Facebook IPO, I just don't "get it"

Discussions about the psychology of the markets and the masses as it relates to trading.
Moto moto
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Post by Moto moto » Sun Mar 04, 2012 5:33 pm


Moto moto
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Post by Moto moto » Wed May 23, 2012 5:19 am

I thought it appropriate the insanity of the markets right now....(but aren't they always insane ?)

Facebook IPO....
it falls from the open, given that it was reasonably expensive, the IPO price was marked up, the markets are pretty weak right now, etc; etc;

and the newswires are going haywire about investigations into how could this happen, the IPO should be up, its a conspiracy..etc; etc;

Talk about moral hazard gone crazy.....and yet there is MFG, the m....f..... group

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Post by fab1usa1 » Fri May 25, 2012 9:58 am

So it looks like the price is settling in at about $32.50. If that is it’s “trueâ€

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Post by AFJ Garner » Fri May 25, 2012 10:58 am

I have traded IPOs for many years. The only unusual aspect of the Facebook fiasco is its size. Look back to the 90s and recall the insane valuations and the corruption and intrigue. Remember the CSFB scandal and all the other shenanigans. I have had endless letters from US lawyers over the years asking me to join law suits and collective actions resulting from IPOs.

A lot of people are glum about Facebook and it has certainly not cheered the market. I also feel sorry for those who got suckered who thought it a long term buy. Those who stag new issues though would have been out flat or better on the first day and simply shrug their shoulders and move on to the next deal. There have been a number of highly successful deals in the US this year and a few in the rest of the world. There have been some good premiums in secondary offerings and in fixed income deals.

The trader doesn't give a toss about Facebook. Its a numbers game. Shrug and move on.

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Post by LeviF » Fri May 25, 2012 11:01 am

AFJ Garner wrote:I have traded IPOs for many years. The only unusual aspect of the Facebook fiasco is its size. Look back to the 90s and recall the insane valuations and the corruption and intrigue. Remember the CSFB scandal and all the other shenanigans. I have had endless letters from US lawyers over the years asking me to join law suits and collective actions resulting from IPOs.

A lot of people are glum about Facebook and it has certainly not cheered the market. I also feel sorry for those who got suckered who thought it a long term buy. Those who stag new issues though would have been out flat or better on the first day and simply shrug their shoulders and move on to the next deal. There have been a number of highly successful deals in the US this year and a few in the rest of the world. There have been some good premiums in secondary offerings and in fixed income deals.

The trader doesn't give a toss about Facebook. Its a numbers game. Shrug and move on.
How does a typical IPO play work?

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Post by Moto moto » Fri May 25, 2012 11:44 am

How does an IPO play work?

In my experience (Australian equities) - just as Mr Garner says - its a numbers game.
You maintain as many accounts and good relationships with various brokers over years so that they give you good allocations in IPOs. In a bull market you leverage yourself up a lot and hope to get out on the first day of trading (maybe you run some of it) and just keep doing the deals, looking to capture lots of small wins and minimise a few losses.
This can also be applied to stocks doing capital raisings etc if the discounts are good, and the markets are running.
(when the markets dont run they are a pretty poor business)
Then there is also the pre IPO market. Here the odds of getting a stock to market is slimmer, but the uplift from getting it to the market can be any ware from 100-400%. Depends on the market, the industry (miners can be good if they strike it rich and you are an early investor)

For my two cents its not for everyone, works well when the market is running hot - but then so does most things.

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Post by AFJ Garner » Fri May 25, 2012 12:56 pm

Yep, that's how it plays. But when the markets are not propitious you just sit on the sidelines: you don't bleed to death as markets chop. And it does have its terrors. Just different ones. Illiqidity and syndicates who walk away from deals being the major ones. Good lead managers and good liquidity usually mean getting out flat or a little down at worst. But there are the occasional shockers. No free lunch .....and it does mean you actually have to talk to people. Never one of my strong points.

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Post by Mark Johnson » Wed Jul 11, 2012 3:47 pm

I just read and thoroughly enjoyed an article called The Facebook Fallacy in Technology Review magazine. The headline was
  • For all its valuation, the social network is just another ad-supported site. It needs an earthshaking idea.
They've put the article up on their website, you can read it (HERE). Here is his summary, the final two paragraphs of the article:
Michael Wolff wrote:Oh, yes ... in its Herculean efforts to maintain its overall growth, Facebook will force the rest of the ad-driven Web to lower its prices, too. The low-level panic the owners of every mass-traffic website feel about the ever-downward movement of their CPM is turning to dread. Last quarter, some big sites observed as much as a 25 percent decrease, following Facebook's own attempt to book more revenue.

You see where this is going. As Facebook gluts an already glutted market, the fallacy of the Web as a profitable ad medium will become hard to ignore. The crash will come. And Facebook—that putative transformer of worlds, which is, in reality, only an ad-driven site —will fall with everybody else.


note: CPM is the sales price of an online ad. Cost per thousand ad impressions.

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Post by danZman » Wed Jul 11, 2012 5:50 pm

[quote="Michael Wolff"]Oh, yes ... in its Herculean efforts to maintain its overall growth, Facebook will force the rest of the ad-driven Web to lower its prices, too. The low-level panic the owners of every mass-traffic website feel about the ever-downward movement of their CPM is turning to dread. Last quarter, some big sites observed as much as a 25 percent decrease, following Facebook's own attempt to book more revenue.

Facebook has two things going for it:

1) A world wide audience.

2) They will have the ability to do non-website-centric advertising when
the technology comes in a few years. Don't think for a second that a website will be the only medium they advertise with. Augmented reality is coming. So is person specific offline ads a la Minority Report.

I would not buy here...lots of time to get in this. Just wait for the next bear market like Buffett does.

D

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Post by DPH » Wed Aug 01, 2012 9:28 pm

Was Zuck allowed to buy puts on IPO day? ;)

Any guesses?? Bottom??? Cut in half again?

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Post by mojojojo » Thu Aug 02, 2012 11:53 am

DPH wrote:Was Zuck allowed to buy puts on IPO day? ;)

Any guesses?? Bottom??? Cut in half again?
Guess? Who knows. I will start looking at it when breaks through the $20 mark which might happen today. Until then, not too worried about it.

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Post by DPH » Thu Jan 17, 2013 5:08 pm

I have to admit that Facebook's new "Graph Search" really does seem like it might be pretty cool. I have not used it (but signed up for when its available), however just reading the press releases I am intrigued. There is no question they have unimaginable amounts of data to mine!

I am also intrigued by the integration of Facebook and Microsoft's Bing search engine. If you don't know about this, basically Bing will integrate your social circle (friends) into the relevancy rankings of your search results.

I also just ran across this press release about some side-by-side comparisons of Bing and Google (the Pepsi Challenge!) If the data is true that people really do prefer Bing in blind tests then I would have to say that a real competitor to Google may be percolating......http://www.bingiton.com/

It's fun watching this massive battle (chess game) playing itself out here...

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Post by DPH » Wed Jul 24, 2013 6:23 pm

I must say that I have continued using Facebook since the time of my initial post and the ad relevancy has improved considerably. They have seemingly made pretty good strides generating revenue with mobile too (which had been their major problem), ads are now fed directly into the news feed instead of only displaying them off to the side. Pretty big upside breakout today too. I'm not entirely sure why, but I've had an interest watching the progression of this one...

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Some curve fitting

Post by sluggo » Thu Jan 23, 2014 10:12 am

Epidemiologists have performed a fun little bit of curve-fitting and come up with this graph:

Image

The number of searches on Facebook seems to be well-modeled by an infectious-disease recovery equation called "irSIR". Projecting that model into the future, it shows that the internet recovers from the infection called Facebook between 2015 and 2017.

One article is HERE, and you can Google for others.

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