Is Facebook IPO more like Google or Groupon?

[ninaprincess]

I have $20,000 and thinking about buying Facebook shares at IPO.

I thought google shares were too expensive when they came out at around $100. Now they are $600.

[ltsddd]

[quote=ninaprincess]I have $20,000 and thinking about buying Facebook shares at IPO.

I thought google shares were too expensive when they came out at around $100. Now they are $600.[/quote]

It’s a groupon-like company and a google-like stock.

[The-Shoveler]

Me IMO a large part of the so called current recovery was due to the apple ibubble.
I had heard one analyst break down the numbers and if it were not for apple
the Tech sector’s earning would be negative.
Could they be timing the IPO to boost the market just as the seasonal weakness usually kicks in Just to keep it going ?

Or maybe they can keep everyone lining up to buy the latest Ibubble product for an extended indefinite period, who knows stranger things have happened.

Me I think if the facebook IPO falters, well..

[Coronita]

Please dont nina… I mean, really there are better ways to gamble on the stock market than this….

Because in short… Most companies end up being more like Groupon/Zygna versus Google. Google was really the exception…

I’ve already covered this extensively…

Here’s the issue with IPO’s… You’re not an insider. You’re going to be buying shares at retail the day it opens. Share’s are going to be pumped up big time. Meanwhile, insiders are going to be trying to be selling like crazy. You’re facilitating making people on the inside rich at your expense.

I’ve been there and done that. I use to work at 3 pre-ipo companies pre-dot.com One company (B2B software company that partnered with Ariba/CommerceOne/etc/etc/etc), A lot of us that joind 1 months right before the quiet period/IPO month had pre-ipo shares at $30/shares… First day of opening was $315/share, and topped off within a month at $450 or so… Guess who was trying to unload while everyone else was trying to buy????? Yup, that’s right insiders. But it’s worse now.

See, back in .com 1.0 days, there was this thing called “lockup period”. Basically, insiders could not be selling shares for the first 180 days after the first day of trading. The purpose of this rule was to prevent massive insider selling, tanking the stock.. The purpose in part is to restrict supply of shares (and to keep prices high)…

Once lockup period expired, insiders tried to sell as much as they could (typically what the vested). And boy did we sell. Within 2 weeks of the lockup period expiration, shares dove from $450/share down to $198/share… Yes, it sucked that the shares fell so quickly,but none of the insiders like us got hurt. Because our shares were at $30/share. Guess who really got hurt? Yup, that’s right all the retail purchasers who paid $450+/share.

And it gets better. The company then tried to impose rules on when employees/insiders could sell.. Employee’s were only allowed to sell within a 10 day window per quarter. They said the reason for this was because the concern of insider information and that it was an SEC rule that made everyone have these trading windows (which was bullshit, because a lot of us had no inside information. We were roughly 500+ employees). A lot of us suspected the real reason was that they wanted to prevent everyone from selling like crazy……So employees came up with very creative solutions.

*Some of the employees that were already fully vested and were sitting on $4million+ options simply quit the company…Pooffff. Lockup restrictions were gone…

*Some of the other employees that were not fully vested, ended up purchasing out of the money put options to cover the unvested stock options, as insurance just in case the stock tanked… For example, if you had 10k options shares that were priced at $30/share but couldn’t exercise and sell for the next 4 years, and the current stock price was $200/share after the lockup period….To protect yourself, you would try to buy 10k worth of put options (100 puts) with a slightly lower strike price say $150/share that would expire months if not 1-2 years out. The put options would be dirt cheap and worthless. But the point was to use it as insurance in case the stock tanked while you were waiting for your options to vest…Well guess what? In less than 2 years, the stock fell from $200/share to $10. and the company subsequently acquired by another company….Again, it wasn’t the insiders that got hurt when this happened…Because while the employee’s stock options were now worthless, the put options they bought clearly wasn’t. Since then, companies actually have some internal policies that tell employees they can’t do that…

Fast forward to web 2.0.. It’s really the same thing…Pump and dump…Only worse…
See remember I was talking about the 180 day lockup window companies use to do to prevent the stock price from initially cratering?? Well, web 2.0 companies have figured out a way around it. It’s called doing a “secondary offering”, in which they reissue shares during the supposedly lockup window…. Guess where those shares for the secondary offering are coming from???? Yup, that’s right insiders….

And if you don’t believe me… Look no further than Groupon and Zygna, who did just that…And why both companies are pretty much flatlined since the ipo…
At one point I actually bought shares of Zygna…But the moment they even mentioned about the secondary offering, I knew EXACTLY what they were trying to do… Because it’s the same sort of game that was played in web 1.0 only worse…Trying to get insiders to sell shares at grossly inflated prices over the retail market.

Now let’s talk about facebook. CEO is a total control freak.. He even said, he’s going to take care of the employees and insiders. Banks/institutions are going to be heavily trying to unload tooo… Who do you think they are trying to unload to?

Until a company can prove it’s earnings for 2-3 years, I’d say you’re really just making insiders rich…There are much better ways to gamble $20k and make money….
Buying $20k worth of facebook shares is a lot less likely to make you rich than it is to make you poorer. If you really think this is going to be a high flyer, you should instead try to get a job at facebook and get insider shares and let other people buy your shares over retail….

[Coronita]

Reposted this link… Read it nina…

http://articles.marketwatch.com/2012-04-23/commentary/31382869_1_zynga-ipo-shares-ipo-price

SAN FRANCISCO (MarketWatch) — If you’re wondering whether shares of Zynga Inc. might be ready for a bounce after their monthlong slide, a clue can be found in the recent trades of company insiders.

With its recently completed secondary offering, Zynga found an innovative way to allow its top executives, early investors and other insiders to sell off their stakes — despite IPO restrictions designed to prevent it.

As they sell, common shareholders unwise enough to have bought IPO shares in the company have watched their investments fall through the floor.

Since Zynga filed the registration statement for its secondary offering on March 14, the stock has shed more than 25% of its value. It’s now sitting at around $9, roughly 10% below its IPO price of $10 a share.

Between the registration date of the offering and the day it closed on April 3, Zynga’s IPO bankers, led by Goldman Sachs and Morgan Stanley, agreed to modify the lockup restrictions that previously had prevented the social-game maker’s insiders from selling their shares.

And sell they did.

By the time the cash register closed, Zynga Chief Executive Mark Pincus and other insiders unloaded more than 49 million shares at a price of $12 a share. The offering, which included more than 6 million shares bought by the company’s IPO underwriters, generated $593 million for the sellers, while providing nothing to Zynga or its common shareholders.

As the company said in its April 3 statement, “Zynga did not receive any proceeds from the sale of shares in the offering.”

While that statement also said a reason for the offering was “an orderly distribution of shares,” I’m not sure common shareholders would use that phrase to describe a near-30% drop in Zynga’s stock price since it was announced.

Zynga will report quarterly results on April 26.
Groupon’s turn

As I’ve been writing for more than a year, both Zynga and Groupon Inc. are among a group of young companies that have allowed insiders to cash out without waiting for an IPO. Read how Facebook, Twitter, Zynga bubbles are minting millionaires.

Since Groupon (US:GRPN) said on March 30 that it would restate results for the fourth quarter and all of 2011, its stock is down roughly 35%.

In case you missed it, the daily-deals company also said it was extending the expiration of its IPO lockup date to June 1. That’s when Groupon insiders will be able to dump even more shares than they have already.

Groupon will report quarterly results on May 14.

These tech IPOs have been great vehicles for executives, early investors and other insiders to cash out their stakes, courtesy of professional money managers who bought IPO shares with other people’s money. If you have retirement money in any tech-sector growth funds, some of that money is likely yours.

With Groupon’s market cap now around $7.1 billion and Zynga’s down to $6.5 billion, some investors might be tempted to wade into these stocks in hopes of a bounce. In fact, many traders predict that these new tech issues will get a ride on the coattails of Facebook Inc.’s (US:FB) IPO, expected next month.

No doubt the trading desks of Morgan and Goldman will be working the phones to find buyers of all those Zynga shares for which they just paid insiders $12 each. Once Groupon insiders can dump their shares, its IPO bankers will be shilling that stock as well.

Yet stock-market history suggests that insiders usually buy or sell shares of their companies at the right time.

So far, nearly all the insider activity in Zynga — as with Groupon — has been selling.

[Coronita]

So in short. If you got those extra zygna or groupon shares, no worries. Goldman/Morgan will be shilling for you to try to pump up those secondary offering shares…That will be your time to unload to someone else.

The old, hot potato game..Last person holding, loses….

come on folks, don’t you get it? Goldman wins during the Housing Bubble. Goldman wins during the Tech Bubble…. In fact, Goldman always wins.

[ucodegen]

[quote=flu]The old, hot potato game..Last person holding, loses….

come on folks, don’t you get it? Goldman wins during the Housing Bubble. Goldman wins during the Tech Bubble…. In fact, Goldman always wins.[/quote] .. because Goldman in in control of the Fed & Treasury..

[ninaprincess]

Wow, these are scary allegations if true. I watched the 60 minutes clip on Groupon and I don’t trust that CEO at all. I think I will hold on to my money for now. Thanks very much for your advice.

[enron_by_the_sea]

If I can buy facebook shares at the underwriter’s price then I would probably buy them and flip them ASAP at open to Joe-the-clueless-investor. But most likely, I can’t do that because those IPO prices are reserved for fat-cat customers of Goldman Sachs only!

If I can’t get shares at that price then it is best to stay out of this and watch the fun from the side…

[markmax33]

[quote=ninaprincess]Wow, these are scary allegations if true. I watched the 60 minutes clip on Groupon and I don’t trust that CEO at all. I think I will hold on to my money for now. Thanks very much for your advice.[/quote]

Nina,
The below information is pretty false. Google’s success is in advertisement from the those little ads at the top of and side of the screen you see all the time. Groupon is not an ad company and has a huge transaction fee for everything. Zynga and Facebook are exactly the same as Google, they will make money from ads and go through the roof as ad budgets get shifted from TV to online. It is shifting like 2-3% per year AND the estimated amount of ad revenue Facebook makes from each user is about $125/user. It is a very powerful business model for those that truly understand this is not a web stock. Take it from someone who called Google, Apple, Chipotle, VMware, etc. Don’t let the anyone over 35 give you advice on a tech stock. Watch the under 35 crowed and see what they are doing and you’ll find the next successful company.

[an]

Sorry MM33, but you’re not the only one here under 35, but you seem to be the only one who thinks it’s different this time and .com v2.0 is for real this time.

FYI, ZNGA and Facebook are not the same as GOOG. GOOG was MAKING money from day one if IPO. A LOT of money at that. What’s ZNGA’s EPS?

[sdrealtor]

Wow! Groovy Man! Did MM just saw don’t trust anyone over 30? Are Bell Bottoms back yet?

[Coronita]

For reference. I talked about it here…

http://piggington.com/ot_lol_groupon

And BTW, funny on the last thread I mentioned QC would see something below $65 eventually…….

Trust me, you shouldn’t be playing in May, June or July, unless you really want to deal with the volatility and have the stomach for it…

[Coronita]

[quote=enron_by_the_sea]If I can buy facebook shares at the underwriter’s price then I would probably buy them and flip them ASAP at open to Joe-the-clueless-investor. But most likely, I can’t do that because those IPO prices are reserved for fat-cat customers of Goldman Sachs only!

If I can’t get shares at that price then it is best to stay out of this and watch the fun from the side…[/quote]

If you’re talking about the termed “friends and family” program that was prevalent in web 1.0… Don’t count on that either…There were rules put in place for that too, and a lot of lawsuits that happened….

Ah yes, .com reborn into something even more dirtier this time around…

[Coronita]

[quote=markmax33][quote=ninaprincess]Wow, these are scary allegations if true. I watched the 60 minutes clip on Groupon and I don’t trust that CEO at all. I think I will hold on to my money for now. Thanks very much for your advice.[/quote]

Nina,
The below information is pretty false. Google’s success is in advertisement from the those little ads at the top of and side of the screen you see all the time. Groupon is not an ad company and has a huge transaction fee for everything. Zynga and Facebook are exactly the same as Google, they will make money from ads and go through the roof as ad budgets get shifted from TV to online. It is shifting like 2-3% per year AND the estimated amount of ad revenue Facebook makes from each user is about $125/user. It is a very powerful business model for those that truly understand this is not a web stock. Take it from someone who called Google, Apple, Chipotle, VMware, etc. Don’t let the anyone over 35 give you advice on a tech stock. Watch the under 35 crowed and see what they are doing and you’ll find the next successful company.[/quote]

how’s your zygna holding doing, after you double/tripled/quadrupled down…

Ah yes, and let this be another corollary to the stock market retail “investors”…. Folks only talk about what the were right on, but sweep everything else under the covers.

[Author]

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