Geek things we all think about sometimes...

What Facebook's IPO Has Taught Me About The Stock Market

I am by no means a stock market professional. I've looked into learning about it a few times here and there, but I've really paid attention to the Facebook IPO. Watching the errors made by the technology giant is pretty much a "do not do these things to your tech company" learning lesson in stocks for me. I'll repeat I am not an expert.. but this is what I've taken from the experience… 🙂

What I've Learned
 • Do not use "perfect price' unless your company is perfect – Pricing your stock value at "perfect price' (everything is perfect in your company.. this is what it would be worth) and then purposely leaving out that your earnings are failing for the quarter, would mean your "perfect price" is doomed to fail.

 • Do not over value your company when your numbers do not back it – Facebook's valuation was roughly 100 times their previous years profit and way higher than other tech companies.. Like Apple or Google… who also happen to actually make way more proven profits.

  • Know where your flaws are in your business. Fix them quickly before going public – Mobile is the way the web is moving and Facebook never figured that out before going public.

 • Do not over sell your company when your numbers are already inflated – Facebook increased the number of shares 25% just before it launched… A strange idea considering the stock was already over valued and the previous points I just mentioned. This would cause people to sell when the stock didn't work out because they got "more than they wanted".

 • Do not do insider trading in any way.. If the legal system somehow lets you go, the other investors will not – 57% of Facebook Inside members sold. Typically its about 10% from insiders. That's a big number difference in the stock world. Insider trading went rampant, legal investigations have begun and a good portion of the other 'regular guy outside' investors, got spooked and sold too.

 • Do not annoy your big advertisers when you are about to go public – When a large company like General Motors pulls out publicly from supporting your company at the same time, you've just driven the nail in the coffin of anyone who was on the fence with the previous points.

 
*Can Facebook Recover?*

Facebook needs to somehow justify its 100 Billion Dollar Valuation. It needs to figure out its mobile platform, which so far even almost 4 months later is still no further along.

Facebook has lots of options it could do at this point, subscriber models, premium features(like featured posts or special new features) . A paid model even? Would most humans shell out 10$ a year to keep their account open? Maybe they will do something massive with Instagram. But will any of these be accepted or received by the 8 year old audience?

Currently it will have to continue to plague its audience with advertising and more than it is right now. A fate that happened to once social network giant –  My Space. How long before users switch to other, less cluttered social sites  – Google+, Pinterest, Twitter, Foursquare to name a few?

Here are some recent articles you can have a look at to learn more about this too:
http://www.forbes.com/sites/nathanvardi/2012/07/27/mark-zuckerbergs-big-facebook-mistake/
http://en.wikipedia.org/wiki/Facebook_IPO

#facebook #stocks #my2cents

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102 Comments
  1. Hayes Starns says

    Oh my. Hahaha. Thanks for the good laugh. 🙂
    (from the picture)

  2. Jeni Rowland says

    LOL!

  3. David Thompson says

    do i make you horny baby ?? i got 1 beelleeion $$$$$

  4. ash soto says

    the guy in blue is dr.evil in austin powers

  5. Ambra Vanderpool says

    Oh, I saw this. They are going to be releasing a "Facebook" phone at some point.

  6. Ralph Uy says

    Excellent post Ms. +Amanda Blain 🙂

  7. James Russell says

    I thought the phone was this year?

  8. Harrison Borges says

    Hey again +Gavin King 

  9. David Thompson says

    +Ambra Vanderpool  phone? care to elaborate?

  10. Stephen Zipprich says

    +Ambra Vanderpool I think they are going to release their second one because the first was a flop. 

  11. Amanda Blain says

    omg that itallic was killing me… ugh :P.. all better 🙂

  12. T.Stephen Gaunt says

    +Amanda Blain You're spot on.  Unfortunately the FB whizzers lacked solid council like yours, and stepped all over themselves in a sordid display of ineptitude.

    I would hope they have thought about how to reverse the blunder, though, the "paid model" idea seems a bit like……extortion.  "Pay us $10, or else!!"

  13. Marcelo Hatti says

    Brilliant!!!

  14. Jordan Gill says

    I say they need to improve on most of what they are currently doing. Make your product good before being risky, or most people will hate it. Hell, Most people only use it for their friends not because it's "Good"

  15. Marcelo Hatti says

    All they need now is sharks with freaking lasers attached to their heads

  16. Stephen Zipprich says

    I don't see them going to a paid model. People would probably drop it like a sack of bricks if they did that. Also, they say in their privacy policy that they'll never charge to use the service.

  17. Amanda Blain says

    Yup… but as stated.. their advertising model currently is not working… everything they try… its not working.. 🙂 10$ per the average FB user per year.. would be a heck of a lot of profits.. 🙂

  18. Jason Bugra says

    Facebook IPO was a setup… Mark got screwed, other bank investors.. IPO is the fastest and easiest way to sell your interest in a company…A smart investor would have known social media will always change.

  19. Maxx Daymon says

    FB just simply is not worth $100B in any rational framework.

  20. Lee kleckner says

    lol

  21. David Wong says

    I am watching with interest since FB stock found the cliff and went over, and it has apparently not landed yet. Down >6% yesterday, down close to 4% today.

  22. Lee kleckner says

    FB whack

  23. Lee kleckner says

    they need to make google + harder to use

  24. Jason Bugra says

    Facebook is the next Myspace
    Google + is the next Social Media Bubble
    Twitter is the next world wide text messaging package
    Instagram is the next half nude porno channel

  25. angie bella says

    lol they look alike

  26. Kevin Ke says

    FB  worth 100 BILLION, are you kidding?

  27. Patrick Flavin says

    But if everyone did move to an uncluttered social network, might that network get just as cluttered as Facebook down the line?

  28. Wayne Martin says

    Since the Facebook app is so shitty all they have to do is smack an advertisement in every time someone loads up the Facebook app. I usually log into mine about 5 times in 15 minutes when its having a bad day so there's 5 ads straight off the bat!

  29. Lee kleckner says

    i use myspace for musica lol

  30. Amanda Blain says

    Nope. I dont see Google putting advertising here.. which has been backed by several high ups in the company. They dont really need to.. Google makes money in search.. Lots of it. G+ just ties all the Google pieces together in one nice account 🙂

    Facebook doesnt have that luxury. Their one page is all they have to make money on. They need to make you click on ads to keep it going.. and who wants to do that when you just wanna see what your friends ate for lunch or pictures of your high school friends babies? 🙂

  31. Jason Bugra says

    +Amanda Blain  Google is profiting from the information acquired from Google +… So they can produce better advertisement.. 😉 

  32. Lee kleckner says

    so fast cause no one uses it

  33. Atila Syah says

    wow…

  34. David Andrews says

    Being publicly owned, the stock holders expect a profit… taking the spam to a new level.

  35. Patrick Flavin says

    But going forward search isn't the future, at least that's what I hear, and so they say no advertising in the future, but what's to keep them from changing their mind and making social their cash cow, and moving a away from search more?

  36. Amanda Blain says

    Sure +Jason Bugra  … but i dont mind that.. I like targetted relevant ads… Woudnt that be a novel idea? I see pictures of products I might actually be interested in ..  in the ads instead of generic You are single? Here is a dating site Ad…  like FB does… I have never clicked an add on FB except by accident… I click on google ads a bunch of times cause the results are what im searching for…  how about the rest of you? 🙂

  37. Jason Bugra says

    +Amanda Blain  I guess that makes more sense.. Both positives and negatives in that.

  38. Kenny Magee says

    +David Andrews That is exactly right. Even now, when I try to look at a friends pictures, they now have a whole new sidebar of ads in that popup as well.  Personally, if it weren't for my daughters being on FB, I would be gone instantly. If my real friends want to get in touch with me, they all have my email address, they can text me, or <gasp> even call me.

  39. Jason Bugra says

    This is giving me ideas on a new advertising concept… Advertising has yet to be perfected, and I believe we just found a loop hole here. 

  40. Marlon Luna says

    Google and search? After 16+ years of data dominance + Android proliferation + emerging social network (G+ has healthy growth numbers) anyone who has used the GoogleNow feature in JellyBean…now THATS the future, Google knows you so well it will predict which "ad" you want to and dont want to see, …so the question is…if its super relevant and useful to my life and pops in at just the right moment? Is it still an "ad"? ….i think it has elvoved beyond that…its perfectly timed useful information that i actually wanted    hmmmmmm….Just my shiny pennies ;P

  41. Kenny Magee says

    Google will never stop being the largest search engine in the world. They may branch out further. i.e Android, G+ etc, but they would be retarded to drop what their company was build on. That would be like Kelloggs not making cereal anymore in lieu of making cameras.

  42. Patrick Flavin says

    But search could be less of a priority then it is now, that's what I'm saying

  43. David Andrews says

    One of the issues of targeted ads – we redid our counters in the kitchen and baths, so I looked at about a thousand faucets. Job has been done for months, but I'm quite sure I will be seeing faucet adds for the next year.

    The model of targeted ads is great. Relevant to my life, instead of carpet bombing with everything trying to be sold. it allows the manufacturer to reduce their expense on advertising, which should translate into better prices. It just needs to evolve.

  44. Kenny Magee says

    I agree with that +David Andrews. The longevity of previous searches needs to be reworked. I still get ads for stuff I have long since moved on from.

  45. Amanda Blain says

    Yes +Kenny Magee  I bring that point up to anyone who says they use fb to get in touch with friends… They never like it 🙂 I call or text my friends.. and im LONG done 8 years of stalking high school people i dont care about… 

    +Marlon Luna agree… GoogleNow is pretty technology. 🙂 Im not late for my meetings anymore 🙂 ehhe

  46. Rich Webster says

    It's OK +Amanda Blain. I don't believe the experts are very expert either.

  47. Kenny Magee says

    Yes, my only problem is that I live in a different state as my daughters and they are still young. (12 and 18). To them, FB is still where it's at, unfortunately.

  48. DJ Thistle says

    Hi Amanda, nice article. I enjoyed reading it. 🙂 I as well have been following Facebook as well even before their IPO.

    I wrote this article about Facebook as well: http://www.djthistle.com/2012/07/19/reasons-why-im-investing-in-apple-and-not-facebook/

    Another thing just to clarify:

    “Do not do insider trading in any way.. If the legal system somehow lets you go, the other investors will not – 57% of Facebook Inside members sold. Typically its about 10% from insiders.”

    Insider trading is illegal. It’s when insiders have been given information that is not available to the public. This is not what happened. Employees of Facebook have a window to legally sell their shares, which is what they did. It was their right to sell their shares. You would as well with the ridiculous valuation on the company.

  49. Chinmay Kanchi says

    It really depends on what the intent was for going public. If the intent was to maximise the payout to Facebook before things started to go sour, then the IPO succeeded spectacularly.

    If the motive was more typical of the normally stated reasons for an IPO, i.e., a cash injection into the company to fuel expansion, then Facebook is in a whole lot of trouble, as additional investment is now going to be difficult, if not impossible, to come by.

  50. Jason Bugra says

    +Chinmay Kanchi  It all depends where they invest now… Instagram was a very smart investment.. Maybe Twitter is next, unless Apple buys them out. 

  51. Howie Chicago says

    blankfein is dr evil LOL

  52. John Bockman says

    I remember this happened some years ago to Nippon Telephone and Telegraph when they went public.  Their IPO stock was dumped on the first day, and a lot of people got burned.  I think NTT got sued.

  53. Marlon Luna says

    +Amanda Blain you're on the money…downside to progressive tech: peoplez know in  GoogleNow how long it should take me to get from point A to their house. real time traffic updates are my nemesis ;P

  54. Chinmay Kanchi says

    +Jason Bugra IMHO, Instagram was a terrible investment. $1 billion in a company that has
    1) A tiny proportion of Facebook's users, almost certainly with an enormous overlap (I can't imagine a case where a substantial portion of Instagram's users don't also have a Facebook account)
    2) No way of monetizing their userbase. 
    3) No real uniqueness to their service that prevents them from being more than a short term fad.

    I can't see Facebook recovering anything close to their investment.

  55. Jason Bugra says

    +Chinmay Kanchi  I understand exactly where you coming from.. But seriously only from a personal level of usage, over the last few months.. Instagram has BLOWN up. It's being updated almost constantly by all my peers. Even as a phone salesperson, Instagram is my top key feature I sell to my customers. Second they are most def monetizing their userbase, in fact people are addicted to editing their photos to make themselves look better. Its a phenomenon really.

  56. Jason Bugra says

    Its never been about innovative and unique a company is.. What people want is 'simplicity' .. The more the basic the technology is the better it is for users.. People love to be creative, and Instgram gives you that opportunity. 

  57. Donagh Reardon says

    Invest in virtual commodities, you end up with virtual money.

  58. Steve Kwan says

    +Chinmay Kanchi I agree with you 100%, no way will they see ROI on that. I read somewhere that the FB board was not aware of this purchase until after the deal was sealed.

  59. Chinmay Kanchi says

    +Jason Bugra I never said anything about innovative. Instagram could be the most innovative photo sharing app in the world, but the moment someone "cooler" comes along and gets more mindshare, Instagram is dead. I still can't see Facebook making $1 billion off Instagram. 

    Even if Instagram hits a 100 million users, they would still need to make a profit of $10 per user. Even if you assume that there are no scaling costs, $10 per user for a "free" (ad-supported) service seems impossible to me, especially for a one-trick service.

    Even with a billion users, I don't see Instagram making a profit of $1 per user on average.

  60. John Mink says

    +Amanda Blain interesting post, but I think the #1 thing is that people forgot that Zuck was never interested in the IPO in the first place!  Don't expect him to model his company to maximize shareholder earnings…that's not how he's running his company.

    The only point you made I disagree with is "Know where your flaws are in your business. Fix them quickly before going public – Mobile is the way the web is moving and Facebook never figured that out before going public."

    Breaking it down:
    "Know where your flaws are in your business."  – Always excellent advice regardless of whether you're involved in an IPO or not.

    "Fix them quickly before going public" To paraphrase the Dread Pirate Roberts, 'any company which tells you they're perfect is lying (we already know they're trying to sell you something)'

    "Mobile is the way the web is moving and Facebook never figured that out before going public" – Facebook was well aware (in the sense that they weren't surprised…yet clearly unprepared) that the web was going mobile, they just hadn't figured it out yet :p   

    Just my 2 cents on your overall awesome post 🙂

  61. Aaron Applegate says

    Anyone that knows anything about investments saw this pump and dump scheme from a 100 billion miles away…

  62. Kenny Magee says

    I don't understand the whole Instagram craze. I mean, what is the point of spending hundreds and thousands of dollars for a good camera or a smartphone, only to make your photos revert to the level of a polaroid?

  63. Kenny Magee says

    I think I am just getting old.

  64. John Mink says

    Previous post was already bordering on TLDR (my bad)

    But i'm fascinated that you're genuinely not expecting Google to throw some ads into G+.  Obviously Facebook has it's problems, but Google has way more experience with focused ads..do you really think they couldn't overcome the hurdles of Facebook?

    +Kenny Magee it happens to the best of us :p   but clearly some people were interested, no?

  65. Amanda Blain says

    Hey.. Instagram makes my pictures pretty without any effort for me… and people double tap like them… and im validated.. 🙂 heheeh

  66. Chinmay Kanchi says

    +John Mink They really don't have to. G+ acts as an enormous data collection exercise that they can then use to target ads across the rest of their services.

  67. Craig Miller says

    This is Fricking Hilarous
    But so true!

  68. Jason Bugra says

    +Chinmay Kanchi I think the investment was to overall help Facebook evolve. Yeah its true they may not ever see the light of over 1 billion $ return, but heck you must see the craze for Instagram.. It makes stupid things look that much better.. I could take a picture of my dirty laundry and say its some retro clothing I own. LOL! In terms of something cooler coming out, the transition wont happen that quickly, but frik if something does "we" better be the ones who made it haha 🙂 

  69. John Mink says

    +Chinmay Kanchi as long as they're careful not to integrate too many products into G+

  70. Chinmay Kanchi says

    +Jason Bugra Heh, to be honest, Instagram doesn't appeal to me at all. I love taking photographs with my DSLR. Though I wouldn't even call myself an amateur, the results are very important to me. Somehow, I don't think I'm Instagram's target market ;). 

    I don't have to want to use a product to evaluate it as an investment opportunity, of course. I'm just one of those people that needs to see at least a plan for a reliable revenue stream before plonking down cash for a company.

  71. RAJIB NATH says

    Hey whts up ?

  72. Jason Bugra says

    +Chinmay Kanchi When billions are in your disposable, people could care less about revenue stream haha 

  73. Borey Sao says

    that is a good post.

  74. Chinmay Kanchi says

    There still has to be a coherent investment strategy. Instagram felt like an impulse buy for a company at a critical point in its evolution (Facebook). 
    Google is guilty of doing this too, but they did it when they were far more stable and capable of making speculative investments without really impacting their bottom line or investor confidence.

  75. Craig Miller says

    Wednesday, Aug. 1: Closed at $20.88, down 3.8 percent for the day, down 45 percent from IPO price

  76. Shailendra Singh says

    I have learned one lesson in investing.

    When your fruit vendor and milkman and cab driver start talking about buying stock ABC – its time to sell. 

    The above is exactly what had happened in days prior to FB IPO.

  77. Malki Zee says

    The second FB charges $0.01 to keep an account open it's the last nail in the coffin.

  78. Mitch Stokely says

    Goldman Sachs….. I wonder why they only paid 1% in taxes in 2010, yet offshored hundreds of analyst jobs to China, and took about $4 billion in bailouts from American taxpayers? I wouldn't trust those hedge fund gambling schmucks….

  79. Neal Beer says

    When Facebook became Faceplant!

  80. Wayne Martin says

    Instagram couldn't help my face 🙁

  81. Jake Kern says

    Nailed it, +Amanda Blain. It's all about the mobile web now, and industry giants that don't understand will go the way of RIM. As for Zuck reportedly dumping a bunch of stock at the peak, if there is an ounce of truth to it, there are so many people who would do everything they could to make him go the way of Martha Stewart.

  82. Furkan Speedya says

    I Furkan
    from Indonesia
    greetings

  83. Mukesh Kumar Sharma says

    how do they evaluate the worth of a social networking sight.

  84. Mukesh Kumar Sharma says

    they dont produce nothing.

  85. tim daley says

    facebook is CIA. im sorry are we talking about fictional money & capitalism?govts. there all gone it s socialism now forget cap. buy silver gold in raw form

  86. HuXxaiN NaeEm says

    facebook once i was on that but unfortunaly nobody cares 
    man in pic i kick your ass

  87. morteza zaeimnejad says

    only google+!

  88. Misael Cifuentes says

    they should sell it for that 100 billion dollars before they go out of style and go bank rupt

  89. Jerry Portillo says

    I think FB had to go public.  Once a company has more than 500 shareholders they must follow the same SEC rules as a public company.  I guess that rule is to protect shareholders.  So FB must do all the disclosures, and filings as a public company. 

    I don't think the reasoning to go public was to gain access to capital markets.  It was to meet SEC obligations.  The unintended consequence was increased liquidity, leading to insider cashouts.  I guess a lot of FB insiders were figuring "a bird in hand…"

    We have long know FB earnings.  Now we know them faster, along with a bunch of analysts predicting what the earning "should" be.   

    Now we will see what kind of leader Zuckerberg is.  If he is at the same level as Bill Gates, Steve Jobs, and Andy Grove.  It is one thing to invent something, and/or steal good ideas.  It is a different talent to build a company that helps millions of folks over a period of years.   

  90. Mitch Stokely says

    What do you get when you combine FaceBook and MySpace? FaceMyBooks.com

  91. Mark Wolfskehl says

    I have tried Internet advertising a number of times. While it does drive web traffic I have not found it to drive revenue.

  92. Mitch Stokely says

    What do you get when you combine Twiiter and YouTube?
    TwiYourTubes.com

  93. Adrian Wainer says

    @ Amanda Blain https://plus.google.com/107982618909749811163 you seem to me to be under the impression that Facebook was being run as a serious long term business proposition,(  though in a very incompetent fashion ),. I put it to you Ms Blain that it is looking increasingly likely that the power players within Facebook believed that the company would collapse within twelve to thirty six months and that their priority was to maximize the IPO price, maxing the value of the IPO share sale since they wanted to sell their shares at circa forty dollars as they believed the value of the shares within three years would be around eighty cents and that company could not survive longer than three years and more likely could not last two years and could possibly collapse within twelve months. 

  94. Amanda Blain says

    ok then.

  95. Craig Miller says

    That's certainly reading a lot into things!
    wowie

  96. chakkaphan phewngam says

    I ?? love

  97. Lars DeRuntz says

    … two weeks before an additional 271 million shares are made available, with an additional 243 million shares coming to the floor in mid-October/mid-November. 

  98. Rob Bob says

    This stock was doomed right from the word ipo. I seen it, sad though just couldn't pull the trigger on shorting it. Thats a failure on my part. 🙁

  99. Chris Lau says

    According to my calculations (see most recent post), Facebook has a forward value of $100.296 billion May 2013. This assumes shares don't drop.

  100. Adrian Wainer says

    Facef8ck, Inc. ( Facebook / #Facebook) is engaged in building products to create utility for users, developers, and advertisers. People use Facef8ck to stay connected with their friends and family, to discover what is going on in the world around them, and to share and express what matters to them to the people they care about. Developers can use the Facef8ck Platform to build applications and Websites that integrate with Facef8ck to reach its global network of users and to build personalized and social products. Advertisers can engage with more than 900 million monthly active users (MAUs) on Facef8ck or subsets of its users based on information they have chosen to share with the Company, such as their age, location, gender, or interests. It offers advertisers a combination of reach, relevance, social context and engagement.

    #MarkC8ntberg #Facef8ck #CEO #SherylKW8nkerberg  #Facef8ck #COO #DavidASh1tman #Facef8ck #ChiefFinancialOfficer

  101. Adrian Wainer says

    Chris Lau
    #ChrisLau
    https://plus.google.com/u/0/105927011583510008537

    " According to my calculations (see most recent post), Facebook has a forward value of $100.296 billion May 2013. This assumes shares don't drop. " 

    Are you some public relations drone who works for Facefuck ? 

  102. Elon Sanders says

    OMG :(, that if it is true.

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