the facebook bubble burst?

[jhc68]

Early on the 3rd day of trading after the IPO, facebook stock has lost 18% of its opening value.

I keep wondering why anyone would have bought shares to begin with.
The company does not produce any tangible product, its corporate structure is entirely dominated by one personality (and in some ways may be a dysfunctional personality), the p/e ratio is horrendous and there is no model for how it will produce enough future profits to justify the hype. Also, the previous social networking big dog, Myspace, disappeared into oblivion practically overnight when facebook came along and other big players are currently doing their best to eat into facebook's near-monopoly.

So is the current drop in price a reality check or will facebook shares rebound in the long run?

[Rye Catcher]

Just suckin the rubes in. Could be a great short.

[Rye Catcher]

Oops, double post. Error 503.

[Marlow]

Facebook is like a Ponzi scheme in that it's running out of people to suck in. That, plus the fact that people are VERY fickle in their fads and this IS a fad. The next gen of social media will find a gimmick even 'cooler' than this one, and when it does, even with an aggressive response by Zuckerberg, Facebook will fall. Once there's a crack in the Facebook dike, the flood will come and wipe it out as everyone migrates to the Next Big Thing. The problem with these kinds of geniuses (and Zbg is one) is that their savantry almost always comes with blinders and their breakthrough is old news soon enough.

[gh]

Heard on the radio this morning that some of the major trading firms knew the IPO was way overvalued, but of course that info was not passed along to the man in the street.

[tandfman]

The impact may go quite a bit beyond the people who bought the stock at the IPO price. The State of California could take a revenue hit if that particular bubble bursts.

http://www.washingtonpost.com/business/ ... story.html

[bad hammy]

Can you say 'tech bubble'??

[mcgato]

The impact may go quite a bit beyond the people who bought the stock at the IPO price. The State of California could take a revenue hit if that particular bubble bursts.

I'm not going to pick a fight with the Washington Post, but I'm a little fuzzy on the article linked there. From my point of view, Zuckerberg and others from the California based headquarters of Facebook put up their shares for the IPO. The shares sold for the initial price of $38, so they are liable for the taxes on the profits that they got from that. That will be rather huge. Any secondary buying or selling of shares in Facebook only tax the difference between the buy price and the sell price. So the stock tanking would generate losses for the California buyers of the IPO, but those losses would be dwarfed by the profits from the gains from the Facebook people who made huge profits from the IPO.

And regarding the report from gh about Wall Street knowing that Facebook was overpriced and not telling the general public: someone on letsrun asked back in January how to profit on the Facebook IPO. I was about the second response, and I said "Short it." Two other posters agreed in quick succession. Large portions of Main Street were well aware that Facebook is wildly overvalued. But the US seems to love to chase bubbles.

[tandfman]

Andy Borowitz tweet:

>>Today the dude on my street who usually hands out pizza flyers was handing out Facebook stock.<<

[BruceFlorman]

But the US seems to love to chase bubbles.

Wasn't this an Onion headline about three and a half years ago:
Angry American Public Demands New Bubble To Invest In

[gh]

Good commentary from a journo in the heart of the thing. Small guys get fucked again, including Facebook employees, while "Wall Street" cleans up once again. Nah, we don't need any more regulation. Big gubmint would just screw the general public. Right.

<<...The Facebook flop is just the latest evidence of a growing and unsustainable imbalance across the tech investment spectrum....>

Read more: http://www.sfgate.com/cgi-bin/article.c ... z1vf6ACeRq

[gm]

Have we learned nothing from Enron?

[CookyMonzta]

Have we learned nothing from Enron?

Probably not. If that insider investigation spreads like a virus, and the feds indict enough people to fill a city bus, Facebook will most definitely go the way of MySpace within a year of the indictments.

[Vince]

Good commentary from a journo in the heart of the thing. Small guys get fucked again, including Facebook employees, while "Wall Street" cleans up once again. Nah, we don't need any more regulation. Big gubmint would just screw the general public. Right.

<<...The Facebook flop is just the latest evidence of a growing and unsustainable imbalance across the tech investment spectrum....>

Read more: http://www.sfgate.com/cgi-bin/article.c ... z1vf6ACeRq

Nobody was forced to buy Facebook stock, and even an idiot knows tech IPO's are risky transactions. If there is fraud or collusion, there are already plenty of laws against that, but there must be a competent government employee willing to do his/her job.

[Conor Dary]

Heard on the radio this morning that some of the major trading firms knew the IPO was way overvalued, but of course that info was not passed along to the man in the street.

I don't know about that. It was in the NYTimes last week, before last Friday that Goldman Sachs for one, was going to dump most of their holdings of the stock. That sounded like a pretty clear signal.

There also have been quite a few stories about facebook inability to make any significant money from mobile devices. Also how much can they grow? Probably very little at this point. Also that Instagram purchase for a billion seemed pretty weird. An app to make photos look old. Wow, that sounds exciting for about 2 minutes....

And finally if anyone followed the Groupon IPO follies would know this stock was probably head south. So yea, shorting was the way to go.

[cullman]

Have we learned nothing from Enron?

Yes, the game is rigged and for the most part isn't against the law...anybody observing Wall Street for the last 100 years knows that.

cman

[Conor Dary]

Have we learned nothing from Enron?

Yes, the game is rigged and for the most part isn't against the law...anybody observing Wall Street for the last 100 years knows that.

cman

I don't know if Enron is a good comparison. No one has to use Facebook, I don't, or buy their stock. And even if you use Facebook, if you use some common sense it doesn't seem a big deal.

Meanwhile, Enron was manipulating the energy market in California in 2000 for their own greed and hurt a lot of people.

[JRM]

Also that Instagram purchase for a billion seemed pretty weird. An app to make photos look old. Wow, that sounds exciting for about 2 minutes.....

Yes, I'm pretty sick of seeing Instagram photos. We have 20 Megapixel cameras to take photos of the highest resolution, yet we should instead want to see the photo as if it were a blown-out, fading, and ripped Polaroid from the 80s. Hmmm...

[gh]

Humorist Andy Borowitz pens another fake letter from Mark Zuckerberg, explaining why Facebook is instituting new charges, like for removing an ex from a profile photo:

<<As you may have heard, our IPO last week didn’t go quite as well as expected. How badly did it go, exactly? If you live in a major city, you’ve probably seen homeless guys huddled around bonfires of Facebook stock. More ominously, I just received a call from my attorney telling me that I probably didn’t need a pre-nup after all....>>

[Conor Dary]

Steve Coll in The New Yorker on Leaving Facebookistan.

That is a laudable conception. Yet for now, at least, Facebook concedes to its users only when it judges that it is in the corporation’s interest to do so; what user votes and consultations there may be are purely advisory. As MacKinnon observes, this system suggests the political control strategies of the Chinese Communist Party: periodic campaigns of state-managed openness and managed local democracy.

http://www.newyorker.com/online/blogs/c ... istan.html

[tandfman]

Joe Nocera of The New York Times has an interesting take on this.

http://www.nytimes.com/2012/05/26/opini ... aster.html

[gm]

Joe Nocera of The New York Times has an interesting take on this.

http://www.nytimes.com/2012/05/26/opini ... aster.html

I haven't read it yet. I assume he ties the NCAA into it somehow?

[tandfman]

Believe it or not, Nocera is not a one-trick pony. Yes, he has been writing some very critical columns about the NCAA. But he's not in their Sports Department--he's a regular Times op-ed columnist. I don't think they could afford one of those on their staff if he limited his writing to NCAA-related stuff. That said, his NCAA columns are really good, and I'm sure his editors give him free rein to write about the NCAA whenever he wants to.

[Conor Dary]

Believe it or not, Nocera is not a one-trick pony. Yes, he has been writing some very critical columns about the NCAA. But he's not in their Sports Department--he's a regular Times op-ed columnist. I don't think they could afford one of those on their staff if he limited his writing to NCAA-related stuff. That said, his NCAA columns are really good, and I'm sure his editors give him free rein to write about the NCAA whenever he wants to.

Along with Krugman, Nocera is a columnist on the paper I read regularly. Good stuff.

[nunusguy]

Just suckin the rubes in. Could be a great short.

Correction: is a great short !

[gh]

twitter humor from Andy Borowitz yesterday:

<<I've invented Twofacebook, the antisocial network. You start being friends w/entire world & defriend people one by one.>>

[bad hammy]

Potential uh oh - CTO jumping ship: http://blog.sfgate.com/techchron/2012/0 ... ave/?tsp=1

[Conor Dary]

More bad news for Facebook.

Limited Run, a New York-based startup company that creates websites and online stores for its clients — record labels and artists, mainly — is doing something odd for a company these days: It’s leaving Facebook behind.

On Monday, the company posted a strikingly candid note on Facebook informing its followers that it would soon be deactivating its Facebook page due to two problems it encountered on the website: It discovered that a vast majority of the advertisements it was running on Facebook were being clicked on by bots — or automated computer programs, not real users. This is an issue because Facebook charges a company higher prices for advertising space based on the number of clicks a company’s ads receive.

Separately, when Limited Run tried to change the name of the company on its Facebook Page, Limited Run says that Facebook asked for $2,000 in advertising buys in exchange.

''Facebook was holding our name hostage. So we did what any good hardcore kids would do. We cursed that piece of shit out! Damn we were so pissed. We still are. This is why we need to delete this page and move away from Facebook. They’re scumbags and we just don’t have the patience for scumbags."

http://idealab.talkingpointsmemo.com/20 ... fpnewsfeed

[Marlow]

Meanwhile Facebook marches inexorably towards ONE BILLION users.



Should happen in the next two months.

[mcgato]

IPO Price: $37.00
Current (July 31): $21.74
41.4% Drop

Probably have to reverse split to see a price anywhere near $37 for a long time.

[Conor Dary]

And it is going to get worse when employees can soon start selling the stock.

Wall Street is also bracing for a potential deluge of hundreds of millions of shares after August 16, when Facebook employees can sell their company-awarded shares for the first time.

"It's a combination of the Bernstein note, and partly complaints about the Facebook bot. Lockups are also causing pressure on shares today," said analyst Herman Leung of Susquehanna Financial Group, which owns and is a market maker in Facebook shares.

"People are just wondering what the next update is, and there's more headwinds than not."

[cullman]

And it is going to get worse when employees can soon start selling the stock.

[list]Wall Street is also bracing for a potential deluge of hundreds of millions of shares after August 16, when Facebook employees can sell their company-awarded shares for the first time.

The lockup ended today for a few "insiders" and shares closed at $19.87 down $1.33 (-6.27%)

[Conor Dary]

And it is going to get worse when employees can soon start selling the stock.

[list]Wall Street is also bracing for a potential deluge of hundreds of millions of shares after August 16, when Facebook employees can sell their company-awarded shares for the first time.

The lockup ended today for a few "insiders" and shares closed at $19.87 down $1.33 (-6.27%)

And more is on the way. A billion more shares coming this fall! Sell, Sell, Sell!

By the way, Groupon is also in freefall. Down to about 5. I think they are doomed.

[lonewolf]

I have never understood the business plan behind Facebook.. or why anyone would want to be on Facebook.
Ironically, I am on Facebook because a friend some how signed me up. I do not know my password or how to logon/respond to the Facebook alerts I receive.
When someone shows me how I can make money on Facebook, I will get interested.
But then, I don't understand Google either.
Or LinkedIn.
Or Twitter.
Or Groupon.
I am being dragged into the 21st Century.. just as I was becoming adapted to the 20th Century.

[Marlow]

But then, I don't understand Google either.

It ain't called Google for nuttin. There's about a Googol (a 1 followed by 100 zeros) of hits on it daily. People pay dearly to advertize there (the first bunch of results are paid ads!!).