Facebook IPO

[explanade]

Out of the blue, eTrade emails me and says I can participate in the eTrade IPO.

Anyone ever do an IPO?

Offering price is $26-35 they say.

Heard actually that their profits or revenues in the first quarter was down compared to 1Q of last year.

Some rumblings about an uncertain ad platform.

 

[Bestwifeever]

Interesting.

I saw that Groupon closed at <$10 on Friday, off its IPO of what, $22 a few months ago. I wonder where Facebook would go.

 

[ziggy29]

Out of the blue, eTrade emails me and says I can participate in the eTrade IPO.

Anyone ever do an IPO?

Once, at the height of the dotcom insanity back around 1999.

I had a chance to get in on 100 shares of TheStreet.com at 19 per share, but I had to open an eTrade account to do it. I put $2000 into an eTrade account, bought the shares at the IPO price of 19, sold the same day for $61 a share, withdrew the windfall and closed my eTrade account once the funds settled.

 

[ERD50]

Warned a relative about the Vonage IPO. Offered at $17, and no one ever had a chance to get out above $14 something. Currently at $1.85.

The horse track might be more entertaining?

-ERD50

 

[Animorph]

I did the GM IPO just for fun and made a little bit. I might do the same with Facebook, since I did get the offer from my broker. The one tricky part is that they don't want us to sell for 15 days or so. So if everyone comes to their senses in a couple of weeks it could be a losing proposition. IIRC the penalty for an early sale is IPO probation, so it's not something you can ignore very often.

 

[explanade]

I think maybe the closer IPO might be Linked In, which came out about a year ago.

52-week range is 56 to 122. It eventually priced at $45 and ended the first day of trading up 109% at $94.25.

Guess it depends on how frothy the market is at the time. Buffet was on CNBC this morning saying he was buying stock on Friday and today based on weakness in the market.

 

[explanade]

Hmm, they want you to hold shares for 30 days.

 

[explanade]

The other tricky part is that you have to specify the max share price you're willing to pay.

May not be able to predict what it will end up that easily and may end up with no shares.

 

[ziggy29]

Hmm, they want you to hold shares for 30 days.

There are likely "penalties" for violating this such as locking you out of future IPOs for some period of time. But as far as I can tell they can not *stop* you from selling early if you accept the penalty for it.

 

[Dimsumkid]

There are likely "penalties" for violating this such as locking you out of future IPOs for some period of time. But as far as I can tell they can not *stop* you from selling early if you accept the penalty for it.

Fidelity has the same 30 day no sale period, after 3 violations, they will banish you from ever getting another IPO.

Facebook is so well known, the hype will probably price the IPO at the high end or higher. Then depending on the brokerage offering you the IPO and your place on their priority list, you may or may not get some of the IPO. There's an article in the WSJ today about Facebook (pg C8), they seem to be generally positive and stated "patient investors should take advantage of any volatility after the IPO euphoria fades to buy the shares".

 

[Brat]

My concern about Facebook is that it will be a flash in the pan, so to speak. Daughter says they are making money hand over fist from advertising and that many people are socializing on the web instead of in person.

I just don't wan't to own it and as it may end up in the 'large cap' segment of the market but frankly I don't want to be there.

 

[explanade]

I'm not that big into FB, though I do have a fake profile.

But I can't see it going away any time soon. Don't see some other social networking service displacing it, like it did to MySpace.

Google Plus is Google's attempt but it's not getting the kind of traction to displace FB.

 

[EvrClrx311]

Just some thoughts...

1) Facebook has close to to 800 million users... currently 1.7-1.8 billion people in the world have access to the internet. I think it's safe to assume that Facebook will never have 100% ... also the rate of increase in people signing up is slowing down from a peak in 2010. Facebook also doesn't have an option to delete an account... meaning people who signed up in 2005 and never use their account anymore count in that 800 million figure.

2) Facebook revenue fell from $1.13 billion (Q4 2011) to $1.06 billion (Q1 2012)... although it was up from Q1 (2011)

3) Their profit (or net income) was $205 million... 12% lower than the first quarter of 2011

4) A $30 share price would value Facebook at $75 billion, yet they have revenue of under $5 billion and profit under $1 billion.

5) Google+ is the first real competitor to Facebook and just released in summer of 2011 (in 9 months they've grown to 100 million users)... its caught on slower than Google would have liked, but they've shown no desire to stop throwing money at the project.

6) in 2011, 15% of Facebook profits came from Zynga... a game app developer. You know, that one that spams your news feed with ads asking you to start growing wheat in a game called Farmville.

As a company Facebook profits less than $1 billion a year... I'm not sure how they could be worth $75 billion under any circumstances other than a dot com super hype frenzy. Google dwarfs Facebook as a company in size... and all it takes is a couple of bad moves from Facebook on the PR front to allow a foot in the door from someone else who could crush them with funding...

Personal anecdote... chatter within some of my circles of friends indicates that people are starting to boycott Facebook and some are moving to other social media sources that are fresher and newer. So although Facebook is the start of it all and has the numbers of users... you have to wonder: how many of those 800 million log in daily? weekly? monthly?

As a company, they really have little to no assets... just users, or people. The key to their success is trying to squeeze as much ad revenue from those users as possible while making sure they don't run to the next "hot new thing" out there...

As you can tell... I'm less than optimistic about facebook.

I'm guessing they see the money passing and rushed to get this IPO out there to cash in on their fame before their 15 minutes (er, I mean 7 years) are up. Their timing has been less than ideal... last fall would have made a much larger splash.

I have no doubts that this stock will swing huge... up and down. A lot of people will make and lose a lot of money on facebook. My gut is that in 20 years facebook won't be around anymore. This is not one to invest in for the long haul.

P.S. Zuckerberg (facebook founder) plans to cash in $1 billion worth of his shares in the IPO. He claims its to pay off taxes for exercising his stock options...

 

[Midpack]

Not really relevant, but in 1996 I bought 100 shares in an IPO (Cal-Pearson Corporation) at $1 each for sentimental reasons. By 1998 they were toast and the shares were worthless. An inexpensive lesson...

I'd worry that Facebook doesn't have a lot of room to grow (they're huge already!), but Apple once looked like they were done, and look what they did. And Mark Zuckerberg is obviously a genius, he's probably waited until the company has peaked to lock in his gains. I clearly remember the advice he got from Sean Parker about going public too soon from the Social Network movie.

 

[Brat]

I basically agree with Midpack. There is a huge difference between Face-Book, essentially an application IMHO, and a hardware with software company (full meal deal) like Apple.

 

[nun]

I use facebook to keep in contact with a bunch of friends. IMHO the platform itself is pretty poorly designed and everyone I know regularly complains about the new Timeline. I only use Facebook because my friends are on it. If Google+ gets some traction I'll probably go over to that. So I have very little admiration for Facebook, Zuckerburg was just at the right place at the right time. Once the hype is over Facebook will go the way of Yahoo and MicroSoft.

 

[kcowan]

Does anyone remember MySpace? I bet not well...

I participated in a couple of IPOs back when I was trading more. I made out OK on both of them. But now I am considered persona non-gratta because my heavy trading days are over. I had to buy LULU after the IPO.

If they are soliciting enrolments, it is a good bet it will be undersubscribed.

As a FB user, I can vouch for the fact that they make no money off of me. I was particularly freaked by their invention of new "subscribers" who have an ID and use it to log in to other sites but never see a FB ad. Also their mobile app never shows ads. Once the advertisers catch on to this, I think their revenues will drop.

And non-voting shares? That alone would prevent my participation. Remember Magna? It cost nearly $1 Billion to get rid of them (Frank Stronach and family). How do you know that Zuckerburg will stay around? His moral standard is not that high.

 

[2B]

If a small investor can get in on the IPO, it's because they can't get the price they want from the big investors. The small fish are being used to hike the offering price. Based on their numbers, it's hard to justify the offering price range unless you also factor in substantial earnings growth which isn't there.

Typically, it's also the small investors that rush in to buy the few shares available when the IPO is first traded. If they can get shares directly, where's the bump up going to come from?

I'd recommend a heavy dose of caution on this one.

 

[powerplay]

I once tried to get in on an IPO for a local restaurant chain that I liked called Macheesmo Mouse. My application was rejected so it never happened. The stock went down and the restaurant chain is in the history books. So didn't actually drop any $$$ there.

 

[Brat]

Good heavens, even I remember Macheezmo Mouse. I did make a few bucks the Pixieland IPO but Dad lost his investment because he refused to sell.

 

[EvrClrx311]

The only IPO I've played recently was Tesla... I knew the media would be all over that because green energy and electric cars make for flashy headlines. Bought in at $17 in that morning, and sold at $28 the same afternoon ... despite making a quick 60%, just seeing what happened to the price on that opening day scared me away from IPOs... I could just have easily gotten in at $28 and sold at $17 the next day when it went back down.

I'll stick to my slow/boring methodical means for investing... chasing quick returns is too stressful

 

[obgyn65]

No.

Anyone ever do an IPO?

 

[Brat]

My DD has done a couple from a VC chair. The fees of lawyers and the issuing house are significant.

The one bit of wisdom I gleaned from our conversations over the years is when you buy an IPO the executive to watch is the CFO. If the company is having problems that position is a hot potato that no one wants to hold at the end.

 

[NYEXPAT]

Interestingly enough the Fed recently disclosed one of the founders gave up his US citizenship in 2011 in order to minimize the exit tax on his 3.2 billion FB holdings.

 

[frayne]

A sucker is born every minute. Who said dat ?