a $15bn value. Anything on top of that is a bet that they'll find some other way to grow the company. Certainly possible.
- zeroonetwothree 14y agoDoesn't FB have like $15 billion in cash?
- mbesto 14y agohttp://finance.yahoo.com/q/ks?s=FB+Key+Statistics http://finance.yahoo.com/q/ks?s=FB+Key+Statistics $10.19B
- Jabbles 14y agoWhat proportion of that was raised by the IPO? I see 421 million shares @ $38 ~ $16 billion, but presumably some of those were investor stock, not company stock. http://en.wikipedia.org/wiki/Facebook_IPO http://en.wikipedia.org/wiki/Facebook_IPO
- quattrofan 14y agoNo it doesn't, between $5-10 share and it would be though.
- rorrr 14y agoAnd it's still trading at the insane P/E of 116. It's a stock on its way to $5, and even that is too high at the current earnings.
- nostromo 14y agoBy P/E (admittedly a poor indicator of value) it's a steal compared to Amazon (~285) and SalesForce (historically between 200-400, now in the thousands).
- rorrr 14y agoAmazon's revenues have been growing like crazy, year after year: http://i.imgur.com/EWBOe.png http://i.imgur.com/EWBOe.png Which justifies this high P/E. Amazon is about to grab a huge section of retail by offering cheap next day shipping. Same for Salesforce - consistent growth: http://i.imgur.com/FaaA1.png http://i.imgur.com/FaaA1.png
- NoPiece 14y agofrom the WSJ today, Facebooks forward PE is 45, and trailing is 81. http://blogs.wsj.com/marketbeat/2012/07/31/tweet-this-j-c-penney-stock-costs-more-than-facebook/ http://blogs.wsj.com/marketbeat/2012/07/31/tweet-this-j-c-pe... " Tweet this: Facebook shares have been pushed down so far, so fast, that they now cost less than J.C. Penney shares. J.C. Penney shares right now are around $22.55, Facebook shares are around $21.75. Now we know what you’re going to say: look at the valuations, dummy! (There, we saved you the trouble.) J.C. Penney’s PE (forward, one-year) is about 18. Facebook’s is 45 (and it’s trailing PE is 81). Plus, J.C. Penney has about 219 million shares outstanding; Facebook has 2.1 billion. "
- tobtoh 14y agoAs a frequent FB user, I find it interesting watching how my FB experience is noticeably degrading now that they have IPO'ed and have to 'prove' results. The sponsored posts that look similar to normal user 'likes/shared' posts, the 'Friend has just accepted an offer' posts when they haven't, the 'Pages you may like' ads that appear in the mobile FB app ... to me, it feels grubby, deceptive and invasive of my user experience. I know FB has to make a profit somehow, but that's really not my problem - I can only rank a service on my user experience, and FBs is sliding downhill. It's been said by others that Google Adwords has been so successful because it captured intent and context. I also think it was successful because (for the most part) it was non-disruptive to the overall user experience on the page it was displayed. The ads were reasonably discrete and clearly defined. FB's approach of 'disrupt' or 'trick' the user into clicking on ads seems like a throwback to interstitials, pop-ups and other dubious methods. I can't see this as being a good approach and believe this will only hurt their user base (and stock price) in the future.
- mikescar 14y agoI deleted my account a year ago but just signed up with a new account so I could test results for contract projects. From account deletion, to clearing out my OS X and installing Lion on a new SSD, and using a fresh email for the new signup a year later, I still have my same friends showing up. I wasn't trying to lose track of these friends, I'm just surprised that FB was able to figure that out with what I assumed was new information. How does that even work? Maybe my old Time Machine brought long-living cookies back for Chrome? It was just disconcerting.
- cglee 14y agoI'm guessing it's from the mobile app.
- mikescar 14y agoIf that's the case, then the Facebook app I can't delete from my Verizon Incredible has full access to read my Mail configurations. Edit: (and then correlate the account I used to use for Facebook to my newer LLC FB account I use for testing)
- systems 14y agoi think they may have waited too long, facebook in my opinion is more or less a product, not a company ... you know how we compare g+ to facebook, now google is company, they made g+ which may or may not be big but for google its just one more product they made and products have a life cycles ... and its definitely not the growth cycle for facebook anymore, i think they are in maturity now ... and i think they should have went for IPO while still in growth and they definitely need to start making new products ... they need to innovate or die! simple and basic, but i believe correct
- grandalf 14y agoIsn't this just the various banks pulling capital back out? They invested lots of money in the days after the IPO to keep the price close to the target (to avoid spooking investors). The strategy behind the high dollar IPO was to maximize the return to the early investors who wanted to cash out and who were influential in the IPO negotiations. The investment banks look at the IPO price in terms of the risk that the sell side of the firm will look bad. Once sufficient time has passed nobody assumes the bank had anything to do with propping up the price weeks after the IPO, when in fact it has lots of control over this. Also, the relationship between share price and marginal supply and demand is by no means likely to be linear.
- tedsuo 14y agoCould someone explain, how the low stock price is bad for Facebook? They are profitable, so they aren't going to go bankrupt. And they made a lot of money on the IPO, arguably more than they should have. Doesn't this mean the joke is on everyone but facebook (the company, not including the stock-owning employees)? Through what mechanism does it come back to bite them? Not defending them, just uneducated on this side of business.
- rieter 14y agoHiring and retention.
- tobtoh 14y agoOne way it is bad for FB is it makes it harder to make acquisitions. Frequently, when you buy out another company, you offer a mix of cash and stock ... but if your stock is tanking ...
- mikescar 14y agoYahoo's been profitable for a long time, but their imminent death has been on the books for years. No growth, so the stock doesn't increase. Facebook was somehow hyped as being above the middling concerns that every other public company must address. But they are not, and have lost value accordingly.
- frankienwafili 14y agoWell you have to remember that the stock price already takes all of this into account. The problem with Facebook's price is that it's based on expectations far higher than what it seems like Facebook will be able to achieve in the near future.
- gsibble 14y agoWell, all of those Facebook employees have lost 41% of their value of their options portfolio since the IPO. Imagine how you would feel seeing 41% of your hard earned cash just evaporate because management priced the IPO too high or doesn't care about the stock price. There's many more reasons, but that's a big one. No one is going to come work for a company for equity that doesn't care about their stock price.
- film42 14y agoI'm quoting a friend of mine who is a stock broker at wells fargo, "One of the main problems with facebook isn't just that it's not the most amazing company, I mean, it does alright. The problem with its IPO is that people aren't trading it like a normal company. In other words, yes, the stock price is falling, but it's got more to do with the 'cool' and 'fear' factor than any economic strength facebook has." Maybe you agree or don't, but there is a lot of truth there.
- Zenst 14y agoThis is hardly supprising at all and anybody who had a serious look at the IPO and facebook could clearly see that its value was based alot on hype. Not like FB would argue there price down and it was certainly not in the interest of the banks helping to launch this IPO. Only people hurt were those who blindly went and brought shares on day one when everybody else knew if they wanted facebook shares that they were better of waiting a bit until the true value was reflected in the share price. Now sad part is that there now in a position were they have to do knee-jerk responses to maintain the hype and in that as many have said they are diluting there trust with there user base by doing adverts saying such and such a friend got this or liked this when IRL that friend will say they did not and is news to them. That is a level of marketing that is akin to fraud. I do wonder what the advertising laws are like in comparision to TV adverts and online adverts - laws need to catch up to reality and fast or it will just carry on.
- blawson 14y agoFor me, Facebook has become the best example of why investing in stocks that don't pay dividends doesn't make sense. That's not to say that investors can't make fortunes in companies that don't - obviously they, the investors, can. But otherwise what is non-dividend stock but a ponzi/confidence game? The way shares are classed as well now you don't even really "own" a piece of the company. You have limited to no voting privileges, and don't share in the company's profits. No wonder the banks have to push them onto investors! Basically you are hoping someone comes along who also doesn't mind buying a stake in a company where the only benefit is that there might be a third person in the future who will pay even more, and so on. Have I got it wrong? I can understand stock when you are expecting your investment to generate returns based on a company's performance, but most stock these days buys you nothing but the ability to sell it to someone else down the road. Ownership itself has no value.
- JumpCrisscross 14y agoFinancial theory says every stock should have an expectation of generating dividends or resulting in a payout when the company is acquired (the acquirer being able to directly harvest the free cash flow). Yes, it's a confidence "game" on the company's fortunes when one buys with the expectation of selling before one of these outcomes are realised. But then so is staying in a country a confidence game that it won't blow up, holding cash that it won't be inflated away, holding gold that it won't plummet, etc. It is not a Ponzi scheme as the shares try to approximate the productive value of the assets they represent ownership to - buying a tractor and putting it in your house is about the same as buying a piece of paper that says you own a tractor in a lot and neither is remotely Ponzi-ensqe for lack of presently producing cash flows. Stock of non-fraudulent companies represent real net assets while Ponzi shares don't.
- dedward 14y agoYou have no voting rights, but if someone wants to buy the company, you do own a piece of it. it's not much different than, say, a 2 person company where one person has the majority vote. The second person's vote is worthless anyhow - but if hte company is sold, they are entitled to their share of the sale.
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- eurohacker 14y agojust as soon it was made public that Goldman Sachs bank was involved in the IPO, it was cear to me that the average investor should run away from the FB stocks as fast as he can run , banking is not the most honest business these days in america
- maayank 14y agoAm I the only one expecting a tighter and tighter Apple-Facebook integration[1], driving the stocks of both upwards? It's a great synergy against Android/G+ [1] https://www.google.com/webhp?sourceid=chrome-instant&ie=UTF-8#q=apple+iphone+facebook&hl=en&tbo=1&output=search&source=lnt&tbs=qdr:y&sa=X&ei=_xAZUOv2BObO4QSP7oCoBA&ved=0CAgQpwUoBQ&bav=on.2,or.r_gc.r_pw.r_cp.r_qf.&fp=917465cf75d369c2&biw=1056&bih=806 https://www.google.com/webhp?sourceid=chrome-instant&ie=...
- guelo 14y ago> online chatter about the potential proliferation of automated Facebook accounts HN FTW!
- bitdiffusion 14y agoIt seems to me that facebook has all their eggs in one basket whereas google is extremely diverse (even though many of googles' ventures inevitability feed back into search). I think facebook haven't used their huge cash reserves wisely which is why faltering in a single area (aka. advertising) puts them in a very precarious position. What has google done (just off the top of my head)? android, gmail, google maps, search, self-driving cars, glass, hardware (I know the nexus/q are manu. by asus but google do have their name on it) What has facebook done? facebook.com, facebook app for mobile? thrift?