Facebook: The smart money exits

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stratton
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Facebook: The smart money exits

Post by stratton »

Facebook: The smart money exits
The Facebook IPO is now set to raise an absolutely astonishing amount of money — as much as $18 billion, if the greenshoe is exercised and the offering prices at the top of the indicated range. As a result, it’s certain to be the single largest technology IPO of all time. (Most companies don’t even have a valuation of $18 billion when they IPO, let alone have $18 billion worth of stock for sale to the public.)
...
Mark Zuckerberg ... He’s now going to sell 126 million shares in the IPO, $5 billion. [Stratton: Some of those he has a proxy control over, but doesn't own.]
..
More generally, this seems to be the point at which the smart money is getting out of Facebook. Accel Partners is now selling 49 million shares in the IPO (think $1.8 billion), while DST and Mail.Ru will sell some $2.5 billion of stock in total.
I don't remember Google's founders cashing out that fast.

Paul
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kraftwerk
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Re: Facebook: The smart money exits

Post by kraftwerk »

GM aslo just pulled their FB advertising. Said it doesn't work.
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LH
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Re: Facebook: The smart money exits

Post by LH »

there was a great graphic of fords net worth, revunue cash flow etc versus facebook in another thread.....

To me the IPO worth is wild given revenue... But I dunno, maybe it will triple in a year : )
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Re: Facebook: The smart money exits

Post by stratton »

kraftwerk wrote:GM aslo just pulled their FB advertising. Said it doesn't work.
To quote the article:
According to the report, the auto giant's marketing executives "determined their paid ads had little impact on consumers."
Not a good sign for Facebook's business model. At the very least Facebook should help their advertisers measure their returns some way. If they can't do that then they're making a good case for people not paying them to advertise.

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IMNestea
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Re: Facebook: The smart money exits

Post by IMNestea »

I remember going on IRC years ago. The headline read "IRC: The world biggest online communication tool" :oops:
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Re: Facebook: The smart money exits

Post by interplanetjanet »

IMNestea wrote:I remember going on IRC years ago. The headline read "IRC: The world biggest online communication tool" :oops:
It was in some ways, for a while. I still use it heavily, both personally and at work - it's the primary means of "immediate" group communication in the technical ops group of the (Internet-based) Fortune 500 I work for. You can integrate in other protocols (such as various "Instant Messenger" ones) using programs like bitlbee (http://www.bitlbee.org). I wrap my IRC clients in detachable terminal sessions and I can reach them from anywhere with a smartphone, never missing a message. Sometimes bits of 20-year old tech can be a perfect solution to a problem. Good times!


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Muchtolearn
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Re: Facebook: The smart money exits

Post by Muchtolearn »

They are cashing out as soon as they can. One guy is even leaving the country. Whoa to those lemmings who buy after the open.
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Re: Facebook: The smart money exits

Post by ilmartello »

LH wrote:there was a great graphic of fords net worth, revunue cash flow etc versus facebook in another thread.....

To me the IPO worth is wild given revenue... But I dunno, maybe it will triple in a year : )
Image


Because you asked nicely.

And here's this one.
It's a good piece, but I don't think it adequately distinguished between the idea that Facebook is likely to be a successful company and the idea that a $100 billion valuation is reasonable. McDonald's, for example, is a very successful company with a $93 billion market capitalization. Surging Wendy's is at a mere $1.75 billion or so*. The premise of Facebook having such a large valuation isn't just that the company will be successful, but that it will become much more successful than it already is. Merely getting every single human being on the planet earth to become a Facebook user wouldn't be enough for a $100 billion valuation to be in line with a standard price/earnings ratio of 15. Facebook would have to turn every single person into a customer and increase its per customer profits. Is that possible?

I have my doubts, personally, but the point is that Facebook could easily miss this target and still be a wildly successful company. If it ends up flattening out at 4 billion users and $5 billion in annual earnings, that'd hardly be the second coming of Pets.com—it just wouldn't justify a $100 billion market capitalization.
http://www.slate.com/blogs/moneybox/201 ... _deal.html
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Re: Facebook: The smart money exits

Post by danieljquirk »

I'm not invested either way, but I think it is quite possible for Facebook to justify its IPO. Facebook is a unique company, one with very large and powerful network effects. They have nearly a billion users today.

Their first priority is attracting users, getting them entrenched, and making it a cool experience--one without obnoxious ads. The second priority is making money. Yes, GM pulled its campaign, but Facebook is going to continue experimenting in a variety of ways to make money. There will probably be failures along the way, but I won't be surprised if they eventually stumble upon a "pay-per-click" type of idea that has propelled Google to a $200+ billion market cap. They've hired a lot of smart and creative people to figure it out. I think Zuckerberg has also been smart in retaining majority control--he doesn't seem like the type of guy to worry about meeting quarterly earnings targets--which would be a terrible way to manage and grow the company.

It will be fun to watch.
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Re: Facebook: The smart money exits

Post by TheEternalVortex »

The original article is wrong: Zuckerberg is not selling any more of the shares he owns. I think what happened was that demand for the IPO was higher than anticipated, so they had to come up with more shares than they were planning on, so they had to find them from somewhere.
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Re: Facebook: The smart money exits

Post by billern »

TheEternalVortex wrote:The original article is wrong: Zuckerberg is not selling any more of the shares he owns. I think what happened was that demand for the IPO was higher than anticipated, so they had to come up with more shares than they were planning on, so they had to find them from somewhere.
I think what you mean to say is that the amount they could sell at that price was higher than previously expected (or the price was better than expected) so the founders decided to sell more.
'
To add to the other conversation here, my understanding is that Google, by comparison, had much less of the founder's shares sold when they went public. They have been selling their shares much more slowly. To me, that seems like they believed more in the value of their business relative to the IPO price, than facebook does.
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Re: Facebook: The smart money exits

Post by Imperabo »

Indeed, you would have to be an idiot to keep all of your assets in your employers stock, or if you're investment bank, maintain a huge position in a single company after it goes public rather than cash out any reinvest somewhere else.

I'm missing how this says jack squat about the prospects of Facebook.
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Re: Facebook: The smart money exits

Post by Village Idiot »

kraftwerk wrote:GM aslo just pulled their FB advertising. Said it doesn't work.
I could have saved GM alot of money in advertisement. Why would anyone think that a bunch of kids and unemployed folks that sit around all day sipping coffee at Starbucks posting on Facebook would click on a GM ad to buy a car?
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Re: Facebook: The smart money exits

Post by The Wizard »

Good thing about Facebook, of course is, unlike the domestic steel industry, it can't be outsourced to the Far East...
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Re: Facebook: The smart money exits

Post by Sidney »

The Wizard wrote:Good thing about Facebook, of course is, unlike the domestic steel industry, it can't be outsourced to the Far East...
Why do you think that?
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Re: Facebook: The smart money exits

Post by ofcmetz »

Will Zuckerburg be buying several billion dollars worth of the Vanguard Target Retirement 2040 fund now? :D

I'm sick of all this Facebook news. Reminds me that I don't have 0.1% of the company to cash out. I would stay far away from this show personally.
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Re: Facebook: The smart money exits

Post by eucalyptus »

Imperabo wrote:Indeed, you would have to be an idiot to keep all of your assets in your employers stock, or if you're investment bank, maintain a huge position in a single company after it goes public rather than cash out any reinvest somewhere else.

I'm missing how this says jack squat about the prospects of Facebook.
That was my thought too. I assume Facebook isn't going public because it needs the money, it's going public to create a liquidity event.

I don't believe in Facebook, but the people who did have a better track record ...
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Re: Facebook: The smart money exits

Post by BogleTurtle »

Sidney wrote:
The Wizard wrote:Good thing about Facebook, of course is, unlike the domestic steel industry, it can't be outsourced to the Far East...
Why do you think that?
I think that was sarcasm :)
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Re: Facebook: The smart money exits

Post by Muchtolearn »

The Wizard wrote:Good thing about Facebook, of course is, unlike the domestic steel industry, it can't be outsourced to the Far East...
I think it can. It is all computer driven.
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Re: Facebook: The smart money exits

Post by jebmke »

I've noticed that a number of news/blog sites have ported their comment systems over to FB. That effectively blocks many people from reading any of the commentary (admittedly, much of it useless) following the articles.
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Re: Facebook: The smart money exits

Post by VictoriaF »

Muchtolearn wrote:
The Wizard wrote:Good thing about Facebook, of course is, unlike the domestic steel industry, it can't be outsourced to the Far East...
I think it can. It is all computer driven.
I think The Wizard was referring to the distinction between the Latin alphabet and Eastern scripts.

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Re: Facebook: The smart money exits

Post by chaz »

Mark Zuckerberg is doing OK at age 28.
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Re: Facebook: The smart money exits

Post by KyleAAA »

Even $5 billion is less than a third of his ownership stake. He has to cash out over $1 billion just to pay taxes. So he'll have a $4 billion non-Facebook net worth and a $12-13 billion stake in Facebook. Doesn't seem amiss to me. He's still betting substantially on his company. Would anybody here do any different? I know I would take the $4 billion.
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Re: Facebook: The smart money exits

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Village Idiot wrote:
kraftwerk wrote:GM aslo just pulled their FB advertising. Said it doesn't work.
I could have saved GM alot of money in advertisement. Why would anyone think that a bunch of kids and unemployed folks that sit around all day sipping coffee at Starbucks posting on Facebook would click on a GM ad to buy a car?
They wouldn't. But then again, that's not the point of advertising on Facebook for these big companies. I doubt GM had that expectation at all.

However, if you think most Facebook users are kids or unemployed, you haven't been paying attention.
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Re: Facebook: The smart money exits

Post by HomerJ »

The Wizard wrote:Good thing about Facebook, of course is, unlike the domestic steel industry, it can't be outsourced to the Far East...
Umm.. it would be even EASIER to out-source Facebook.
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Re: Facebook: The smart money exits

Post by HomerJ »

BogleTurtle wrote:
Sidney wrote:
The Wizard wrote:Good thing about Facebook, of course is, unlike the domestic steel industry, it can't be outsourced to the Far East...
Why do you think that?
I think that was sarcasm :)
Oh. :oops:
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Re: Facebook: The smart money exits

Post by gkaplan »

Anyone see the movie Sneakers, with Robert Redford, Ben Kingsley, Sidney Poitier, River Phoenix, among others? The movie reminds me of Mark Zuckerberg and Facebook.
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Re: Facebook: The smart money exits

Post by richard »

Facebook priced at the top end of the range and will raise at least $16 billion. This values that company at over $100 billion. Think of what they could have done if all that smart money hadn't left.
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Re: Facebook: The smart money exits

Post by texasdiver »

Remember when Groupon was going to be the next great thing? It's at $12 after an IPO price of $20 and hitting something like $26 the first week of trading 6 months ago. Facebook seems to me like it has even less of a revenue model than Groupon

http://www.google.com/finance?chdnp=1&c ... RPN&ntsp=0
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Re: Facebook: The smart money exits

Post by greg24 »

VictoriaF wrote:
Muchtolearn wrote:
The Wizard wrote:Good thing about Facebook, of course is, unlike the domestic steel industry, it can't be outsourced to the Far East...
I think it can. It is all computer driven.
I think The Wizard was referring to the distinction between the Latin alphabet and Eastern scripts.
Unicode.
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Re: Facebook: The smart money exits

Post by VictoriaF »

greg24 wrote:
VictoriaF wrote:
Muchtolearn wrote:
The Wizard wrote:Good thing about Facebook, of course is, unlike the domestic steel industry, it can't be outsourced to the Far East...
I think it can. It is all computer driven.
I think The Wizard was referring to the distinction between the Latin alphabet and Eastern scripts.
Unicode.
I stand corrected. And embarrassed for missing The Wizard's sarcasm.

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Re: Facebook: The smart money exits

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texasdiver wrote:Remember when Groupon was going to be the next great thing? It's at $12 after an IPO price of $20 and hitting something like $26 the first week of trading 6 months ago. Facebook seems to me like it has even less of a revenue model than Groupon

http://www.google.com/finance?chdnp=1&c ... RPN&ntsp=0
How so? Groupon's revenue model is based on one-off expenses. Everybody knew this even before the IPO. Facebook, meanwhile, is severely under-monetized. And they know it.
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Re: Facebook: The smart money exits

Post by ilmartello »

KyleAAA wrote:
texasdiver wrote:Remember when Groupon was going to be the next great thing? It's at $12 after an IPO price of $20 and hitting something like $26 the first week of trading 6 months ago. Facebook seems to me like it has even less of a revenue model than Groupon

http://www.google.com/finance?chdnp=1&c ... RPN&ntsp=0
How so? Groupon's revenue model is based on one-off expenses. Everybody knew this even before the IPO. Facebook, meanwhile, is severely under-monetized. And they know it.

What makes you think they will able to successfully monetize facebook without alienating users?
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Re: Facebook: The smart money exits

Post by KyleAAA »

ilmartello wrote:
KyleAAA wrote:
texasdiver wrote:Remember when Groupon was going to be the next great thing? It's at $12 after an IPO price of $20 and hitting something like $26 the first week of trading 6 months ago. Facebook seems to me like it has even less of a revenue model than Groupon

http://www.google.com/finance?chdnp=1&c ... RPN&ntsp=0
How so? Groupon's revenue model is based on one-off expenses. Everybody knew this even before the IPO. Facebook, meanwhile, is severely under-monetized. And they know it.

What makes you think they will able to successfully monetize facebook without alienating users?
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Re: Facebook: The smart money exits

Post by texasdiver »

KyleAAA wrote:
texasdiver wrote:Remember when Groupon was going to be the next great thing? It's at $12 after an IPO price of $20 and hitting something like $26 the first week of trading 6 months ago. Facebook seems to me like it has even less of a revenue model than Groupon

http://www.google.com/finance?chdnp=1&c ... RPN&ntsp=0
How so? Groupon's revenue model is based on one-off expenses. Everybody knew this even before the IPO. Facebook, meanwhile, is severely under-monetized. And they know it.
I probably have a distorted impression of facebook but I teach at a HS where most kids are on facebook to some extent as is my teenage daughter. They are already mostly migrating to smart phones for their facebook and twitter usage and I expect that is also the case for the great majority of users outside the US where smart phones are much more common than computers.

I don't yet see how they force-feed ads onto the tiny smart phone screens without driving away users. Kids will abandon it in droves for whatever is the next new thing that works better on their phones. We are the old folks who still stare at big desktop LCD monitors. Kids these days do everything on their iPhones.
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Re: Facebook: The smart money exits

Post by GammaPoint »

If I were going to buy one of these techy stocks (which I'm not), I would buy Amazon a million times over before buying Facebook. Amazon's P/E is higher, but I actually understand how they make money. Don't get me wrong, I think companies like Facebook will be around for quite some time, I just don't think they are worth over $100 billion.

Being subject to a deluge of ads will never be what the cool kids are doing.
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Re: Facebook: The smart money exits

Post by KyleAAA »

texasdiver wrote:
KyleAAA wrote:
texasdiver wrote:Remember when Groupon was going to be the next great thing? It's at $12 after an IPO price of $20 and hitting something like $26 the first week of trading 6 months ago. Facebook seems to me like it has even less of a revenue model than Groupon

http://www.google.com/finance?chdnp=1&c ... RPN&ntsp=0
How so? Groupon's revenue model is based on one-off expenses. Everybody knew this even before the IPO. Facebook, meanwhile, is severely under-monetized. And they know it.
I probably have a distorted impression of facebook but I teach at a HS where most kids are on facebook to some extent as is my teenage daughter. They are already mostly migrating to smart phones for their facebook and twitter usage and I expect that is also the case for the great majority of users outside the US where smart phones are much more common than computers.

I don't yet see how they force-feed ads onto the tiny smart phone screens without driving away users. Kids will abandon it in droves for whatever is the next new thing that works better on their phones. We are the old folks who still stare at big desktop LCD monitors. Kids these days do everything on their iPhones.
I won't be buying Facebook because I don't buy individual stocks in general and if I did, I probably wouldn't pay what Facebook is going to be trading at. But suffice it to say the problems you've outlined have already been solved. Displaying ads without driving away users is simple. Most users don't even realize when an ad is an ad, anyway, including most extremely technical people. There are ads everywhere on the internet. I would be willing to bet an extremely large sum of money you've clicked on several without even knowing it. Probably very recently. Besides, you assume people in general don't like ads. This is not true. People don't like to feel like they're being SOLD TO, especially when it's something they don't want. People generally enjoy being sold to when it's something they are interested in. The mere existence of ads isn't going to drive anybody off. It never has and it never will. INAPPROPRIATE use of ads is what drives people off. When most people claim that ads annoy them and that they would stop visiting a site if there were any, well, the data says they are lying. When put to the test, they don't leave.
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Re: Facebook: The smart money exits

Post by chaz »

gkaplan wrote:Anyone see the movie Sneakers, with Robert Redford, Ben Kingsley, Sidney Poitier, River Phoenix, among others? The movie reminds me of Mark Zuckerberg and Facebook.
Also "The Social Network".
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Re: Facebook: The smart money exits

Post by Ice-9 »

I realize I may not be typical. But...

* 14 years using Hotmail - never once clicked on a banner ad
* 18 years on World Wide Web in general, never clicked on a banner ad until...
* 3 years using Facebook - so far have clicked on two banner ads relating to my "likes" and resulting in one purchase

I am a stick-in-the-mud who has trained himself to ignore advertising and has several browser extensions to block advertising, and the only purchase I've made in nearly two decades after clicking on a banner ad was from Facebook. If they got me to click, I have a feeling they have something valuable.
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Re: Facebook: The smart money exits

Post by Elysium »

Ice-9 wrote:I realize I may not be typical. But...

* 14 years using Hotmail - never once clicked on a banner ad
* 18 years on World Wide Web in general, never clicked on a banner ad until...
* 3 years using Facebook - so far have clicked on two banner ads relating to my "likes" and resulting in one purchase

I am a stick-in-the-mud who has trained himself to ignore advertising and has several browser extensions to block advertising, and the only purchase I've made in nearly two decades after clicking on a banner ad was from Facebook. If they got me to click, I have a feeling they have something valuable.
Facebook hasn't even got me to join yet. Pass.
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Re: Facebook: The smart money exits

Post by Sidney »

I'm amazed how few people use ad blockers.
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Re: Facebook: The smart money exits

Post by tetractys »

Facebook reminds me of the "Halloween" movie with the jack-o-lanterns that turned kid's heads into maggots. I don't see the trend continuing. I do see the final effect a reflection of Zuckerman's tendencies. -- Tet
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Re: Facebook: The smart money exits

Post by Sam I Am »

Message deleted.
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Re: Facebook: The smart money exits

Post by KyleAAA »

Ad revenue context:

http://www.insidefacebook.com/2012/04/0 ... rcent-ctr/

CTR is very low, but CPC is quite high. Plenty of room for improvement.
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Re: Facebook: The smart money exits

Post by sommerfeld »

The Wizard wrote:Good thing about Facebook, of course is, unlike the domestic steel industry, it can't be outsourced to the Far East...
There's actually something to that - datacenters are best located on the same continent as their users; the speed of light is finite and transoceanic cables aren't cheap.

But aside from a few folks in the datacenters to replace hardware as it breaks, the programmers and sysadmins can for the most part be anywhere on the planet.
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Re: Facebook: The smart money exits

Post by nisiprius »

Ice-9 wrote:I realize I may not be typical. But...

* 14 years using Hotmail - never once clicked on a banner ad
* 18 years on World Wide Web in general, never clicked on a banner ad until...
* 3 years using Facebook - so far have clicked on two banner ads relating to my "likes" and resulting in one purchase

I am a stick-in-the-mud who has trained himself to ignore advertising and has several browser extensions to block advertising, and the only purchase I've made in nearly two decades after clicking on a banner ad was from Facebook. If they got me to click, I have a feeling they have something valuable.
The interesting thing is that I pretty much ignore banner ads--I do click on truly awful ones because of intense curiosity to see the pitch, e.g. penny stock ads. On the other hand, I frequently click on Google's paid search placement links. I hate myself for doing it, and when I'm being strong I will click on the unpaid link to the same site that's typically right below it on the first page. But what Google does is just so useful, and they have found that amazing win-win sweet spot where they are genuinely serving me at the same time as they are serving their advertisers.

Places swear that I really want them to spy on me because it will help them show me relevant content, ads I actually want to see. Color me skeptical--except for Google, which actually does show me ads I want to see.

And not to be difficult about it, but I can't remember even being tempted by a Facebook banner ad. I have been very tempted by many of their participatory online games, but have never been able to get myself past the page where I say that I'm agreeing to share all my information and my friends' information with everyone in the galaxy...
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Re: Facebook: The smart money exits

Post by greg24 »

FB IPO price set at $38.

Opens at $42.

Currently at $38.40.
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Re: Facebook: The smart money exits

Post by vasu100 »

Looks like the company priced the stock correctly, and raised the optimal amount for itself. Smart guys.

When I see IPO shares get a huge bump on day-1, I think it usually means the company under-priced the offering, and raised less money for itself than it could have (and allowed "other people" to make $$$, instead of raising more $$$ for the company for the long haul).
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Re: Facebook: The smart money exits

Post by GammaPoint »

The value seemed pegged around $38 for quite some time near the close. I guess a bunch of buy orders were sitting around that price. Wonder if there was any effort put into keeping it above the opening for PR purposes...
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Re: Facebook: The smart money exits

Post by bberris »

The underwriters are the ones bidding $38. This is done to prevent embarrassment or something. (What is the price of embarrassment?) After some period of time (a month at the most) when they have sold all the shares they were required to buy to support the price, they will stop bidding and let loose the hounds.
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