

FB new low (18.23), down 52% from 38 IPO price - veyron
http://www.google.com/finance?q=NDA:fb

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leothekim
Should someone add a FB ticker to the HN home page? :-D

But seriously, is there something about Facebook that hit the news that is
leading to this drop and is worth discussing? Or is this just to spur some
discussion on stock price speculation? If the former, what's the news? If the
latter, what's the point?

~~~
veyron
The reason why this cross is important is because it dropped more than 50%.
Regulation T, which governs margin requirements in most accounts, says that
you are allowed to borrow up to your cash balance to buy shares. So if you had
1900 dollars in your account (for simplicity of math), you could borrow 1900
more dollars to buy FB shares (3800 dollars = 100 shares). Now that FB dropped
below 19 (and it looks like it'll close below 19), basically those investors
lost ALL of their money (the value of the shares is now 1825, so your equity
in the position is 1825[current value] - 1900[borrowed money] = -75) and we
should expect another wave of selling pressure as those investors are forcibly
closed out of their positions.

The importance is that _institutions_ may decide not to participate in future
IPOs (or may do so with weak uptake).

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thejerz
Can anyone clarify whether the IPO was technically at $38 or $42? On the day
of the IPO, everyone in the press was saying the price was $42. But now a lot
of the online charts (google finance, yahoo finance, etc.) are showing it
opened at $38. Obviously there were a lot of technical glitches that morning.
What is going on here?

~~~
NoPiece
The IPO price was $38. When it opened the price rose to $42 in early public
trading before the price started to fall.

[http://www.businessinsider.com/this-is-what-traders-saw-
when...](http://www.businessinsider.com/this-is-what-traders-saw-when-things-
went-haywire-on-facebooks-first-day-of-trading-2012-5?op=1)

------
stevievee
It is going to be a bumpy road if they miss future earnings estimates.
Negative sentiment around this stock is strong.

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mkhalil
I said it when it first IPO'd that this would be bad. Investors were looking
at this company as they did many other things they invested in. What they
couldn't understand is that IT IS NOT like the others. It is a social network.
People tend to move on and get tired of them. I don't care what the numbers
say, they could be misleading. I stopped going on facebook. And when I do go
on, my 1000 friends or so don't have much posting going on. It has become
pretty much a more popular version of photobucket or flickr. And when I go on,
I don't get that "feeling" that I used to when I used to go on back in the
days. A lot of my friends have deactivated and most others aren't on much.
Unsuprisingly I might add.

~~~
veyron
"Investors were looking at this company as they did many other things they
invested in."

tl;dr: Investors were looking for the IPO pop and then dumping it. Problem is,
if everyone follows that idea, there's no upside left.

It was obvious from when FB first started trading on SecondMarket that the
"IPO pop" would happen before the IPO. The IPO pop stems from a supply/demand
mismatch (lots of people want to get in but are unable to). And because the
accredited investors got in before the IPO, the only people left were "retail"
investors (and we know how that story ended). Many analysts and investors
don't understand that key point, which is why a lot of people were caught with
their pants down.

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lanstein
Compare that with SPLK. Apparently there's something to this whole 'build
stuff people will buy' thing.

~~~
MichaelGG
Let's compare, shall we? Last year, Splunk lost a few million dollars on
revenues of 66M. Facebook profited $1BN on revenues of 3.7BN.

Guess there's something to businesses that generate lots of snarky comments.

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404error
They should just start charging a couple of bucks a year to use the damn
thing. They have so many users even if some drop off they would still be
making money.

(I don't use it so it's easy for me to say)

~~~
dclowd9901
Or freemium servicing.

~~~
404error
I never understood how giving things/services away for free made sense to
anyone. I still don't get it. Sure you have a huge user base but no way to
make money.

~~~
xmmx
You've never heard of google?

~~~
404error
who?

------
dkroy
This makes me want to start buying up shares just so I could brag to friends
saying I bought it when it was super low. Probably not a good reason, but the
heart wants what the heart wants.

~~~
outside1234
this isn't super low. $1-2 will be super low.

~~~
dkroy
You are right, I guess I was embellishing a little. Though it is quite a drop.

~~~
taytus
Yes, it's quite a drop but I think it will keep dropping until reaches $10.
It's a matter of time really.

------
16s
I plan to buy it if it falls to 4 dollars or less.

~~~
WiseWeasel
I bet it won't fall that low. $4 would be valuing the company at about 10x
their 2011 income of $1B, which is extremely low for a company expected to
grow. I wouldn't expect to see a valuation under 20x, or about $7-8 per share.
My guess is ~$10 per share is the floor on this one.

[http://www.forbes.com/sites/tomiogeron/2012/02/01/facebooks-...](http://www.forbes.com/sites/tomiogeron/2012/02/01/facebooks-5-billion-
ipo-filing-3-7-billion-in-2011-revenue/)

~~~
cube13
Is Facebook really expected to grow that much? Even counting the 13% or so
fake accounts, they have around 800 million active accounts.

That's a bit over 10% of the world's population. They can't really get the
growth that's expected with their P/E, especially because of the difficulties
that they're having with getting higher returns/user. They can't grow their
userbase by that much either.

~~~
diego
What keeps the stock up is the idea that one day they may do something other
than ads, and sell something to their user base.

I don't know if there is an example of a public internet company that was able
to transition from being an ad-base business into selling stuff. The closest
may be LinkedIn, who's selling recruiter tools and premium memberships.
However, LinkedIn had been doing that before the IPO, as a relatively small
company.

I'm skeptical that Facebook can pull this off in a reasonable time frame, but
shareholders who are psychologically anchored to the IPO price are probably
more optimistic.

~~~
bunderbunder
_What keeps the stock up is the idea that one day they may do something other
than ads, and sell something to their user base._

Which sounds remarkably similar to the way people thought about companies
during the dotcom boom: Get the users first, figure out how to make money off
of them later. Facebook's admittedly got one key difference from companies
during the dotcom heyday, which is that instead of a burn rate it has this
thing called 'revenue'. But that aside, at least for a while investors seemed
to have fallen back into the old trap of thinking that the monetary value of a
user isn't somehow tied to the amount of income they provide.

Maybe Facebook will figure out something else. . . but if nobody's sure what
that is right now then it's still an Underpants Gnomes[1] business model.

[1]: <http://en.wikipedia.org/wiki/Gnomes_(South_Park)>

------
colmvp
Some small additional info:

[http://uk.reuters.com/article/2012/08/31/uk-facebook-
shares-...](http://uk.reuters.com/article/2012/08/31/uk-facebook-shares-
idUKBRE87U0PJ20120831)

------
billpg
If you thought $38 was a good price, this must be a good time to buy some more
with the prices low.

~~~
chollida1
> If you thought $38 was a good price, this must be a good time to buy some
> more with the prices low.

Only if you never factor in new information to your decision making.

If you $38 was good with the assumption that there would be a pop to $50 then
now you wouldn't buy as it's now clear there won't be a quick pop that gets
you to $50.

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jahansafd
Hmmm... Isn't facebook still growing? aren't they making money? aren't they
expanding?

~~~
theorique
Yes. But the question is "how much?"

If I offered you FB stock at $10,000, what would you say? "Too much", I hope.

If I offered you FB stock at $0.05, what would you say? Probably, "Hell, yeah,
that's a bargain".

So there's a rational price that the market agrees upon, within certain
boundaries. The market seems to agree that the IPO overpriced the real market
value of the shares. It's a real time machine that tells us what people think
the shares are worth.

------
dkroy
At what price is everyone else going to be tempted into buying some shares?

~~~
taytus
$5 it's a good price for me :)

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mp99e99
FB has 2.7B shares outstanding, yahoo and other sites have it wrong.

~~~
veyron
The original prospectus quoted the 2.1B share count that google uses. I'm sure
the difference will be corrected after a few filings ...

