| ||||||
In a new op-ed for CNN.com, Damodaran addresses the idea that the Facebook pricing and offering was some sort of conspiracy cooked up by Facebook and its bankers to cash in by to screwing new investors.
"I don't buy this story," he writes. "First, unlike many others who have seen the crises of the last few years as evidence that bankers are evil, I see them more as inept. Facebook's IPO is just proof that if you want something valued, you should not ask a bank to do it."
As he sees it, it was in no one's interest to intentionally overprice the stock. The bankers face major damage to their reputations, the Facebook insiders will have an even more challenging time unloading their shares, and the big institutional investors who reportedly had an informational advantage are facing huge losses.
So, why was the pricing so off? Damodaran explains:
I think the investment bankers priced the offering based on how shares of Facebook were trading in the private market and their assessments of institutional demand. I don't think that revenue growth, margins, risk or any other fundamentals played much of a role in the pricing. I don't fault them for playing the momentum game, but they played it badly.
So, rather than focusing on fundamentals, the bankers were looking at price momentum metrics, which Damodaran considers to be a considerably riskier exercise. In fact, the reason he dumped Apple was because it was looking much more like a momentum stock, rather than one that traded on value.
Read the whole post at CNN.com.
C'mon....Is this guy really that naive?
Anyone with a bit of common sense will conclude that the Facebook IPO was a calculated and orchestrated event by very smart insiders.
Quite honestly and frankly, I wouldn't touch the stock at any price; I don't like their company ethics and they're full of CIA/Mossad connections, from what I hear. But it's certainly not genuinely worth above $20 at present and even that is generous. They are worth about $20b at a 15 P/E and should have been released at that price, which is actually under $10 a share. Speculative money and money from Facebook's own large institutional investors and backers keeps propping up the stock at the grotesque valuation it's at.
Facebook can justify a $38 per share valuation when it has $10b in yearly revenues; they currently have between $1b and $2b.
Anyone who believes they are going to $20b in revenue someday, feel free to buy up as much of this stock as you want. I want to see proof that they are not going to get clobbered like they clobbered Myspace, first - I know a great deal of Facebook users, and power users as well (average friend count > 1000) who are FURIOUS with Facebook's data mining policies and snooping and ready to jump ship as soon as the next better network comes along.
Remember what happened to Myspace? It went from being valued at $660m to $36m in less than five years as its competitors (including Facebook) eventually ate its lunch. Facebook itself now has tons of competitors and there are very few barriers to entry in the social networking sector.
Enjoy the ride, people.
If you knew so much about Apple and stocks in general, if you could predict their future price you would keep it to yourself. Instead you come here to bash anyone who disagrees with you. This shows the little confidence you have in your own arguments.
http://seekingalpha.com/user/926530/instablog/full_index
IPOs need to be released to all investors simultaneously, or you will see this happen on EVERY IPO - there's a tremendous amount of speculative money floating around at the top of the market that does not care about anything but itself, and it WILL inflate every IPO with potential before the release, then take profits off the hype and crash the system.
http://en.wikipedia.org/wiki/Pump_and_dump
Bush and Obama both deserve a great deal of the blame for de-fanging the SEC and allowing this to happen, quite frankly. The SEC may as well be a kennel full of puppy dogs for all the protection they give, anymore.
anyone that wanted to buy facebook could have gotten in between 38-42 instead of some vastly inflated price
It would be nice if web 2.0 companies would IPO much sooner though instead of going the 2nd market route
http://seekingalpha.com/user/926530/instablog/full_index
Sorry, but 38-42 is a grotesquely inflated price for Facebook, corresponding to a P/E between 70 and 100 depending on the revenues for this year. This is like saying "Well people could buy pencils for a dollar each at our special event instead of some vastly inflated price!"
Are you a Facebook employee or shareholder? Full disclosure, please.
The PE ratio is high, but not obscene for a fast growing internet company. Google wen IPO with a PE rario of 100. LNKD has a PE ratio of 600. The market sets a valuation depending on a multitude of factors, but a high pe ratio isn't in any way indicative of fraud of foul play.
If it's so cut and dry that facebook is overvalued I implore you to short it.
http://seekingalpha.com/user/926530/instablog/full_index
Facebook might make it work; and then again they might get creamed like Myspace, too. I see customer dissatisfaction with Facebook that I never saw in Google. I consider them vulnerable; but you don't have to agree - it's your money, you can do what you want with it.
As a postscript, if you like LinkedIn at its present P/E of 609, suffice it to say you and I have radically different notions of what constitutes a good investment.
I don't short sell. I consider it a form of "investing" that adds no value to the economy and have ethical objections against the practice. Even if I didn't, Facebook also saw damn near a pump-and-dump on its opening day by Morgan Stanley and has CIA and DARPA connections - why would I short a price-manipulated stock with those kinds of immune-from-prosecution sharks in the background?
http://www.therealnewsonline.com/2/post/2012/01/facebook-and-its-connections-to-the-cia-and-darpa.html
I don't bet against the CIA, pal, nor do I play at rigged poker tables. Far better to boycott it entirely and speak out against it.
All that being said, if Morgan Stanley and all the various interests propping up the price of this stock would stop doing it, I don't think it's worth $15. You have a good day.
(a) We had a bubble driven by Facebook.
(b) Facebook was and is hugely overvalued, on the basis of what they might become rather than what they are. The song goes like so: "900M users sharing photos SHOULD be a huge business."
Then came reality
(c) The USPS reaches 300M users in the US alone, and 7B worldwide and is lousy business.
(d) Facebook is just the electronic replacement for the picture postcards segment of the USPS.
Insider greed overpriced the IPO. As the tide ran out we can tell who is naked.