Facebook; what went wrong?

rbnfl
by rbnfl
05-Jun-2012
 

In a matter of few days, the eight-year-old company we know and mostly love has shed more than $33 billion in value - several billion more than the market capitalization of Morgan Stanley the lead underwriter of Facebook's IPO and slightly more than the market capitalization of Time Warner, one of the largest media companies in the world. To put it another way, close to 10% of GDP of Iran!

Fortunately most of the $33B loss was borne by large institutional investors; the minimum buy for the IPO was around $1,000,000.

Many of key executives of FB itself suffered huge dents to their net worth; Mark Zukerberg's net worth was decreased by $6 billion for example.

A significant number of unbiased (on Wall Street? Please!) analysts place a value of $16-$18 on the stock.  Many ask how this initial public offering was sold for $38 a share to highly paid professionals who buy and sell securities for a living. 

There is probably no one complete reason.  There are probably many key factors that led to this.  But the underlying problem is institutionalized fraud and looking out for personal interest only attitudes on Wall Street.

One thing is for certain.  Many of the managers responsible for buying FB IPO will be fired soon if not already.  A large number of law suits will be filed against underwriters, Nasdaq, Facebook and Zukerberg himself.  It is only a function of time.

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Anahid Hojjati

good comments by everyone

by Anahid Hojjati on

 It was overvalued. In business school there is always talk of price to earning ratio. I have not looked into this but as bavafa noted there was overvaluation involved just like we had with Dot co companies. However, the good point about facebook is that it has many users.


Faramarz

De-friend Your fb Stock!

by Faramarz on

 

 

Facebook has the best micro-kitchens on every floor, free cafeteria food (dinner too, not on Fridays), Freshly-squeezed orange juice and grass juice, toothbrush, toothpaste and aloe-vera in their restrooms and all kinds of other things, but as a business concept, there will always be something else.


Esfand Aashena

Facebook is out Twitter is in!

by Esfand Aashena on

Everything is sacred


hamsade ghadimi

the short answer to your

by hamsade ghadimi on

the short answer to your question, what happened to fb[‘s initial ipo offering]?, is that zuck is a douchebag and he teamed up with some other douchebags from wall street to maximize fb’s (and his own) net worth?  that explains the shit storm that followed immediately after the offering.

i still would bank on zuck to re-invent fb and for the very least bring up the value of fb’s stock to its initial [bogus] valuation of $38.  but i would suggest to wait for the price to stabilize before investing in fb.  my optimism for fb is that it has about a billion users with the majority who are engaged.  the users willingly part with their personal information which is highly valued by companies who actually make products (gilani’s concern); hence, the advertisement revenue.  google which relies much more on advertising for their revenue (95% as opposed to fb’s 85%) has a much better business model but it took them a while to figure it out.  i think zuck and staff will figure it out too.  and as i mentioned it helps that zuck is a douchebag, a pre-requisite for being a good company ceo.


Bavafa

I wouldn't buy it for 18 cents, literally ….

by Bavafa on

I believe those who put their $$$ in FB either had not learnt a thing from the recent history  that is overly inflated bubbles of dotcom and housing or cannot control their greed.  For a company that is relaying only on ads as a source of income and in that arena cannot compete with Television for the foreseeable future, it is nuts to gamble so much on it.

  

BTW, I don’t mean any disrespect to those who put their faith and/or $$$ in FB.

 

'Hambastegi' is the main key to victory 

Mehrdad


rbnfl

Income source

by rbnfl on

FB's main income sources at this time are ads and sponsored "stories".

They also make $ from allowing games to be played through their platform.  In a few European countries including the U.K.,they have started selling page real estate to on line gambling entities.

There are however a couple dozen more sources of revenue which have not been explored yet.

But many industries are now fighting to keep Facebook from becoming a destination for everything.  Gaming industry and companies such as Microsoft (XBOX), Nintendo (Wii) and Sony (Playstation) are creating their own communities to prevent people from playing games through Facebook.

 At the moment though future is nowhere as bright as thought even last month! 


Roozbeh_Gilani

Thank you!

by Roozbeh_Gilani on

Being an old fashioned person, I never understood how an internet based company, whose only source of revenue is adverising could be worth much, much more than the companies who build machinery, electronics, medical equipment,....., you name it. The companies who employ lots of real people, doing real work, producing real goods....

But then again, I never worked at wall street, nor would I ever trust a penny with that bunch of crooks... 

"Personal business must yield to collective interest."


First Amendment

Stocks for dummies...

by First Amendment on

What's fb's source of income?


Anahid Hojjati

lawsuits have already been filed against Morgan Stanley

by Anahid Hojjati on

and Zuckerberg. Check this link:

http://money.cnn.com/2012/05/23/technology/facebook-lawsuit/index.htm

there are many interesting developments as result of facebook's IPO. Here is a link to an article that discusses how a recent law signed by president Obama in April may affect future IPOs:

http://www.reuters.com/article/2012/06/05/us-ipo-whispers-facebook-idUSBRE85417520120605