
Facebook Stock Falls 5% in After-Hours Trading Following WhatsApp Announcement - ghayes
http://techcrunch.com/2014/02/19/facebook-falls-5-in-after-hours-trading-after-announcing-16b-cash-and-stock-to-buy-chat-app-whatsapp/
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gojomo
There must have been other bidders – such as Google, Apple, Microsoft – who
saw WhatsApp as an end-around Facebook's social dominance.

So imagine one of those other bidders had won, at a lesser price. Facebook
might still have taken a 5% hit, facing a newly-empowered competitor. At least
now, as with Instagram, the threat has been absorbed into the mothership.

It's a rich price, but arguably strategically justified.

The people who criticized the prices paid for YouTube and Instagram were very
wrong. Also wrong were those who said Facebook was crazy for not accepting
Yahoo's buyout offer, or that private investors were crazy for giving Facebook
its rich pre-IPO valuations. Facebook keep chugging along, knowing and
confident in its understanding of the opportunities and threats.

~~~
psbp
So should facebook absorb every social threat? What would happen if Google's
hangouts started to become popular, or another startup?

~~~
Tohhou
No, for their own interest they should do what they can to combat the most
vital threats.

>What would happen

That would be more of a problem for Microsoft's Skype.

~~~
psbp
Hangouts is also a messaging app that is meant to replace texts.

~~~
ianstormtaylor
True, but the only thing I've ever heard it praised for is how well it handles
multi-person video chats. I've never heard of anyone using it for purely text
chats. Maybe that will change, but it's not an SMS replacer yet at any level.

~~~
YokoZar
Of course people use hangouts for purely text chat -- it's Google Talk!

~~~
lewispollard
Yep, my company uses Google Talk for IM, so as a result most of us use the
Hangouts app if we want to chat on mobile.

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kens
After-hours price changes are pretty much meaningless. After many years of
seeing dramatic after-hours changes contradicted when the market opens, I've
concluded that generally you should just ignore what happens after hours.

~~~
andylei
this is a totally expected shift in prices. large acquisitions almost always
cause the stock of the acquirer to drop.

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mmanfrin
5% is what, 8-9bil market value? This deal gives out 12bil in _stock_ , so the
loss in market cap is less than the dilution of shares from the deal.

In other words, in hearing that 12bil of worth was being taken away from
shares, only 75% of that was realized in the fall, making this a net gain in
share price (not counting cash). If you count cash, this actually seems pretty
neutral.

~~~
klochner
If this were an all stock deal, and the market cap had fallen by $12B
(assuming $12B stock given out), that would mean the market were valuing
WhatsApp at $0 as an asset.

If facebook had fallen in value by _more_ than the purchase price, that would
mean the market is saying WhatsApp has negative value, even if it had been
given to facebook for free (though it could also mean a loss of faith in
facebook leadership).

Any loss in market cap following the acquisition means the market is valuing
the deal as having negative net value to facebook.

~~~
JetSpiegel
>though it could also mean a loss of faith in facebook leadership

That's the zinger right there. It could be anything, from "WhatsApp is
worthless" to "This tea leaves are turning green, time to dumb Facebook stock"

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pyrrhotech
I'm going to be shorting facebook at the open tomorrow. They overpaid by at
least 300% on this. Big blunder even for a company of FB size

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gobbluth
How the HELL did Everpix die?

No, seriously. Everpix DOMINATED WhatsApp on every possible metric: social
networks/sharing, user commitment, revenue, advertising information, and long-
term potential. Anyone can (and will) switch instant messenger networks on a
whim. There's literally no barrier to keep me from telling friends to contact
me on Hangouts from now on.

A photo site tells you where people go, what they do, who they hang out with,
how they spend their money, and also requires a huge commitment from users
since it's a burden to re-upload photo libraries to other sites. Plus they
enjoyed a steady revenue stream of $50/year or whatever, AND they could rely
on the diminishing cost of storage and bandwidth over time.

To say nothing that Facebook has no photo library feature beyond selected
individual uploads (which yield relatively little information about location,
habits, friends, etc). They really could have used Everpix. (Or Apple could
have finally obtained a usable web service.) But Facebook already has a
messenger application. Hell, they have several depending on how you count
their properties. What the hell does WhatsApp add to their portfolio, beyond a
crappy name and a whimsically unattached user base?

I'm just baffled at this point. I guess $20b for Snapchat will be tomorrow's
acquisition. Then $50b for AIM, why not.

~~~
mmanfrin
430mil of network-affect attached users is not 'whimsically unattached user
base'.

~~~
gobbluth
Of course they're unattached. It's just another instant messenger. Or are
people still loyal to ICQ, AIM, MSN Messenger...?

(Even worse, WhatsApp relies on teenagers. How many social circles endure
beyond high school? Do you still IM people you knew back then... or even as
recently as two years ago?)

Maybe adults will fall back on the best messenger based on technical merit
(probably Hangouts?), but WhatsApp is neither sophisticated nor particularly
appealing for the long term. I'll put down money that it'll be forgotten
within the decade. What the hell was Facebook thinking?

~~~
bsder
> What the hell was Facebook thinking?

Existential threat combined with huge non-US userbase.

What happens if Google buys WhatsApp? Or if Microsoft buys them?

Facebook has saturated the US market and is, in fact, losing people. I suspect
Europe is close if not already there. So, the battle has shifted to other
countries.

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bckrasnow
MG Siegler has been writing recently about the "great unbundling" of Facebook
and how mobile apps are increasingly good at one thing only: Instagram at
sharing Photos, Paper for reading the news, and now WhatsApp + Messenger for
communication. It's becoming increasingly true as we see Facebook trying to
buy the new dominant players in any space that could be a threat in the areas
it holds dear: sharing photos, statuses, or anything else it deems important.

I would have to think that the stock drop is due to the price they're paying
for a startup that had $8 million in funding.

~~~
notahacker
That and the way their announcement basically indicated they were happy to
leave WhatsApp and its uber-smart and now-uber rich engineering team alone in
its own $1/user/year ad-free bubble, on course to break even some time around
the point mobile phones become obsolete. It didn't exactly scream _we had to
pay that much but we 've really thought this through_

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ulfw
Only 5%??

~~~
joe_the_user
As a heavy Facebook user, The weakening of the average users' engagement with
Facebook is palpable at this point. Maybe the number of people with a "utility
Facebook account", for when they really need it, is growing but the energy of
the site is clearly shrinking.

The thing is that Facebook when it started was an ideal site for those who
otherwise didn't "know" the net/online-world. But that naturally changed.
People became more sophisticated in their consumption and more average people
transformed trollish people. Together, this clearly reduces engagement to
Facebook.

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ddrmaxgt37
Why do we care? Are we becoming Wall Street traders and "analysts"?

What use is reporting or reading about stock movements within a day?

~~~
crazygringo
In case you're not actually trolling, here is why.

Because a change in market price reflects a change in the midpoint of opinion
of people on the future value of Facebook, who are willing to put their money
where their mouth is with regards to their opinion -- these are not the
opinions of idle chatterboxes.

As such, stock price movement in response to news is a very valuable critique
of a company's actions. A change in stock price is arguably more objective and
valuable information than any random blogger or columnist whose opinion might
be published here on HN.

Does that make it clear?

~~~
Codhisattva
Buy on the rumor. Sell on the news.

Or as some brokers call it "sell into strength".

It's about profit taking and has nothing to do with "critique of a company's
actions" or objectivity.

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dataminer
So, time to buy.

