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Shares of Facebook broke the IPO price today, and are tanking over 8%.
And there’s a lot of fallout elsewhere in the market.
Facebook’s IPO was a spectacular flop. The shares struggled all day to stay above $38. The underwriters of the IPO, had to buy shares at $38 to support the stock and prevent it from going lower.
By the end of the day, many of the underwriters were eating into their IPO profit or were probably even losing money. It is simply a matter of time before they cut their losses, stop supporting the shares and hence Facebook’s share will sink. When that happens the big funds that bought at $38 for a quick profit flip will start dumping their shares. That will add to the selling pressure which will ultimately push the shares lower.
For months, anyone that asked for my opinion about Facebook IPO shares, I simply said, “I would stay away”. As I believed Facebook was overvalued and that was proved correct on Thursday. However, I did tell everyone, that I had placed an IPO allocation order at $30 or better and planned to sell it at the IPO. The shares were oversubscribed and I did not get any.
But, there were many that planned to buy no matter what the price was as they expected the shares to keep climbing. They are in for a rude awakening. The market now realizes Facebook is overvalued by any metric. The big money will not be buying Facebook shares for a long time. In fact, I believe it is going to be a short-sellers dream stock. I think the pressure will be so great Facebook shares could be $20 by September and with the lockup expiration it could easily be $10.
The slump in Facebook shares will have ramifications for the bay area economy as well. Many people that had hoped to become Facebook millionaires will suddenly realize that they are not. They will put off buying home and other big ticket items. This will be a positive for home buyers because less Facebook dollars will be chasing homes. Soon home prices will resume their slide down.
Facebook is a great company but not necessarily a great stock.
Eduardo Saverin, the billionaire co- founder of Facebook (FB), renounced his U.S. citizenship before an initial public offering, a move that may reduce his tax bill. (Many wealthy Americans are also doing the same to avoid the high tax bill.)
Facebook plans to raise as much as $11.8 billion through the IPO valuing the social network at as much as $96 billion. Saverin’s stake of about 4 percent would be worth about $3.84 billion.
Saverin and his family came to the U.S., in 1992 because they were going to be kidnapped by Brazilian gangs because they had a successful business. They U.S. gave them a home and safe place to live, go to school, work and do as they please. Saverin took full advantage of the U.S. system. He went to Harvard, met Zuckerberg. Later when he learned Facebook was successful, he used the U.S. court system to successfully sued Facebook and got a 4 percent stake when it was questionable how much he contributed to the company.
Farhad Manjoo, an immigrant journals writes that, Saverin’s decision to decamp the U.S. suggests he’s got no idea how much America has helped him out. He outlines it below.
First and most obviously, he lived a life of relative safety in Miami, something that wasn’t guaranteed for him in Brazil.
Second, also obvious: If Saverin hadn’t come to America, he wouldn’t have met Mark Zuckerberg, and—not to put too fine a point on it—if Saverin hadn’t met Zuckerberg, Saverin wouldn’t be Saverin.
Third: Harvard. Zuckerberg and his cofounders met in the dorms, and while Harvard is a nominally private institution, it enjoys significant funding and protections from the government. In 2011, Harvard received $686 million, about 18 percent of its operating revenue, from federal grants; that’s almost as much as it received from student tuition.
Would Facebook have been founded without Harvard? Perhaps—maybe Facebook would have come about wherever Zuck went to school. Still, there were social networks at lots of other schools. There was clearly something about Harvard’s student body that was receptive to Facebook.
More generally, elite, government-sponsored American universities like Harvard have been instrumental in the founding of many tech giants. Microsoft’s founders met at Harvard. Yahoo and Google’s founders met at Stanford. But even if you believe that these universities shouldn’t claim credit for the companies they brought about, it’s still hard to argue that Facebook would be where it is today without the American taxpayers’ large investment in public education. Facebook depends on really smart people to make its products. You don’t get smart people without tax dollars.
Fourth: The American government’s creation of the Internet. The strangest thing about Silicon Valley’s libertarian politics is how few people here recognize how the Internet came about. ARPANET, the earliest large-scale computer network that morphed into the Internet, was funded by the U.S. Defense Department, as was the research into fundamental technologies like packet switching and TCP/IP. Delve deeper into the network and you get to the microprocessors that run the world’s computers—another technology that wouldn’t have come about by loads of federal research grants.
Even the Web itself can trace its founding to government grants. Tim Berners-Lee worked at CERN, the research group funded by Europeans governments, when he worked on the HTTP protocol. Marc Andreessen worked at National Center for Supercomputing Applications—which is funded by in a partnership between the federal government and the state of Illinois—when he created the Mosaic Web browser. Then you’ve got GPS, a technology that makes much of the mobile revolution possible, and one that is wholly created and operated by the U.S. government.
Fifth: The judicial system. If it weren’t for the U.S. courts and laws, Saverin might have been permanently shut out of Facebook. But in 2009, he settled a lawsuit with Facebook that gave him credit as a co-founder and his current stake in the firm. In other words, it’s only because Saverin could sue Facebook and depend on a relatively fair judicial system that he’s got the billions on which he’s now skirting taxes.
Fair courts aren’t to be taken for granted, by the way. There are many places in the world where, if you are wronged by a billionaire, you wouldn’t be able to do anything about it. One of those places is Brazil; according to Transparency International, the courts in Saverin’s birth country are beset by corruption.
Now, none of this is to discount Saverin’s own contributions to Facebook’s success. Though he was only there at the beginning—and although he had some pretty terrible ideas for Facebook, including his plan to show interstitial ads when you went to add a friend—let’s assume that he did in fact add $4 billion of value to the world.
The question is, what’s fair for him to keep?
As an immigrant myself, I’ve got no patience for the argument that he should keep all of it. Pretty much everything in my life that I enjoy wouldn’t have happened without my being in the United States. My education, my job, my wife and family, the fact that I’m not persecuted for my race or religion (I was born in South Africa), the fact that I can sometimes forget to lock my doors at night and not end up killed by marauding bands—I hate paying taxes as much as the next guy, but when I think about all the ways that the United States has been integral to everything in my life, taxes seem like a tiny price.
Now, remember that the tax rate on long-term capital gains is only 15 percent. In other words, Saverin gets to keep 85 percent of everything he’s making from Facebook’s IPO. Given how much of his wealth depends on the government, that’s more than fair.
Sex.com, the most expensive domain name ever sold at $13 million, has become a website for rating naked women.
The site features an endless stream photos and videos of naked women. Sex.com, is trying to engage and entertain users by adding ratings and likes.
The site also lets user build their own collection of naked women and add pictures or video from the web to the the site.
There are probably a million reason why Facebook paid $1 billion for Instagram. Here are a few. If you read the SEC documents carefully you know that Facebook states clearly that it has 800 million accounts NOT users. Of those accounts only 148 million are active. Active, is described as logging into their accounts at least once every 30 days.
In contrast, Instagram has been downloaded 30 million times and it has an active user base of 10 million. Active meaning, that its app is accessed at least, once every 24 hours, and that is from the iPhone on iOS alone. Instagram is only now venturing into other platforms.
After Facebook’s IPO, investors will be looking for quarterly growth. We all know that Facebook is not growing regardless of what the company says. By growth, I mean growth in active users. That can only come from Instagram at this point.
The Facebook IPO, values the company at $100 billion. To put that in perspective, Apple’s iTunes makes more money and profit in a single quarter than Facebook does all year with its “800 million” users.
To maintain that $100 million valuation Facebook needs to show growth. That’s Instagram. Instagram, also fits Facebook perfectly like a glove, because its a photo sharing app, and at its core, Facebook is really a photo sharing site with social networking. What happens if Instagram adds social networking around photos?
So Facebook is buying Instagram for two main reasons, growth and to prevent Instagram from becoming a social networking site around photos.
Further, Facebook is weak in mobile. Its mobile efforts have gone nowhere. Mobile will eventually become the center piece of social commerce. That is where Facebook wants to go. Instagram, knows every detail about your photos, where you took them, when you took them and eventually it can provide you interesting data around commerce based on that data. These are some of the BIG reasons why Facebook paid $1 billion for Instagram.
Tweeters beware.
The Department of Homeland Security is monitoring our social media activities to look for “Items Of Interest” (IOI) that could predict potential threats.
Animal uncovered a full list of terms the DHS looks for, and some of these words are pretty general.
Aside from names of government agencies, such as the DHS or the CIA, words like “dirty bomb,” “scammers,” “biological,” and even “pork” made the cut.
If your tweets or Facebook status updates are deemed questionable, the Media Monitoring Capability team may hand over your personal information to the DHS, perhaps even by phone if the situation is that urgent.
However, the DHS notes that its got an internal privacy policy that will eliminate Personally Identifiable Information (PII) from its string of aggregated tweets and updates, so they won’t entirely snoop on your private life – not unless you post a sentence full of dangerous keywords.
For example, a status like “Jake is shooting a video of himself destroying a plate of uncooked pork chops in China, that’s some food extremism, his toilet is going to be a disaster afterward” might land you in some hot water.
So take a gander at the full list and you might want to watch the way you’re expressing yourself on the web.
Source: SAI
As second-tier social media sites become more popular with consumers, these sites are finding their place within the social media ecosystem, referring traffic to larger social networks, as well as seeing traffic arrive from Facebook and Twitter.
In November 2011, Compete analyzed referrals of US traffic to Facebook, and found that, in addition to retail sites bolstered by holiday traffic, Meebo and Pinterest were two social sites increasing in influence. Meebo’s US referral traffic to Facebook grew 314.48% in November 2011 compared to the previous month; Pinterest’s referrals rose 57.22%.
Pinterest is a social site to watch, as it is gaining users at a rapid rate. The top sites visited by US internet users after visiting Pinterest included several social networks: Facebook, 13.94% of the time; Blogspot, 8.74% of the time; Tumblr, 1.67% of the time; and Etsy, 1.57% of the time, according to Compete. As a visual-focused social network, it makes sense that Pinterest would refer traffic to other sites with photos and visuals, such as Tumblr and Etsy.
Additionally, larger social sites are referring traffic back to these second-tier sites. This demonstrates that consumers may be experimenting with these newer or second-tier social sites, but they also feel the need to share content from the larger networks and point it back to Pinterest or Tumblr. According to Compete, the share of Tumblr’s traffic referred to the site from Twitter climbed 817.78% from October to November 2011. Similarly, the share of Meebo’s traffic derived from Twitter climbed 262.05%, Pinterest’s increased 48.61% and Instagram’s grew 40.80%.
While referral traffic isn’t a traditional measure of success for a website, looking at social networks in this way demonstrates the connectedness of the social media world. Marketers that want to test how their brand works with a second-tier social site like Pinterest or Meebo should work to connect their social media strategies and accounts to best take advantage of the increased interconnectedness in the social media ecosystem.
Over a 20 billionaires and 1,000 multi-millionaires are going to be minted when Facebook does its IPO. Here is diagram of who is making what.
Here are some awesome stats from Facebook’s IPO documents filed with the SEC. The data was put together by comScore & Miniwatts Marketing Group for Reuters.
While I don’t have a crystal ball, here are some developments that I think are worthy of our attention and will affect how we do things in the social mediasphere over the next few years. Many of the things on this list will not be news to the very well-informed social media consultant types who live and breathe this stuff. But for the rest of us, there are seeds of opportunity here that should not be missed.
–Aliza Sherman
