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Facebook IPO: Short immediately or wait?

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January 27, 2012 – Comments (29)

The rumors are that Facebook will be IPOing in the very near future. Looking at how fast MySpace went from Must Have to Must Avoid, I think that Facebook stock will be worthless in the long run. But, things can run up higher on sentiment that you can believe possible. So the question:

 

Will Facebook stock have a run up after the IPO, or will it start to sag immediately? 

29 Comments – Post Your Own

#1) On January 27, 2012 at 2:52 PM, kdakota630 (29.49) wrote:

Apparently the valuation is supposed to be between $75B - $100B.

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#2) On January 27, 2012 at 2:57 PM, NerfBall (< 20) wrote:

Oh I don't think but there's any question but that it will run, the only question is how far and for how long. I agree with you that it's about fundamentally worthless, but IPO euphoria can be a very crazy thing, and particularly for something so omnipresent in people's lives as Facebook seems to have become. I have nothing to do with Facebook and am glad of that, however, I wouldn't short it in a million years despite my own personal opinions about it.

You know what they say about irrational exuberance. It'd take balls of steel to short that thing in my opinion. 

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#3) On January 27, 2012 at 3:01 PM, TheDumbMoney (38.60) wrote:

LOL 

I am a nobodycompoop, but I do not think FB will be worthless in the long run. MySpace was a crap website that was always mainly about the marketing of oneself (which is why bands, etc., gravitated to it).  FB is highly sticky in a way MySpace never was, because many people use it almost as a virtual address book for everyone their are remotely close to.  This is the most significant IPO in this country since Google IPO'd almost ten years ago, and FB makes real money.  Many thought Google would be a bust-IPO when it came out so close on the heels of the dot-com bust.  While it has been a market-perform and/or underperform since about 2007, it had quite a run-up to that point after its IPO. 

THAT SAID, I think the IPO mania is going to be disgusting, piggish, and filled with the whinnying of chumps.  Any money to be made in the next three years, minimum, has already been made by the people setling the stock in the IPO.  FB is an easy short-term short, AFTER the major, major pop that is in my view inevitable after the IPO.  Also watch for the FB IPO to mark a major top in the broader market.

DTAF

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#4) On January 27, 2012 at 3:02 PM, SkepticalOx (99.43) wrote:

Uh... Facebook has a treasure trove of information it can sell to advertisers that is possibly more valuable than Google's. And Google is technically less sticky than Facebook (switching search engines only requires you to change the URL in the address bar, while recreating your entire online social network isn't so much fun). 

Yet look at Google. I wouldn't short this thing anytime soon. 

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#5) On January 27, 2012 at 3:04 PM, catoismymotor (38.39) wrote:

My best guess: I'd short it, but not off the bat. I think it's better to let it run for three to six months to let the lovefest fade then short it.

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#6) On January 27, 2012 at 3:22 PM, Valyooo (99.37) wrote:

Never short based on valuation alone...i learned the hard way.  There NEEDS to be a catalyst.

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#7) On January 27, 2012 at 4:01 PM, Turfscape (44.53) wrote:

I made some quick CAPS points by red-thumbing Groupon at its IPO. While Facebook has a more solid footing than Groupon, I don't think the fundamentals are terribly different. It's hard to justify buying and holding an over-priced stock in our current economic environment...and Facebook will undoubtedly be overpriced upon going public.

I absolutely would not touch this in a long or short sense in real life...but CAPS is another story.

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#8) On January 27, 2012 at 4:15 PM, motleyanimal (86.99) wrote:

I made some cheap points shorting Groupon and Pandora, but I certainly would wait before shorting Facebook. Everyone is going to want to own this one.

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#9) On January 27, 2012 at 4:36 PM, SkepticalOx (99.43) wrote:

Could someone explain why Facebook is more similar to Groupon than it is to Google back when it IPO'd?

When Google IPO'd ($23B valuation in August 2004), the preceding full-year's revenue was around $1.5 billion. Facebook's 2011 revenue is estimated to be around $4 billion (which is more than double revenue's for 2010 - which is similar to the revenue growth of Google from 2003 to 2004). 

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#10) On January 27, 2012 at 4:37 PM, TMFLomax (50.23) wrote:

I did OK in I'm pretty sure just about immediate CAPS red thumbs on LNKD and ANGI too. Some of this social media IPO craziness is just over the top IMHO. The thought also crossed my mind whether I'd red thumb Facebook immediately in CAPS or not. Agree with Turfscape about the real world, particularly in terms of shorting it -- terrifying thought. (My bolding is not for emphasis, it's user error. Typical!)

I am looking forward to reading the IPO filing though. That'll be good reading.

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#11) On January 27, 2012 at 4:46 PM, SkepticalOx (99.43) wrote:

Also, Facebook recently halted trading of its shares on SecondMarket. It's implied value was $82 billion based on trading on SecondMarket (which is uh, less liquid than public markets). 

With that said, Groupon is trading 40% less today than what it traded for on SecondMarket right before it's IPO. So............. 

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#12) On January 27, 2012 at 4:51 PM, SkepticalOx (99.43) wrote:

It would be interesting to see Second Market valuations vs. post-IPO valuations. This VC says one of his investments made in Second Market is now trading 300% higher post-IPO.

Anyhoo. This shall be intriguing what happens!

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#13) On January 27, 2012 at 5:43 PM, chk999 (99.97) wrote:

It occurs to me that a "buy on the first day and sell pretty quickly" strategy probably works. But the question is, am I feeling lucky?

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#14) On January 27, 2012 at 6:52 PM, kdakota630 (29.49) wrote:

chk999

"Well, do ya... punk?"

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#15) On January 27, 2012 at 7:07 PM, kdakota630 (29.49) wrote:

Sorry, couldn't resist.

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#16) On January 27, 2012 at 7:18 PM, obga18 (80.14) wrote:

i am thinking of this same thing, buy in the morning, let it run and sell at the end of the day...anyone else in the same boat?

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#17) On January 27, 2012 at 8:40 PM, awallejr (85.50) wrote:

Unless you could get the IPO price that stock is going to runaway fast at the open I suspect.  I know nothing about the company's financials, but if they in fact earned 4 billlion in revenue last year, 100 billion estimated valuation might actually be cheap.

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#18) On January 27, 2012 at 9:47 PM, walt373 (99.80) wrote:

Might be severely overvalued but judging by the continued optimism in all things internet, cloud, and social, and seeing as how Facebook is best in class, I would be reluctant to short them...

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#19) On January 29, 2012 at 6:22 PM, MichaelMolenaar (< 20) wrote:

Myspace had flaws that facebook doesn't. I would go long on facebook, but I'm curious as to what the IPO will be. Maybe $30?

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#20) On January 30, 2012 at 12:10 PM, Mega (99.96) wrote:

awallejr (82.35) wrote: "but if they in fact earned 4 billlion in revenue last year, 100 billion estimated valuation might actually be cheap."

I think I read $3.8B in revenue and around $1.9B in earnings.

The problem I see is that user growth is going to be limited given how big they are.  Growth will come from ARPU and users might not like being more "monetized".

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#21) On January 30, 2012 at 1:22 PM, IBDvalueinvestin (99.66) wrote:

Facbook will change Valuation Metrics of the entire Social Networking sector. Once fund managers see what valuation metrics are given to facebook they will then know what added valuations need to be given to :

RENN

ACOM

QPSA

FFN

Some will argue that these companies have been turned into oversold bargains while waiting for the Facebook re-evaluation.

Sort of like when you buy homes, you need to have comparables in your area to get a mortgage.

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#22) On January 30, 2012 at 8:22 PM, awallejr (85.50) wrote:

Growth will come from ARPU and users might not like being more "monetized".

That is the 100 billion dollar question.  If it is generating almost $4 billion now, how much could it generate once they figure out a way to monetize it.  From my understanding, I thought only about 5% of the company is in the IPO.  From a stock investing point of view the only people I really see being helped are the 95% private shareholder's since now they can point to a statement and give a value to their holdings.

I might buy a share or two just for laughs but am too leery to make it a serious investment.

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#23) On February 01, 2012 at 1:00 PM, drgroup (69.31) wrote:

This stock will run like a scaled dog for the first week, then the program traders will short it in order to scalp some easy money. The average joe investor/trader won't be able to touch this ipo anywhere near the opening price and will get burnt if they buy in during the first week or so. Does anyone know who is handling this offering?

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#24) On February 01, 2012 at 8:48 PM, HarryCarysGhost (99.70) wrote:

@#23-

http://www.bloomberg.com/news/2012-02-01/bankers-may-collect-1-to-1-5-fees-for-handling-facebook-public-offering.html

My only plans for this stock-

Red thumb it on caps at the IPO.

End red thumb after the 7 day waiting period.

Shares might look cheap or grossly overvalued when they finally have to disclose what the company is really worth, otherwise were just speculating and not in a good way.

I agree with  awallejr that I might pick up a few shares once a proper valuation can be done. If not does anybody remember the dot.com bubble.

Cheers.

 

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#25) On February 01, 2012 at 11:57 PM, awallejr (85.50) wrote:

Seriously, from a valuation point of view anyone who buys this stock is nuts.  Why in the world would you pay what will be a ridiculous valuation for measley 5% of the company?  Zuckerberg has all the power.  He will dictate what this company will do.  Buy a share or 2 for fun, anything more is nuts.

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#26) On February 02, 2012 at 10:54 AM, drgroup (69.31) wrote:

#24...thanks for the lead. I think this offering is being so hyped up, it could open around $50 and suck a lot of dot.com'ers into the trap. I agree with you on waiting for the pull back. Good luck.

#25... 10-4

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#27) On February 02, 2012 at 6:23 PM, HarryCarysGhost (99.70) wrote:

Real time alert-------------------------

Cramers saying BUY!!!BUY!!!BUY!!!

Kiss of death for sure.

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#28) On February 03, 2012 at 3:33 PM, EnigmaDude (92.95) wrote:

I dunno about shorting FB, but you may want to look at shorting Zynga - it's taking off just because the FB IPO was announced and it said 12% of FB revenues come from ZNGA. 

I think market sentiment will drive up the price of FB in the short term (6 months to a year).  After that its anyone's guess.

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#29) On February 03, 2012 at 3:35 PM, IBDvalueinvestin (99.66) wrote:

Social network companies are all overhyped and will crash and burn, but I noticed some posts here including Cloud sector with them.

The Cloud sector is the real deal Growth Story that should not be confused with the social networks sector.

ORACLE, SAP,  IBM, BMC, TDC, CA, CRM, FFIV, VMW, N

Are going up for the correct reason, high sales growth coupled with high profits.

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