Earlier, I wrote that Facebook's (FB) IPO is becoming a sucker's bet. On its IPO debut, Facebook started at $42, hit a high of $45 for a brief moment, and then turned south quickly. It hovered around the round number psychological price of $40, and went directly to $38 at approximately 11:50 EDT. $38, Facebook's official IPO price, provides the second psychological barrier that sustained through the day. Its price bounced back from there and stay above $38 for most of the rest of the day. The fact that $38 has been hit multiple times during the day makes it a very ugly IPO. ,,,,,,,,,PLUNGE PROTECTION TEAM JUST GOT A NEW ASSIGNMENT LOL,,,SAVE FLOPBOOK.
Once $38 is penetrated, the bottom for Facebook's stock price can be pretty deep.
By midday, many Facebook related plays went down in sympathy: Zynga (ZNGA) was down 13.3% and its trade was halted. Renren (RENN), the Chinese equivalent of Facebook, was down 9.4%. GSV Capital (GSVC) and Firsthand Technology Value Fund (SVVC), two funds heavily vested in Facebook were down 12.4% and 18.6%, respectively. Pandora (P) was down 6%. Groupon (GRPN) was down 4.9%.
Why did the market give Facebook such a lukewarm response? It is too expensive. The expected return for shareholders who purchased at the IPO price of $38 is not very rich, even under the most optimistic scenario.
We can use a very simple calculation to value Facebook's IPO. The goal is to find a price that can give investors a reasonable return in the next five years.
First we gauge Facebook's approximate terminal valuation five years from now. Given its recent growth trend (around 100% in 2010 but dropped to only 37% during Q1 2012), we use what I believe to be a fairly generous 50% year-on-year revenue growth over the next five years. That
http://seekingalpha.com/article/601251-i-told-you-so-facebook-s-ugly-ipo-debut?source=feed
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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