A Load o FB ull...

Not exactly 9/11 related, at least not obviously so, but given that I quit Facebook the day they took the company public in their now infamous IPO, I need a new outlet for more conventional rants. The first time I ranted about an IPO was when Google went public in 2004. My problem with the Google IPO in a nutshell is that while the company's assets minus liabilities at the time indicated a real value of about $3 (three dollars) per share, the IPO offered the shares to the public for between $85 and $100 dollars. By the magic of the stock market, the fact that the small fraction of existing shares that were available for purchase were sold at those prices meant that the rest of the shares were also deemed by "the market" to be worth that much, making the owners of all those $3 shares very happy (and wealthy) indeed. Neat, huh?
If that little gimmick weren't bad enough, it needs to be pointed out that neither Google nor Facebook are exactly "your grandfather's stock". See, grandpa used to buy a stock because it entitled him to a share of the profits the company made. If he owned $100 of Ye Olde Tyme Widgets, Inc., he might get a check from the company every year for, say, $10--his share of the company's net profits for that year. If his only other alternative was to keep his money in a bank account paying 5% interest, then he'd be pretty happy. Of course if YOTW had a bad year and lost money, he would get no dividend check, and the value of his shares might drop to $95 as fewer people wanted to own YOTW. On the other hand if YOTW was a well run company in a growth industry, those who owned shares could expect a steady stream of revenue from their shares. The more established the company and the more reliable its profits, the more people would want to own it. Given that there would always be a finite supply of shares, people might bid up the price of YOTW to $200. If the company made the same profit, $10 per share, then YOTW would only pay 5% of your original investment. After all, the less risk involved, the less reward, which is why bank accounts can be attractive even when they only pay 5% interest a year.
At some point some companies (like Google and Facebook) decided that they wouldn't share any of their profits with their shareholders, i.e. they would not pay dividends. People would have no reason to buy the stock except in the hope that someone would buy it from them later for more than they paid. Not being a financial wizard myself, I can't quite see the point, but apparently they were right. Google's stock, for instance, defied my expectations by rising to around $700 in just a few years (before dropping to below $300 and rising again to around $600 where it hovers today.) And all this while the supply of shares has increased, not decreased, as insiders have sold to the public the shares that they owned at the time of the IPO but which were not then available for purchase.
When Facebook's stock was offered to the public at $38, the book value, or assets minus liabilities, was around $2.50 per share. When the stock dropped in the first week to the mid $20s, much was made by financial pundits about the ridiculous price of $38. They complained that Facebook's earnings (that you're not going to get a part of anyway) didn't justify the resulting valuation of the company at $100 billion. Granted, when Facebook sold all those shares, they raised cash, which gets added to their balance sheet. So the book value did go up, but not to much more than $4 (four dollars) per share. In other words, even at its low of about $25, you would be paying a premium of $21 over what the company is actually worth, not for the right to a share in the profits, but for the right to sell that share to someone in the future. In the future may be this November, when Facebook insiders will be allowed to begin selling their shares, which of course were not available for sale when the lack of demand for FB caused the price to drop by 30%.
Obviously something fishy must have to happen--and probably will--for FB to do what Google did and seemingly defy the law of supply and demand. What will happen is that the pundits, analysts, and other assorted hucksters will change their tune about those earnings FB isn't going to share with you. As it happens, FB has been rallying in the last few days, back up to over $30. This is, we're told, because FB may actually earn more than everyone thought they could. But remember, whether they earn more means nothing to owners of the stock so long as the company isn't paying dividends. It's as if the 2012 set of Topps Yankees baseball cards became more or less valuable based on how well the Yankees were playing or were expected to play, even though owning the baseball card entitled you to nothing more than selling it to someone else. And even though the Topps company plans to print millions more of those cards to sell. We all know that's not what happens with an unproductive asset like a 2012 baseball card that unlike Honus Wagner cards are not in the least bit scarce! The difference? See below.
Is the WORST Over for Facebook Shares?
By Aabha Rathee
June 19 2012
On Monday, Facebook (NASDAQ:FB) shares gained 4.7 percent, or $1.40, to end the day at $31.41. That’s still down 17 percent from its IPO price of $38, but the social network has now seen its third consecutive day of gains and shares have now climbed 21 percent since closing at $25.87 on June 5. Those lows came largely on investor worries about the company’s ability to keep increasing revenue and make money from its growing mobile audience.
However, the company has now recovered more than $10 billion of the $35 billion in market capitalization it lost following its IPO. Even its lowest point of $25.52 from less than two weeks ago now appears to be a distant memory.
What is the reason for the sudden recent rise? Facebook has been spending a lot lately, but most of it has been on acquisitions that are expected to eventually help the company get rid of its technical rough edges. On Monday, it acquired Face.com, a facial recognition software maker whose technology the social network has used for a while. It also launched Facebook Exchange, a platform for real-time ad bidding, last week, prompting R.W. Baird analyst Colin Sebastian to write a positive review of the social network to investors. Sebastian reiterated an Outperform rating on the company’s shares and his $37 price target, saying that “there are signals the company is developing a third-party ad network” that may help in monetizing mobile usage much better.
Wedbush analyst Michael Pachter told MarketWatch that the launch of Facebook Exchange showed “that they are trying.”
“The important thing is that they are mixing it up, trying to find ways to better monetize, and I think that is important,” he wrote. “I don’t think any of us can know whether allowing access to browser history really makes advertising more effective, but Google (NASDAQ:GOOG) does it and people just love them,” he added. “It makes sense that this will work for Facebook, and I think that the market is finally seeing signs that Facebook management cares about growing revenue.”
Facebook Rated a "Buy" by its IPO Underwriters: Objective?
And of course, based on this stamp of approval, your pension and mutual fund managers can put your money into it with a perfectly good (enough) alibi.
6/27/2012 @ 9:35AM |473 views
Analysts Make Facebook Cases: Buys From Goldman And Morgan Stanley, Citi Says Hold
Mark Zuckerberg, founder and CEO, shows off th...
(Photo credit: Wikipedia)
Wednesday marked the first day underwriters on Facebook‘s $16 billion initial public offering could publish research on the social network, and there were certainly some bullish views from the firms that helped bring the company to market, but a healthy measure of caution as well.
A quick glance through the new rankings show buy calls, or the equivalent, from the top three underwriters of the IPO, Morgan Stanley, JPMorgan Chase and Goldman Sachs. Also launching coverage with upbeat views were Oppenheimer, William Blair, Piper Jaffray and RBC Capital Markets, according to TradeTheNews.com.
Offering a more tempered view were the likes of Credit Suisse, Pacific Crest, Raymond James, Lazard, Barclays and Citigroup. The latter, with a hold rating from analyst Mark Mahaney, said risks include questions over the management team’s attitude toward public shareholders, a particular concern since Mark Zuckerberg has effective voting control over the company.
Mahaney says he would grow more bullish with “clear signs of mobile monetization” or evidence that advertisers are engaging more with the company, while lack of such improvements, or signals of Facebook fatigue, would turn his view more bearish.
In that camp he would be joined by the likes of BMO Capital Markets, which ranks Facebook at underperform with a $25 price target. The firm argues that with decelerating user growth Facebook must show better pricing power to support its still-rich valuation of 67 times next year’s earnings.
Facebook’s stock price, which may have had bullish analyst views baked in after a recent rally, lost 3.4% Wednesday morning.
This article is available online at:
http://www.forbes.com/sites/steveschaefer/2012/06/27/analysts-make-faceb...
Newsflash: Emperor Nude!
Facebook stock continues to plunge. Current book value per share (assets minus liabilities) is just over $6, stock trading at $21. Why? One person seems willing to tell the truth...
http://www.huffingtonpost.com/janet-tavakoli/facebook-stocks_b_1708225.h...
Janet Tavakoli
President, Tavakoli Structured Finance
Facebook: Is Stock Research Rigged?
Posted: 07/26/2012 9:36 pm
Facebook announced its earnings on July 26 after the close of trading. Its share price fell 8.5 percent to 26.845 before the market close in the wake of Zynga's dismal report. Facebook's own report raised questions, and shares fell 10.7 percent to 23.97 (as of this writing) in after-hours trading.
While Facebook claims 955 million active users, that doesn't translate to protected revenues. Its sales increased to $1.18 billion, but it earned only 12 cents per share (adjusted) for the second quarter of 2012. Facebook had a fourfold increase in marketing costs and its operating margin declined to 43 percent from 53 percent last year. It also took a one-time charge for stock-award accounting to post a loss for the quarter of $157 million for an unadjusted loss of 8 cents per share.
Analysts' Rosy Price Targets
ZeroHedge.com shows that stock analysts--including analysts whose firms made handsome fees for participating in Facebook's May 17th IPO -- had recent average price targets of $37.74 for Facebook. This is just below the IPO price. Only one of 38 analysts had a sell recommendation on Facebook.
How do these "analysts" justify a multiple that is higher than 95 percent of the stocks in the S&P 500? It seems that either analysts are compromised, or they are painting overly optimistic scenarios based on nothing more than hope. It's interesting that their hopes are aligned with the hope some of their firms have for future fees.
Over-Hyped IPO
After Facebook's May 17th IPO, I made a public bearish bet on Facebook. I made a bet it would fall in value, or at least that sentiment would turn negative. I took a profit on the bet in June. If I had failed to monetize at a profit, I could have called JPMorgan CEO Jamie Dimon to claim it was a hedge, since he had the nerve to pull that one when he appeared before Congress to explain billions of dollars in losses on credit derivatives bets in his London CIO unit. (Dimon later admitted it changed into something else, i.e., a bet.)
Facebook's IPO was emotion in motion. It seemed to me the pricing was based on hot air. At the time Facebook had $3.7 B in annual revenues of which 85 percent came from advertising, and it had only $1 billion in net income.
In my opinion, the game was to bring the IPO at an inflated value and hope Facebook can acquire viable companies with its inflated shares. It's a game of brinkmanship. The investment banks that helped inflate Facebook's share price may stand to earn fees as Facebook acquires other companies. Unfortunately, the fall in value puts a damper on these plans.
More obvious truths about "investing" in stocks
Intelligent Investing
Ideas from Forbes Investor Team
Aug. 2 2012 — 10:51 am | 0 comments
Beware Of IPOs And ‘Over-Owned’ Stocks
Posted by Bert Dohmen
Most people are not aware that most IPOs are now selling below the issuance price. There was a time in the markets when getting in on an IPO was like printing money. No longer!
CNBC’s Gary Kaminsky, who is truly on the side of the individual investor, revealed that more than $50 billion has been lost by investors who would have been able to buy the biggest four IPOs this year. Of course, the insiders who sold the stock made billions while naïve money managers lost their client’s money. Thank you, Gary, for the courage to bring those numbers.
I am always skeptical of hype, especially when it concerns IPOs. Investors should always ask, why are the insiders selling me their stock if it’s so valuable? When companies go public, it’s basically for two major reasons:
Provide better access to the credit markets in order to raise capital for future growth. (That was in the “olden days.”)
Provide an exit for early investors and the founders who see that the major growth period is over, that the competition is gaining on them, and that it’s time to head for the exits. (That’s today’s most common reason.)
You have to decide which it is in each case. The capital markets have changed. Now it’s possible for private companies to sell lots of stock to individual investors. It’s not necessary to have a public company. Before its IPO, Facebook did a lot of that.
Therefore, when a company like Facebook (FB) does go public, you have to ask “why.” We may have gotten the answer. The stock is down 60% from its IPO price. Social media is waning. Monetizing the “free” model is not easy.
It pays to be suspicious. I go by the motto: “Beware of the man who will give you the shirt off of his back.”
even more obvious truth about the Facebook stock meltdown
http://wallstcheatsheet.com/stocks/shocker-facebook-sinks-below-20.html/...
SHOCKER: Facebook SINKS Below $20
By Aabha Rathee | More Articles
August 02, 2012
Shares of Facebook (NASDAQ:FB) hit a record low for the third straight day, dropping more than 4 percent to go below $20 for the first time ever in intraday trading on Thursday. Facebook, which traded as high as $45 on its opening day of trading in mid-May, is less than half of that now.
According to Topeka Capital analyst Victor Anthony, it will take the social network until the end of next year to get back to the range of its $38 IPO price. “There’s huge negative sentiment [on the stock] and there hasn’t been a counter to that,” he said.
While Facebook has been working on trying to introduce new systems of advertising in order to address the earliest and deepest concerns since the company went public, results are yet to be seen. According to Morningstar, there were still several risks as the social network sharpened its targeted advertising models. One issue could be increased regulation on whether it would be allowed to track user behavior more closely. Morningstar said it expected shares to fall for the “next several quarters.”
But while concerns about Facebook’s mobile advertising and revenue models stay strong, an even more urgent issue right now is a series of lock-up expirations for the company’s shares. Later this month, employees and early investors will be allowed to release more than 211 million shares to add to the 484 million that were floated in May. There are additional lockup expirations in subsequent months, which means Facebook could potentially free up almost 1.7 billion shares soon.
The company also lost three top executive this week, with its director of platform partnerships, Ethan Beard; platform marketing director, Katie Mitic; and mobile platform marketing manager, Jonathan Matus, announcing their respective pending departure.
Nobody could have anticipated this!
I mean just look at the stories that were coming out of the business press in the months before the IPO...
http://www.reuters.com/article/2011/12/09/us-facebook-millionaires-idUST...
Facebook IPO sparks dreams of riches, adventure
By Alexei Oreskovic and Sarah McBride
SAN FRANCISCO | Fri Dec 9, 2011 7:50am EST
(Reuters) - Traveling to space or embarking on an expedition to excavate lost Mayan ruins are normally the stuff of adventure novels.
But for employees of Facebook, these and other lavish dreams are moving closer to reality as the world's No. 1 online social network prepares for a blockbuster initial public offering that could create at least a thousand millionaires.
The most anticipated stock market debut of 2012 is expected to value Facebook at as much as $100 billion, which would top just about any of Silicon Valley's most celebrated coming-out parties, from Netscape to Google Inc.
While weak financial markets could postpone or downsize any IPO, even the most conservative market-watchers say Facebook seems destined to set a new benchmark in a region famous for minting fortunes, with even the rank-and-file employees reaping millions of dollars.
Facebook employees past and present are already hatching plans on how to spend their anticipated new wealth, even as securities regulations typically prevent employee stock options from being cashed in until after a six-month lock-up period.
"There's been discussions of sort of bucket list ideas that people are putting together of things they always wanted to do and now we'll be able to do it," said one former employee who had joined Facebook in 2005, shortly after it was founded.
He is looking into booking a trip to space that would cost $200,000 or more with Virgin Galactic or one of the other companies working on future space tourism. That's chump change when he expects his shares in Facebook to be worth some $50 million.
"If that IPO bell happens, then I will definitely put money down," said the person, who declined to be identified because he did not want to draw attention to his financial status, given the antiglitz ethos of many people in Silicon Valley. "It's been a childhood dream," he said of space travel.
Others are thinking less science fiction and more "Indiana Jones." A group of current and former Facebook workers has begun laying the groundwork for an expedition to Mexico that sounds more suited to characters from the Steven Spielberg film "Raiders of the Lost Ark" than to the computer geeks famously portrayed in the movie about Facebook, "The Social Network."
Initially, the group wanted to organize its own jungle expedition to excavate a relatively untouched site of Mayan ruins, according to people familiar with the matter who also did not want to court notoriety by being identified in this story. After some debate earlier this year, they are now looking at partnering with an existing archeological program.
BIG PACKAGES
Founded in a Harvard dorm room in 2004 by Mark Zuckerberg and his friends, Facebook has grown into the world's biggest social network with over 800 million members and revenue of $1.6 billion in the first half of 2011.
Information about its ownership structure or employee compensation packages is hard to come by, since the still-private company discloses very little. Facebook declined to comment for this story.
It is clear that Facebook's earliest employees, who were given ownership stakes, and early venture capital investors -- such as Accel Partners, Greylock Partners and Paypal co-founder Peter Thiel -- will see the biggest paydays. Zuckerberg, 27, is estimated to own a little over a fifth of the company, according to "The Facebook Effect" author David Kirkpatrick.
But the wealth will trickle down to engineers, salespeople and other staffers who later joined the company, since most employees receive salary plus some kind of equity-based compensation, such as restricted stock units or stock options.
Facebook's headcount has swelled from 700 employees in late 2008 to more than 3,000 today. Given its generous use of equity-based compensation in past years, people familiar with Facebook say that even by conservative estimates there are likely to be well over a thousand people looking at million-dollar-plus paydays after the company goes public.
"There will be thousands of millionaires," said a former in-house recruiter at Facebook, who did not want to be identified because of confidentiality agreements.
Lou Kerner, the head of private trading at Liquidnet, estimates that Facebook now has roughly 2.5 billion shares outstanding, which would translate to a per-share price of $40 at a $100 billion valuation.
Engineers are the most richly rewarded among the rank and file. The former Facebook recruiter said as recently as 2009, the company gave an engineer with 15 years experience options to buy about 65,000 shares at around $6 per share.
After a 5-for-1 stock split in October 2010, the engineer would now have the right to buy around 325,000 shares. Assuming a $40 share price, that would yield a profit of more than $12 million.
According to another former Facebook employee, it was not unusual for the company to offer some executive-level hires up to 100,000 restricted shares as recently as three years ago.
The company has since cut back on equity compensation for new hires. Managers hired one year ago received 2,000 to 30,000 restricted shares depending on the job function, according to another recruiter who had also worked for Facebook.
The company has also been stingier in handing out equity to noncore employees -- so there may not be as many of the dazzling rags-to-riches stories that were commonplace at the time of the Google IPO, when in-house chefs and at least one masseuse struck gold with options.
Facebook has its share of chefs -- including head chef Josef Desimone who was lured away from Google -- and other support staff, but it's not clear how many of them were awarded share options.
These days, "Google and Facebook are notorious for hiring contract employees they don't have to give equity to," said the second former Facebook recruiter.
HAVES AND HAVE-NOTS
Facebook's IPO has been long anticipated, but veterans of other startups that have gone public say the period after could be fraught with new challenges.
Some employees could grow jealous over colleagues with more stock, while others might look down on peers who are too quick to sell, questioning their loyalty to the company.
And there is always the risk that talented staff would leave with their newfound wealth to make their own mark in the technology world by becoming entrepreneurs or investing in other promising startups.
Some Facebook employees have already left the company to do that, selling their shares ahead of the IPO on private exchanges such as those run by SecondMarket or SharesPost.
One such person is engineer Karel Baloun, who joined the social network in 2005 and left just over a year later to start his own online network for commodities-futures traders, funded by a tidy package of stock options. It failed and Baloun laments that he could have made a lot more money if he had stayed at Facebook.
But he is philosophical, saying that the equity windfall gave him the cushion to do new things.
"It's really wonderful being able to choose your work based on the meaning of it, not the size of your salary," said Baloun, now chief technology officer at mobile-commerce company Leap Commerce. "I have two kids, and I couldn't do it if I didn't have some savings from this IPO."
Baloun said he has sold about half his Facebook shares and is holding on to the rest until after the IPO. "I will buy a house," he said.
WEALTH MANAGERS SALIVATE
For many of Facebook's staffers, the IPO will provide the means to pay off school loans and buy a house or new car. Home prices in the San Francisco Bay Area have typically been lofty, but many homeowners and real-estate agents are eagerly anticipating a surge of new buyers flush with money from the IPOs of Facebook and other Web companies.
"Watch for Facebook proceeds to buy Palo Alto real estate," said David Cowan, a venture capitalist at Bessemer Venture Partners who backed social network LinkedIn Corp, among other companies.
Wealth managers and investment advisers are also looking to win new clients from the Facebook crowd.
"A lot of them are going to be multimillionaires at 30 and live to be 100. That means creating a 70-year plan, which is unheard of," said John Valentine of Valentine Capital Asset Management in San Ramon, California, noting that his average client plan spans about 35 years.
Valentine, whose firm manages about $600 million in assets, said he plans to break into the Facebook client base through connections with venture capital firms, and he has meetings set the next two weeks to leverage those relationships. "It's the hot ticket in Silicon Valley," he said of Facebook.
David Arizini, managing director of Constellation Wealth Advisors, has several current and former Facebook employees as clients and hopes they refer more of their friends.
But he knows that it will take time and work to win them over for his firm, a New York and Menlo Park-based wealth manager with about $4.5 billion in assets under management.
"They are very skeptical of the financial services industry largely because of what has transpired over the last three years," he said. "So the bulk of clients interviewed five to 10 advisers before they made their choice."
The imminent flood of Facebook dollars is sure to provide a welcome boost to local businesses in Silicon Valley, from high-end car dealerships to wine merchants.
Buff Giurlani, founder of car and wine storage service AutoVino in Menlo Park, is looking forward to an acceleration in already-brisk trade. "If a Facebook guy buys a house and wants to remodel it, maybe the contractor will buy another car," he said. "Maybe the realtor will put a car in. There's a trickle-down effect."
For Facebook's younger staffers, who favor jeans and T-shirts over designer suits, the shopping sprees will almost certainly involve computers and electronics.
"Start packing pepper spray for your next trip to the Apple store," said Bessemer Venture's Cowan.
(Reporting by Sarah McBride and Alexei Oreskovic, additional reporting by Ashley Lau and Jilian Mincer, editing by Tiffany Wu and Matthew Lewis)
Bot clickin'
To be sung to the tune of Grace Jones' "Nightclubbing"
http://news.cnet.com/8301-1023_3-57485745-93/questions-mount-as-facebook...
Questions mount as Facebook advertisers lose to clickbots
Violet Blue
August 2, 2012
A relationship with a startup sours when 80 percent of pay-per-click ad traffic turns out to be costly, invalid traffic. The issue may not be isolated. Is Facebook doing enough to solve the problem?
On Monday, a startup revealed that it was ending its presence on Facebook, alleging it had paid the social network for a shocking amount of automated ad clicks. In its examinations, Limited Run charged that at least 80 percent of the clicks came from invalid traffic, or clickbots.
Facebook gets paid whenever someone clicks on an ad that advertises an ad client's page. It's called pay-per-click advertising.
The situation continued despite complaints to Facebook, and then when Facebook told Limited Run it would need to pay $2,000 monthly to be able to update the company's Page name, enough was enough.
Despite a sizable outcry from tech forums such as Reddit's r/technology and Hacker News, Facebook issued a troublingly unsatisfying statement -- and Limited Run has deleted its Facebook presence entirely.
But now it looks like Limited Run's claims were just the tip of the clickbot revenue inflation iceberg.
As Limited Run's statement made the Internet rounds, it was clear that it was absolutely standing by the claims that they'd been paying Facebook for the 8 out of 10 fake ad clicks.
Meanwhile in the forums, a significant number of other Facebook ad buyers started to speak up with disturbingly similar and detailed stories... (more at link)
Not to mention that I still see no ads on mobile FB...
I mean, shhhh, but when my solitaire app shows me the crapton that it does, you might think they would figure this one out.
Also...
... Do advertisers not realize there are such things as ad blockers on browsers? It doesn't matter to facebook, though, since their IPO netted them 16 billion dollars to play with they're now more hedge fund than anything else...