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> Had all those investors realized that Facebook was a one trick pony they might not have lost 40% of their money (and counting...). No, I am sorry but this is
by joering2 14y ago
> Had all those investors realized that Facebook was a one trick pony they might not have lost 40% of their money (and counting...).
No, I am sorry but this is wrong. You didnt need to realize it was a "one trick pony". All you had to do is read their P/E at the IPO. This should scare you away.
The major issue here was that users and investors both forgot that stock market doesnt care how big of a celebrity you are (as a stock). Math and basic accounting rules thats what counts. Besides you had many smart guys comin up on a TV explaining how wrong this investment is.
Edit: upvoted because it was a good comment.
- maigret 14y agoNot really. Look at Amazon's PE, keeping strong since years and much higher than Facebook's. If there is really a huge growth potential and a good track of growth for many years, a high PE can be justified. Of course, the future will tell us who was right...
- rhizome 14y agoAmazon is often brought up in PE discussions, but as far as FB is concerned it's apples and oranges when you compare the business inputs and outputs of each.
- vibrunazo 14y agoCould you please expand on that?
- joering2 14y agoI can try. Amazon sells physical products, while Facebook sells eyeballs to advertisers. This is how both businesses are setup to make money, at least at the days of IPO. While with Amazon you use it because you want a product, with Facebook you do not want to be plastered with Ads, but you have no choice. Amazon is a solid horse with no "kill me" obstacles on its way. Sure in 150 years you will have a machine a size of your fridge and you download blueprint from internet and the product is being 3d-printed for you, but since we not there just yet everyone needs products that Amazon offers and shift is towards selling stuff online. Mobile movement is to Amazon irrelevant while it may kill Facebook. That's for start.
- Falling3 14y agoAgree for the most part.. though 20 years and the size of a toaster oven is probably more accurate.
- dredmorbius 14y agoAs long as anything you plan to render is the size of a breadbox or smaller. Diamond Age. Or Makers (Stephenson and Doctorow, respectively).
- joering2 14y ago+1. Uncle Wiki says it must be an amazing book (that I've never heard of). Thanks for pointing out! http://en.wikipedia.org/wiki/The_Diamond_Age http://en.wikipedia.org/wiki/The_Diamond_Age
- ericHosick 14y ago> machine a size of your fridge and you download blueprint from internet So, you are saying that in the future, Amazon will manufacture and sell blue prints and 3D printers? :-)
- wlesieutre 14y agoBetter that than pushing legislation to ban 3d printers because they can infringe on copyrights
- TDL 14y agoIf you look at the studies that were done about high PE firms you will see that those firms were not attempting to secure the maximum valuation possible @ IPO. In FB's case they were attempting to secure a $100 billion valuation (the maximum valuation that any stock prognosticator had called for.) I also do not believe high PE studies go further back than the 1990's. There is something there, but more data is needed.
- pbreit 14y ago> All you had to do is read their P/E at the IPO. No, this is wrong. Earnings are almost totally irrelevant at this stage. Companies raise money through an IPO because they are in growth mode which typically means minimal or negative earnings.