Facebook down on IPO price

[FAST6191]

I do not do much stock market stuff for myself these days but it is an interesting development considering the company and what some have taken it to represent. This is not really news either (it being several days old) but that has allowed time to settle a bit.

Basic introduction to such things
For those that do not know when you create a company beyond sole trader stuff you can sell parts of the company to others either with the promise of a seat on your board/say in the company, a share of the profits, a share of some profits (see dividends) or some combination of the lot. Initially you will probably speak to angel investors (individuals with a fair bit of money that like to invest in people) and venture capital firms (companies that invest in new companies so as to make money) and they usually will want you to start trading on a public stock market with the first time you join the market being known as an initial public offering (IPO). Not all companies do IPO (in games Valve are still a private company) and some will get purchased outright but it is a very common path to follow.
Stock prices do not necessarily (in fact rarely) reflect actual worth of the company but they are quite important for those that play in the financial world as it can mean a lot if you are looking for a loan, looking to be taken over or doing some takeovers (if facebook wanted to take over a company and was going to trade some of their shares for it and the company to be taken over was stable that company's shareholders might say no because of it).

Normally a tech company like facebook would have expected to see a rise on the IPO value but instead it saw a drop which would have been worse but underwriters for facebook started buying shares and has continued to drop and hover somewhat. The run up to the IPO and some of the stuff that came before (private investment was sought a while back and rumoured to be higher than the IPO value) was fairly interesting as well.

Now this is not a financial site and frankly I am not a financial person and for that matter facebook's existence does little other than amuse me but facebook is a reasonably big player in the tech world and them not managing to pull off a successful IPO has some larger implications for them as a whole (their ability to actually generate profits (profits/earnings ratio) has been questioned many times already). More will probably happen when the insiders are allowed to trade their stock in a couple of months (apparently it is quite a short timeframe) and there are all sorts of interesting things that might be going on.

A chart

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So thoughts and thoughts on the implications of it.

 

[narrateP]

Oh, mine.
11 percentage down means that 10 Billion dollar was disappear in one day, too big also mean too small sometimes.

 

[Zetta_x]

The problem is that facebook IPO had too much public hype. Everyone who is anyone knows about facebook and amongst average families the IPO date spread like wildfire. It was overhyped and overestimated by many people (people who thought they could instantly get rich). Wealthy people created the first spike drop and then naturally it was predicted to scare a lot of the below average investors which created a downward trend of a semi-panic attitude. The wealthy people who created the first spike drop anticipated the trend to reduce the price significantly in which then they can buy stock 25% of initial value.

It will then continue with an upward trend as long as facebook continues to grow making the wealthy in complete control. Stock has too much dependence on people. AKA The value for stock is not random. To us average day people who absolutely have no significant influence on stock, it's random to us. It's like flipping a coin, while we may not be able to control whether or not it lands on heads or tails, the idea of the coin is nothing but spatial and physics (something that can be predicted). The people who maximize profits from stocks are the people who have large influence and can exploit the average day person with stocks; otherwise, you take your chance.



Edit: speaking of unusual observations; Fast, you are too intelligent for your own good.

 

[FAST6191]

Can't say I disagree with that assessment (it mirroring a lot of what happened in the last for want of a better term tech bubble) but I will say I know/do stuff for more than a few people that make some money from playing stock markets and do for the most part go long and shorting things is a technique but not standard practice.
This is not to say I do not get the same feeling when speaking to some of the people engaged in high frequency/high volume price manipulation/game theory driven trading as I do speaking to some of the slimier SEO people although they can continue buying FPGAs and driving the price of those down if they want. The really amusing part for me is when that second group moan about Mr middle class giving it a punt (and frankly spread betting software is a piece of piss to use and provided you put the time in to learn a bit a reasonable place to stash savings) and in doing so not following the "rules" and/or creating instability to their detriment.

 

[Zetta_x]

While I haven't invested in any stocks (although the stipend attached to my fellowship for my Ph.D. is giving me more motivation to study it), I have played RuneScape. While the game developers have controlled a lot of the market for in-game items, having more than max cash in the game allows for more influence on how the item price fluctuates. Believe me, I didn't get max cash by just predicting prices, I did a number of manipulation techniques with a group of people to influence it. However, a lot of items on RuneScape are independent of other items, it makes predicting very easy. In real life, where there are large dependencies between different stocks, it's much harder to just intuitively predict prices.

I have relatives that were pretty excited about the facebook IPO and invested more then they should especially because they are thinking about selling. I can only imagine how many middle class people who invested more then they should have thinking everyone was just going to buy and for the prices to skyrocket which equals instant rich. I'm pretty balanced, while I do think it's nice to have extra money, I feel it would shift my "wants" positively too much where I would be forced to spend more.

 

[FAST6191]

Yeah I see versions of that on forums and such all the time and probably the most notable of such things would be things like when digg was effectively being controlled by a group of a handful of users and some of the discussions of potential failings of bitcoin hinged on similar principles.

I do not think I know anyone directly burned by this IPO going sideways (pension funds and such are probably a different matter but they as you say will probably sell and buy back with an eye towards the long term) but I have not spoken to many of those that play in this world since it happened and between fees and projected gains not many others would have had enough liquid assets to make it worthwhile.

As for lots of money I came down on the lots of free time instead side of the equation and it looks like I will probably stay there for a while (although part of that would be the effort to increase things).

 

[Zetta_x]

That's why your knowledge is far advanced than the average person; enough time and motivation can accomplish way more than the average. Although, I feel most people lack motivation, they have the time...

 

[nando]

mark sucker berg still made his billions regardless.

still funny for the people that bought into it

 

[Gahars]

I think we're going to need to wait and see how it all plays out. I wouldn't put much stock into these numbers right now.

 

[chains_of_androm]

Most likely overvalued and pumped to many shares..looks like the underwriters might get in trouble for concealing info.

 

[FAST6191]

NYtimes put out an interesting alternative analysis
http://www.nytimes.com/2012/05/26/opinion/nocera-facebooks-brilliant-disaster.html?_r=1

 

[triassic911]

NYtimes put out an interesting alternative analysis
http://www.nytimes.c...aster.html?_r=1

As someone who has basic knowledge on the stock market & wall street, that was a very interesting read. They seem to suggest that with IPO's, up is down, and down is up. Despite Facebook's decision, their status is very well on par with Google (for example).