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kevin1981
2012-May-19, 10:59 PM
I was hoping someone could give me some answers to a few questions i have :)

Why is Facebook being floated on the stock market ? What are the benefits ? It seems to be doing fine as it is,
why change things ?

What are the disadvantages to being floated on the stock market ?

Cheers

Trebuchet
2012-May-19, 11:11 PM
In theory, the benefit is that it gives the company more capital to work with. In practice, it makes Mark Zuckerberg very rich!

Ara Pacis
2012-May-19, 11:15 PM
Also, the venture capitalists who gave them the initial startup money want to lock in their profits by selling their shares to the next sucker.

Romanus
2012-May-19, 11:26 PM
What are the disadvantages to being floated on the stock market ?

A private company has a lot more freedom wrt its finances; public companies are (probably) not only more volatile, but they are (by definition) beholden to investors who will settle for nothing less than consistent increases in profit. Expect FB to become more aggressive with new programs and updates that you'll have little or no choice in accepting as a member, as well as more and more agreements with other sites and companies.

HenrikOlsen
2012-May-20, 07:33 PM
As one joker put it:
They're going public because they can't figure out their privacy settings either.

Chuck
2012-May-20, 08:21 PM
With lots of investors, maybe they're too big to fail.

Van Rijn
2012-May-20, 10:20 PM
As one joker put it:
They're going public because they can't figure out their privacy settings either.

I've never used Facebook because I haven't seen what it would provide that I need and because I've read far too many stories about how you have to fight it just to keep any information private. It's easier just to avoid it completely. I still can't believe Amazon keeps asking me if I want to post my purchases on Facebook. I can't even imagine wanting to do that.

Ara Pacis
2012-May-21, 05:54 AM
As one joker put it:
They're going public because they can't figure out their privacy settings either.This makes me wish BAUT had a "like" button. :)

pzkpfw
2012-May-22, 10:31 PM
It's all a mystery to me.

http://www.stuff.co.nz/business/world/6969440/Facebook-shares-tank-call-for-review


Facebook's shares fell sharply again overnight and two top US financial regulators called for a review of the circumstances surrounding its troubled initial public offering last week.

The separate calls for review, by Securities and Exchange Commission Chairman Mary Schapiro and FINRA Chairman Rick Ketchum, added pressure on the company, its underwriters and the Nasdaq, all of which have taken blame for the stock's harried opening and subsequent sharp decline.

After Friday's nearly flat close and Monday's 11 percent plunge, Facebook shares were down 5.9 percent at US$32.01 in mid-afternoon trading. At that price the company has shed more than US$16 billion in market capitalisation from its US$38-per-share offering price last week.

...


(Been there done that. Inherited $1,250 NZD in 1987, when shares were all the rage. Bought stock in a local bank that was doing its (I think it'd be called) IPO. Turns out the initial value was way over priced, and the shares immediately sank and never regained their value. Had to sell 'em four years later (needed the $), got about 2/3 my money back. Even the expert commentators all seemed in agreement that the experts who set the initial price were way wrong. Of course, hindsight is way easier than prediction.)

HenrikOlsen
2012-May-23, 07:58 AM
It probably didn't help that the underwrites dramatically cut earnings expectations in the middle of the IPO.

A nasty (CT worthy?) thought is that they actually think it's worth a lot more, but sabotaged the IPO to get lots of the shares cheap while making it look like they were the good guys helping to prop up the price at the same time.

Cougar
2012-May-23, 01:24 PM
I've never used Facebook because I haven't seen what it would provide that I need and because I've read far too many stories about how you have to fight it just to keep any information private. It's easier just to avoid it completely. I still can't believe Amazon keeps asking me if I want to post my purchases on Facebook. I can't even imagine wanting to do that.

I am so with you on this. I am so glad facebook stock is falling, falling.... I just do NOT like Zuckerberg.

jokergirl
2012-May-23, 01:31 PM
As one joker put it:
They're going public because they can't figure out their privacy settings either.

Wasn't me. But it's a good one. Made me groan. >.<;

Ara Pacis
2012-May-23, 04:46 PM
It probably didn't help that the underwrites dramatically cut earnings expectations in the middle of the IPO.

A nasty (CT worthy?) thought is that they actually think it's worth a lot more, but sabotaged the IPO to get lots of the shares cheap while making it look like they were the good guys helping to prop up the price at the same time.

Some of the stuff I've read suggests the opposite, that it was bid up high last year by investors and people are trying to sell their shares to lock in the value before the public turns against Facebook in a big way. They probably should have had their IPO a year ago.


I just do NOT like Zuckerberg.True, but at least he doesn't automatically friend you when you sign up, like Tom did.

Swift
2012-May-23, 05:45 PM
It probably didn't help that the underwrites dramatically cut earnings expectations in the middle of the IPO.

A nasty (CT worthy?) thought is that they actually think it's worth a lot more, but sabotaged the IPO to get lots of the shares cheap while making it look like they were the good guys helping to prop up the price at the same time.
Even ignoring any such possible manipulations, I think Facebook was way over-valued for its IPO (based on analysis I heard and read in various places before the IPO).

The normal way to value a company's stock is to look at the ratio of the asset value of the company (the total number of shares times the price per share) divided by the yearly profit. For a typical company, this ratio is in the 10s (say 20 to 50). For Facebook, at the share initial selling price, this value was in the hundreds, because their profits are actually pretty modest (a few million a year, IIRC), but they were valued way high (I think it was around a billion dollars).

All their profits are from advertising. In order for Facebook to get their value to profit ratio into a more normal range, they would have to increase their profits by a factor of 10 to 30 (if I remember the numbers correctly). To do that, Facebook would have to receive a very large percentage of all money spent on advertising, in all media, across the whole planet. IMO, that is not going to happen.

That initial valuation of Facebook was, I think, way inflated. What is Facebook's real assets: a big database of personal data, and an idea. They were valued at multiple times the value of well established companies with actual physical assets, like equipment, plants, and IP, and actual well-established profit streams. It seems absurd.

pzkpfw
2012-May-24, 07:37 PM
...
All their profits are from advertising. In order for Facebook to get their value to profit ratio into a more normal range, they would have to increase their profits by a factor of 10 to 30 (if I remember the numbers correctly). To do that, Facebook would have to receive a very large percentage of all money spent on advertising, in all media, across the whole planet. IMO, that is not going to happen.
...

That article agrees with you.

I'm sure I read somewhere (can't find the link now) that HP was withdrawing from advertising on Facebook. They'd done analysis and decided it just wasn't generating the required returns.

NEOWatcher
2012-May-24, 08:15 PM
That article agrees with you.

I'm sure I read somewhere (can't find the link now) that HP was withdrawing from advertising on Facebook. They'd done analysis and decided it just wasn't generating the required returns.
I heard that too, but being that HP is in a huge cost cutting mode at the moment, it's hard to pin it on Facebook or HP problems.

But; I have heard alot in the news about people not trusting the ads in Facebook.

pzkpfw
2012-May-24, 09:00 PM
Sorry, maybe I meant GM?

http://www.indiadigitalreview.com/features/gm%E2%80%99s-facebook-pullout-are-fb-ads-ineffective-garnering-consumer-impact


General Motors, which reportedly spends close to $40 million on Facebook, had recently said that it will stop advertising on Facebook, saying that Facebook's ads had little impact on consumers. The decision by GM marks the first highly visible crack in Facebook's strategy and underscores doubts about whether advertising on Facebook works better than traditional media.

Of course the cost cutting thing probably applies to them too.

dethfire
2012-May-24, 09:07 PM
I am so happy I didn't jump on the wagon. I was so pissed I missed the Google boat though. Who knows these days.

Ara Pacis
2012-May-24, 11:25 PM
I heard that too, but being that HP is in a huge cost cutting mode at the moment, it's hard to pin it on Facebook or HP problems.

But; I have heard a lot in the news about people not trusting the ads in Facebook.Of course, the general economic climate may also affect ROI on all advertising, but especially on items that often require loans in a high-unemployment and credit-risk-averse climate.

publiusr
2012-May-25, 09:40 PM
It saddens me to see real money generated by something other than real products. Venture capatilists flee from anything with up front costs (VLJ, durable goods made here) and line up in droves to fund things that only exist on screen. All that's left is for us to sell hamburgers to each other.

Solfe
2012-May-26, 02:17 AM
I saw a good one today - "How do you become a millionaire? Invest a billion dollars in Facebook stock".

38.00 bucks a share was way too high.

HenrikOlsen
2012-May-26, 08:50 AM
It saddens me to see real money generated by something other than real products.
So people shouldn't be able to make money washing other people's windows?

Ara Pacis
2012-May-26, 04:02 PM
It saddens me to see real money generated by something other than real products. Venture capatilists flee from anything with up front costs (VLJ, durable goods made here) and line up in droves to fund things that only exist on screen. All that's left is for us to sell hamburgers to each other.

But what about entertainment, like television? Facebook is kinda like that with a bit of telephone and mail service and photo-album thrown in.

Nicolas
2012-May-26, 05:22 PM
True, but at least he doesn't automatically friend you when you sign up, like Tom did.

Tom was my best and only friend...

Until the spambots found my account.