Facebook's Epic Fail

[sassofalco]

The whole edifice is about to come crashing down with dire consequences for the world economy, I fear.

Money is the root of all evil, but as to what the alternative is, I haven't got a clue.

Bartering?

....green exchange of goods and services - I do

The Sepoys

 

[BugMeister]

Hi there.

Half the fun of Facebook was its innovation and "Non Corporate" stuff.
If the boring "men in suits" now have it then loads of users will go elsewhere and soon R.I.P Facebook.

Good luck to the guys who've made their pile -- If I were them I'd take the money NOW and run.

With digital stuff - empires can arise and sink faster than you can say Dot com or California Taxes.

The business model IMO is slightly suspect in any case -- who wants to be "Targeted" (aka "SPAMMED") as a user for "advertisers".

- I've actually opened a second rubbish email account which I use whenever I buy anything from Amazon etc -- I DON'T want to be bombarded with loads of "Special offers" from today until the end of the lifetime of the universe just because I was dumb enough to use amazon to buy a book or a set of DVD's.

I just BIN every email from that address too -- keeps all the "special offers" and 99% of SPAM away from my "Real" account too.

A lot of these social networks will have to start re-inventing themselves into useful niche networks if they are to survive.

Just look at the load of utter crud that emanates from twitter these days -- who cares if you've just "gone to the loo" or whatever.

In any case I always prefer "REAL" people and friends to "Virtual" ones. However if I WERE going to use a social network I'd use a proper one possibly just bordering on the edge of legality and having a sense of excitement and daring which conjures up say the excitement of a Harley Bike meet.

Boring "Suited" corporate sites -- No thanks.

Cheers
jimbo

 

[michaelst]

The whole edifice is about to come crashing down with dire consequences for the world economy, I fear.

Money is the root of all evil, but as to what the alternative is, I haven't got a clue.

Once and for all... the real quote is:

"THE LOVE OF MONEY is the root of all evil"

NOT money... money is NOT evil. the LOVE OF MONEY is the root of all evil.

 

[mavigozler]

I have been told that I should "get into Facebook." But I have never figured it out, and I don't use something I can't figure out.

I am told that if I don't use Facebook, I am "anti-social" or a "loner."

And I am told that if I use it, I am "narcissistic" or an "extrovert."

Go figure. One extreme or the other.

 

[Borg 386]

I thought it was interesting looking at the analysts recommendations, because there was no middle ground. It was either "Strong Buy" or "Do not buy." BTW, someone at my wife's work got a call, a gov employee with a pension, he wanted to put his entire savings into buying FB stock. Oy vey....

Most of the arguments were that the stock should have IPO'd at $24 -$28 instead of $38.

On other notes, they are now being sued by 2 different groups. One over IPO losses, the other over privacy.

Facebook sued over alleged IPO losses | News | The Lawyer

http://news.cnet.com/8301-1023_3-57...$15-billion-over-alleged-privacy-infractions/

 

[jimbo45]

Hi there
Any stock investment is a risk -- I don't see what the lawyers have got to do with it. If you made a bad call and the investment goes down the tubes --tough-- you didn't HAVE TO BUY the stock in the first place.

In a way that's why I am heartily sick of the Banks --they played "Casino" lost trillons of dollars nd got bailed out. If I do the same I would have to take the consequencies for my own actions.

Stock Markets operate on "Fear and Greed" -- nothing per se wrong with that but you have to understand it if you play around on the markets. The main rule is "Avoid the Herd instinct" and trust your own judgement.

Anybody with a brain slightly larger than a pea could have reasoned out that Facebook's current and projected business model made the price of this stock at IPO time totally and utterly absurd in the extreme.

..... "Here endeth lesson 101 in investing ....." !!!

Cheers
jimbo

 

[seavixen32]

What I cannot fathom out is we're constantly being told that while we batten down the hatches we must carry on paying bankers and their ilk shedloads of money because "to get the best we must pay the best".

Hang on, who caused this mess in the first place?

If the financial contagion rapidly spreading throughout the eurozone is their best, I'd hate to see their worst.

As ever Jimbo, you speak a lot of sense. It's a pity our financiers don't do the same.

 

[jalnyc]

Many things went wrong with facebook IPO but I think there is still much upside to this stock in the future -- given that the poo doesn't hit the fan in Europe and/or the slowdown in China isn't as bad as some say it is.

FB got slammed this week because the FB board and guys at morgan stanley got too cocky with the price @ $38. It should have been priced at what they were saying a couple of months ago, 28-32. Also there were gliches in the nasdaq that caused investor confusion which lead to uncertainty which as well all know is like kryptonite to the boys on wall street. And I also think that GM cutting their contract deal with FB about a week b4 the IPO had to have some negative impact on the IPO, even if it was a little bit.

And lest we forget all the inside information that is floating around that no one but the "masters of the universe" are privy to. I'm sure that led to lots of wealth destruction.

 

[M1GU31]

I have been told that I should "get into Facebook." But I have never figured it out, and I don't use something I can't figure out.

I am told that if I don't use Facebook, I am "anti-social" or a "loner."

And I am told that if I use it, I am "narcissistic" or an "extrovert."

Go figure. One extreme or the other.

Who needs facebook when you got the sevenforums

 

[jimbo45]

Hi there
stock can rise as well as fall too -- if you think the long term is UP then buy it -- but again had you waited a day or two you would have got the stock a LOT cheaper.

A better way of "Hedging your bets" on this stuff would have been to SELL a PUT option on this. What this means is that per contract (100 shares) you guarantee to BUY the shares at a price under the IPO price for which you get paid IMMEDIATELY a premium of say 60 Cents a share (or 60 dollars per contract).

If the share price doesn't fall to the PUT price you've agreed (known as the STRIKE PRICE) then that's it and you've still made 60 dollars per contract.

If the shares are "Put to you" it means they fell but then you got the shares much cheaper than the people who bought them at IPO time. AND you keep the 60 cents premium per share as well.

When they are PUT to you you then immediately do the reverse and sell a CALL option -- this means that you agree to PROVIDE the shares at your "strike price" for again say a premium of 60 cents a share or 60 dollars a contract.

say you write your CALL at 30 dollars and the shares are 29.45 . you write 5 contracts so that's 300 dollars immediately. If the shares say go up to 31 you still have to sell at 30 --but so what you've made ANOTHER 55 cents a share -- 5 contracts 500 shares so another 0.55 * 100 * 5 = 275 dollars

so in 2 weeks (assuming you are exercising WEEKLY options) you've made 575 dollars for doing essentially NOTHING - on 5 contracts --- that's nearly 1% A WEEK -- try that at a Bank.

Had you bought at the IPO price you'd be sitting on a loss.

I know which scenario I prefer.

BTW the trades illustrated here are for AMERICAN type options, traded on CBOE (Chicago Board Optione Exchange through people like OptionsXpress or e*trade etc) not European style ones.

As in all matters dealing with investing even if things look like they are going "South" quickly there's always room to jump in and pick up some of the pieces after "The Herd" has done its business and come unstuck. !!!

Cheers
jimbo

 

[seavixen32]

"Who needs facebook when you got the sevenforums"

Exactly!

As for Facebook's market value, some newspaper financial correspondents in the UK are of the opinion that its true value is nearer to $8 per share!

If that's the case, Mark Zuckerberg & Co. are in for a rude shock.

 

[jimbo45]

"Who needs facebook when you got the sevenforums"

Exactly!

As for Facebook's market value, some newspaper financial correspondents in the UK are of the opinion that its true value is nearer to $8 per share!

If that's the case, Mark Zuckerberg & Co. are in for a rude shock.

Hi there
If he's any sense he would cash out now and run while he's ahead !!!.

With that much money he won't be worried about "Job Seekers" allowance or whatever they call it these days.

I think even 8 USD might be a bit optimistic -- I have a sneaking feeling that some of these Social Media thingeys are getting a bit "Passe" now and all the youngsters are waiting for is the next "phenomenon" whatever it might be.

Just look at texting now -- it's diminishing rapidly (thank goodness --we might yet see decent spelling and properly constructed sentences in our lifetime once again).

Future trends and what use people make of them are extremely difficult to forecast.

Sometimes something for almost no reason whatsoever becomes a worldwide hit -- but by the same token this stuff can easily disappear in an instant too.

cheers
jimbo

 

[jalnyc]

Hi there
stock can rise as well as fall too -- if you think the long term is UP then buy it -- but again had you waited a day or two you would have got the stock a LOT cheaper.

A better way of "Hedging your bets" on this stuff would have been to SELL a PUT option on this. What this means is that per contract (100 shares) you guarantee to BUY the shares at a price under the IPO price for which you get paid IMMEDIATELY a premium of say 60 Cents a share (or 60 dollars per contract).

If the share price doesn't fall to the PUT price you've agreed (known as the STRIKE PRICE) then that's it and you've still made 60 dollars per contract.

If the shares are "Put to you" it means they fell but then you got the shares much cheaper than the people who bought them at IPO time. AND you keep the 60 cents premium per share as well.

When they are PUT to you you then immediately do the reverse and sell a CALL option -- this means that you agree to PROVIDE the shares at your "strike price" for again say a premium of 60 cents a share or 60 dollars a contract.

say you write your CALL at 30 dollars and the shares are 29.45 . you write 5 contracts so that's 300 dollars immediately. If the shares say go up to 31 you still have to sell at 30 --but so what you've made ANOTHER 55 cents a share -- 5 contracts 500 shares so another 0.55 * 100 * 5 = 275 dollars

so in 2 weeks (assuming you are exercising WEEKLY options) you've made 575 dollars for doing essentially NOTHING - on 5 contracts --- that's nearly 1% A WEEK -- try that at a Bank.

Had you bought at the IPO price you'd be sitting on a loss.

I know which scenario I prefer.

BTW the trades illustrated here are for AMERICAN type options, traded on CBOE (Chicago Board Optione Exchange through people like OptionsXpress or e*trade etc) not European style ones.

As in all matters dealing with investing even if things look like they are going "South" quickly there's always room to jump in and pick up some of the pieces after "The Herd" has done its business and come unstuck. !!!

Cheers
jimbo

I hear what you're saying, but your scenario requires perfect foresight. I mean, going by historical standards and not gut feelings which always get you in trouble in finance anyways, big time IPO usually have big pops the first day (google, linkedin etc) and why would anyone think any differently about facebook, quite possibly the most highly anticapated ipo in the past 10-20 years. IF you were assuming that the facebook IPO was going to go south, you wouldn't have sold a put, because that's more of a bullish approach. I mean, your example does work, given that the stock price doesn't go too far below the strike. Sure, you make the premium you get from selling the put to the put buyer, but if the stock goes too far below the strike price and the put buyer exercises on you, you now are obligated to buy the stock at the exercise price and you can't say for sure which way the stock is going to go afterwards. If the difference between the strike and the exercise price is greater than the amount you get from the premium, you are out of the money.

I don't think that most people could have predicted that FB was going to have the week that it just did.

 

[seavixen32]

Well, a market value of what was it - $100bn - for a company that's never made a profit could and should have set alarm bells ringing right from the start.

I can say this because I'm too cautious to invest in the stock market, but even the most bullish investors must have had an inkling the company was vastly over-valued.

 

[jalnyc]

I'll be honest, I haven't been following whether or not FB has been profitbale or not but how do we know if they are? Up until a few days ago, weren't they a private company that didn't share their books with the public? I would be really surprised if they are unprofitable given all the ad revenue they probably make. Also, the company isn't valued at billions for nothing.

The inflated valuation could also be due to the speculation on how big they are going to get. I'm still in the school of thought that fb will be a big player one day.

 

[jimbo45]

Hi there
if we all knew 100% in advance I doubt whether we'd be here typing away on this Forum -- we'd probably be surrounded by pretty ladies or whatever serving us nice frozen drinks as we relax on our yachts in Monaco or elsewhere !!!.

Anyway it will be interesting to see what happens -- of course it wasn't the perfect time for an IPO given the whole incapability of the Politicians to sort out anything with the Eurozone apart from pumping yet even MORE money at the Banks.

The French had the right idea in the 1790's Reign of Terror -- nice big Guillotine in a public place like the Place de la Concorde in central Paris and "Off with their Heads".

Cheers
jimbo

 

[jalnyc]

I know right? And now the Spanish banks want a bail out...it's gonna be a very hot summer.

 

[jimbo45]

I know right? And now the Spanish banks want a bail out...it's gonna be a very hot summer.

I don't know about Hot -- but Expensive for sure.

I'm glad I'm not a German Voter !!! OK I like BMW's etc but their taxpayers can't realistically pay the whole lot !! so every country whether in the EU or not is going to be sucked in at some stage -- even the USA isn't 100% isolated or immune to this stuff either.

What galls me is that some of the bosses of these failed institutions walk away with Billons of dollars as "Bonuses" !!!! while if I'm 5 days late with a water bill of say only 55 EUR I get nasty "Threatograms" from some of these back street "Debt collection Agencies" threatening hanging, drawing and quartering if I don't pay up within MINUS - yes MINUS- three and a half days.

No justice at all in matters financial these days it seems.

Cheers
jimbo

 

[seavixen32]

Money - it's a funny commodity really.

If I default on a bank loan of £10,000 I'm in serious trouble and could be made bankrupt pretty sharpish.

However, when governments default on loans running into £billions it's the banks who are in trouble.

If only countries were run like most families i.e. borrow responsibly and spend wisely, we wouldn't be in this mess as the world's economy teeters towards a massive depression.

 

[Golden]

There is certainly some structural change happening in the world economy : keep your assets liquid is my advice.