Thirty-Seven Cents

18 05 2012

FAILbook.

IPO 38.00, closed at 38.37.  It got as high as 41.73 at 12:40, but then fell around 40, flatlined there, then fell again and flatlined just a few pennies above the IPO for most of the last hour.

You can tell these aren’t the late 1990s any more.  An IPO like this would have shot to the sky right out of the gate and kept on going in the late Clinton years.  Even its high today wasn’t 10% higher than the IPO, and it finished the day not even 1% higher.

Oh, and to all of you people who are now 37 cents richer:  Don’t spend it all in one place.

UPDATE

Make that 23 cents.  Too, the investment houses that acted as insurance firms for the IPO had to kick in perhaps as much as nine figures to keep the stock over $38.  If that’s the case, FB is going to tank soon.  I predict single digits within six months.

It really surprises me that The Street isn’t keen on a corporation whose product is a website where drunken lush young adults post photos of their naked asses.

Unless it doesn’t surprise me.

I guess enough people on The Street remember MySpace, how it was here today and gone tomorrow.

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8 responses

19 05 2012
rjp

I guess my rant about FB should have been here.

Next failing over hyped IPO plan, buy 1¢ above the stop the house has in place sell anywhere above. Rinse. Repeat. Of couse every algo shop will be doing the same thing, so literally if there is ever a bloated IPO like Facebook again, the volume on it’s first day could hit a true 1 billion shares traded –meaning not counting those matched prior to the open.

I still believe either the media producers or the darlings of the media are being issued shares on the sly. No one on CNBC said a bad word in the months leading up to this. Same with GRPN (GroupOn). That the issuer had to step in and buy ~50 million shares of FB (a guess — around 75 million traded at 38.00 and 2 NASD and 2 ARCA participants were consistantly showing gigantic size (multi-million share bids) there anytime the price neared 38.00) to keep the the price up I think proves this.

CNBC is pump and dump TV, and has become blatantly annoyingly so lately.

19 05 2012
countenance

My mind is made up. When I become President, you run the SEC. And I don’t mean college football.

I doubt this adds anything to what you’ve already said here and in that other comment:

http://online.wsj.com/article/SB10001424052702303448404577411903118364314.html?mod=WSJ_hp_LEFTTopStories

This is strange thing to say on a Saturday, but I can’t wait until Monday. To see FB fall all day long and for everyone sans Santelli on CNBC to lose their shit in earnest.

19 05 2012
The Friendly Grizzly

My question is, how can a company that produces absolutely nothing have commanded such excitement, and such a high perceived value? Then again, I am not on Facebook, so I know nothing about it. MySpace, from what I am led to understand, fell apart because it became a ghetto site, I wonder if the same will happen with FB?

19 05 2012
countenance

My question is, how can a company that produces absolutely nothing have commanded such excitement, and such a high perceived value?

RJP above just gave you the answer. Morgan Stanley, the chief underwriter for Facebook’s IPO, buys a lot of advertising on CNBC and the other NBCs. A lot of people on The Street watch CNBC.

That WSJ article I linked to states that FB’s MktCap (a useless stat, IMHO) puts it > HPQ and ≈ PEP. Do we honestly think that FB is more important than HPQ and about as important as PEP? Let me put it to you this way — On May 19, 2032, we will with almost 100% certainty be able to buy a can of Pepsi and by doing so contribute to PEP’s operating profits. We will probably (less likely than PEP, b/c the tech industry is always in flux) on that day be able to buy an HP printer to contribute to HPQ’s profitability. Facebook might not even exist on that day.

I wonder if the same will happen with FB?

I think it’s already starting. Not only that, a big undercurrent of pedobears is infecting Facebook.

19 05 2012
rjp

Morgan Stanley, which led the platoon of 11 Wall Street banks that arranged the listing, had to dip into an emergency reserve of around 63 million Facebook shares—worth more than $2.3 billion at the offer price—to boost the price and create a floor around $38 a share, according to people close to the situation.

I hope the Morgan Stanley isn’t long 63 million shares.

And this paragraph is wrong:

Morgan Stanley, which led the platoon of 11 Wall Street banks that arranged the listing, had to dip into an emergency reserve of around 63 million Facebook shares—worth more than $2.3 billion at the offer price—to boost the price and create a floor around $38 a share, according to people (idiots) close to the situation. In successful IPOs, the reserve, known as the “overallotment” or “green shoe,” is used by underwriters to meet soaring demand but in this case, it was used to prop up Facebook’s ailing share price.

The process is common in IPOs and works like this: The underwriters have the extra shares available to either sell or buy for a period after the IPO. If demand is strong, they sell them like all the other shares. But if the stock price falls, they can buy them back, effectively creating a floor for the price.

Morgan Stanly was buying on the open market, not exercising the reserve — the overallotment. Who ever said that to SHAYNDI RAICE, RYAN DEZEMBER and JACOB BUNGE are idiots, and these three writers are fools. The overallotment is sold for pure profit into demand by the IPO runner, they take from FB at IPO price, $38, and sell at whatever they can get (and throw some to especially favored customers at the IPO price).

19 05 2012
countenance

It’s impossible to “dip into” the shares that the company going IPO gives (*) you as the cost of your buying an insurance policy with them to prop up the plunging price of of a stock. I’m MS, and I see FB about to plunge under 38. How does one “dip into” my 63m shares to keep it at 38? If I sell those shares, I’m only glutting the uninterested market with more shares thereby plummeting the price even further. I can’t buy them, because I already own them. All I can do is use straight cash homey to buy other people’s FB shares, and with a market that would otherwise show a falling price, lots of people would gladly give me their FB share for my 38 clams.

Notice in FB’s chart for Friday that it stayed at 38.0x for most of the last hour of trading. That’s the only possible explanation.

* – If I were MS, I would have literally made Zuckerbutt give me those 63m shares. That’s because my reality all through the runup to IPO matched The Street’s reality on Friday. In reality, it wasn’t a gift, it was a IPO face value purchase. But MS had such a strained relationship with reality that it must have thought that FB was headed skyward, and that buying at 38 straight was essentially a gift, especially with visions of sugar plums of 60, 70 or 80 by the final bell dancing through their heads. FB’s failure to launch then rapid descent caught “everyone” off guard. I’m glad I don’t own any MS shares, I think they’ll be hurting for a little bit.

19 05 2012
rjp

I watched it right when it opened, glanced at in on and off during the day, then watched the last half hour and that was when I started counting the huge size bids, because you never ever see bid for like 83759 (cant remember the exact number but 89 was in one of the totals I made for the big 4 bidders), thats 8.3 million ….. I’m bid for $318 million dollars of stock. When I started counting at 2:30, out of curiosity, there were 4 IDs bid for at minimum of a million shares. And I knew it was all MS. It’s comical. It’s like everybody started listening me and said you know, maybe he’s right, the numbers make $38 an insane price.

That top Google link, the ads, (I kept track of web advertising prices for a while for the hell of it), when I started tracking back in 2003 or 2004 (whenever Google went public), “Chicago DUI Attorney” cost $112 per click, last I checked it was below $30 and that was at least 3 years ago. Web advertising is still over priced. Facebook is priced off of ads. The majority of those ads are displayed to Zynga game players who need game clicks/tokens. My guess is the average game player sees 100+ fresh FB pages a day. These all count as impressions and FB sells CPMs (From Wiki:Cost per impression, often abbreviated to CPI or CPM (Cost per mille)) at I think about $5. If a game player sees 100 pages with 5 ads, that’s $2.50. Nobody pays attention to those ads, GM just said so. Now Zynga is trying and actually pulling the players to it’s own site … oh, that’s bad. No more CPMs. That is why I think FB rushed after dicking off for the last year or so acting like they weren’t about the money. ZNGA is carrying money out the door. I put in a GTC order last night for ZNGA, but I am going to cancel it because I now think ZNGA will be acting as a proxy until Q2 releases come out.

19 05 2012
countenance

All this probably proves that I’m wrong, that The Street didn’t have sour tastes of MySpace, and FB’s failure to launch on Friday was a result of the implication of GM pulling out of FB adverts toward FB’s long term revenue model.

How does ZNGA expect to make any money if they’re hitched to the same swayback nag?

One more thing: What perhaps might prove that trepidation over FB has everything to do with web adv being overpriced is the fact that GOOG also took a noticeable hit (-3.6%) on Friday. GOOG is the by far the biggest wagon attached to the aforementioned nag.

Party time now…no more market talk until tomorrow.




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