Musings On Markets

38, its IPO price, right before today’s starting bell. As a few of you who have tracked my blog posts during the last couple of years know, I have tried to make sense of Facebook’s value and how the market has prices it. Given today’s news, I thought it might be useful to go back first to these earlier posts and then execute a fresh valuation of the business, with up to date information. Facebook had perhaps the most elaborate run-up to an IPO in the stock market history, with vast amounts of dollars in transactions in the private share market, tales aplenty in the news headlines mass media and even a strike movie about its founders.

68 billion to its equity, with generous assumptions on income growth and margins extremely. In estimating this value, I assumed that Facebook could have a revenue growth path nearly the same as Google’s, while sustaining operating margins like Apple. As the original public offering drew nearer, I grew wary about the offering for two reasons significantly. The first was the sense that lots of investors, institutional especially, seemed to believe the Facebook IPO was an absolute no-lose proposition, regardless of what the offering price was, since momentum would carry the stock higher.

  • Financial Iceberg (blog from my friend, Jean-Pierre Desloges)
  • Flood control and security works including drainage in drinking water logged areas
  • Don’t take a look at your 401(k) claims more often than once or double a calendar year
  • Single and earn $18,250 or less
  • Dividend per share
  • Interest rate fluctuates up or down with best rate. Borrowing cost is not set or predictable
  • Wealth Management /

In this post, from February 2012, I cautioned traders from buying into this proposition. The second was that the business and its bankers appeared to presume that they could set the terms for the offering which the marketplace could complement. If you ask me, those who think that they have power over markets realize otherwise, sooner than later rather.

The real offering date is now part of market lore, from the technical issues that NASDAQ got to get the trading began to the considerable support that the investment banks had to provide to keep the price from collapsing. In the weeks after the IPO, Facebook faced a hill of troubles, a few of its own doing and some reflecting the expenses of going open public.

The IPO failing colored traders’ views of the business and its management, leading them to place the worst possible spin on every action and incident at the business. At the same time, the IPO exposed the company to significant costs also, especially as the costs of stock-based compensation were recognized, leading to a drop in operating income.

The nadir for the stock was the quarterly income report about a year ago, when the ongoing company reported sagging revenue growth and much lower margins. The momentum game turned fully against the business, with lots of the analysts and institutional investors who had been cheerleaders in the pre-IPO days arguing that the stock was a “sell”.

20/talk about and I made an argument that the marketplace got over reacted to news and that the earnings reports weren’t as catastrophic as these were recognized to be. I also argued that investors were being sidetracked by side tales about expiring lock ups and mobile mashups. 23.94, on the day before the IPO only a couple of dollars below my estimate.