Home › Forums › Financial Markets/Economics › Is Facebook IPO more like Google or Groupon?
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desmond.
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August 8, 2012 at 9:40 PM #749801August 8, 2012 at 9:49 PM #749802
equalizer
Participant[quote=flu]Those FB put options at $27 looking pretty tasty now…
[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]I guess some of us >35 year old but < 40 year old who survived web 1.0 were kinda right after all...[/quote] Darn, chipolte znga and fb havent done too well in last month. Maybe under 35 crowd got jobs and can't waste all day on games anymore. We can only hope!
August 13, 2012 at 3:25 PM #750195
CoronitaParticipantGroupon!!!!!!!!!!!!!!!!!!!!!!!!!!!
http://finance.yahoo.com/news/groupon-earnings-beat-forecast-revenue-201445927.html
August 13, 2012 at 4:29 PM #750211an
ParticipantOuch!!! Shoulda got some puts.
August 13, 2012 at 7:08 PM #750235Participant[quote=flu]Groupon!!!!!!!!!!!!!!!!!!!!!!!!!!!
http://finance.yahoo.com/news/groupon-earnings-beat-forecast-revenue-201445927.html%5B/quote%5D
But, but my cousin who is in her early 20’s told me last year everyone her age is using Groupon and I listened to the man who told me to watch what the youngsters are doing.August 13, 2012 at 7:17 PM #750236CoronitaParticipant[quote=equalizer][quote=flu]Groupon!!!!!!!!!!!!!!!!!!!!!!!!!!!
http://finance.yahoo.com/news/groupon-earnings-beat-forecast-revenue-201445927.html%5B/quote%5D
But, but my cousin who is in her early 20’s told me last year everyone her age is using Groupon and I listened to the man who told me to watch what the youngsters are doing.[/quote]But that guy also told you that Ron Paul was going to be the next GOP candid…
I do like bell-bottoms though. I think they’re totally cool…
Sorry, I couldn’t resist.
Reality is that why use groupon, when you can use UT daily deal??
Where else would you get admission to San Diego Ice Arena for 4 people for $15…And if you only admit two people, you can use the same coupon next time to admit two people again????
August 14, 2012 at 1:43 PM #750277desmond
ParticipantAnother loser ANGI. I would never use that website and I could not stand the song either.
August 14, 2012 at 3:36 PM #750283briansd1
GuestGroupon is for kids on a budget. Businesses soon figure out that coupon customers will only remain coupon customers.
I would never use groupon to go to a local restaurant. You’re destined to get lousy service. Businesses can’t serve you well if they are losing money.
August 17, 2012 at 6:55 PM #750471CoronitaParticipantLol…
Finally someone writes about what others already knew…
http://www.fool.com/investing/general/2012/08/17/why-facebook-is-the-best-ipo-ever.aspx
One of the greatest things about life is that you can never stop learning. Sure, it may be harder to learn a new language after college, it may be more difficult to pick up a physical sport after your double knee replacement, and you might find it challenging to pick up developing apps for smartphones in your 80s; but this makes the easy lessons that much more valuable. And the lessons that Facebook’s (Nasdaq: FB ) highly-visible IPO has given investors are very easy to learn, making it the best IPO for small investors ever. Below are some of the many lessons you should take away from Facebook.
August 18, 2012 at 9:05 AM #750494Participantflu,
saw this on a fb board, is it correct?“All FB employees that had vested RSUs will have to pay taxes on a $38 dollar gain based on the IPO price. They will be taxed at ordinary income levels, which means 45% (state and federal)
Stock price below $19 means that they have to sell ALL their shares to pay the taxes. That is mandatory.
On November 2012, when lockout is removed, you will have employees owing more in taxes than their shares are worth. FB will have to compensate them in some way. This will get very ugly”
August 18, 2012 at 9:36 AM #750497SK in CV
Participant[quote=desmond]flu,
saw this on a fb board, is it correct?“All FB employees that had vested RSUs will have to pay taxes on a $38 dollar gain based on the IPO price. They will be taxed at ordinary income levels, which means 45% (state and federal)
Stock price below $19 means that they have to sell ALL their shares to pay the taxes. That is mandatory.
On November 2012, when lockout is removed, you will have employees owing more in taxes than their shares are worth. FB will have to compensate them in some way. This will get very ugly”[/quote]
It’s unlikely to be accurate. RSU’s are typically not taxable to employees until fully vested. As a practical matter, vesting would require the release of the rights to sell or control the stock, which would be the november date. So they’ll be taxable to the employees at the FMV as of the Nov. date. (this is NOT the same as stock options, which may have a value at date of grant.)
August 18, 2012 at 11:34 AM #750502CoronitaParticipant[quote=SK in CV][quote=desmond]flu,
saw this on a fb board, is it correct?“All FB employees that had vested RSUs will have to pay taxes on a $38 dollar gain based on the IPO price. They will be taxed at ordinary income levels, which means 45% (state and federal)
Stock price below $19 means that they have to sell ALL their shares to pay the taxes. That is mandatory.
On November 2012, when lockout is removed, you will have employees owing more in taxes than their shares are worth. FB will have to compensate them in some way. This will get very ugly”[/quote]
It’s unlikely to be accurate. RSU’s are typically not taxable to employees until fully vested. As a practical matter, vesting would require the release of the rights to sell or control the stock, which would be the november date. So they’ll be taxable to the employees at the FMV as of the Nov. date. (this is NOT the same as stock options, which may have a value at date of grant.)[/quote]
The forum is incorrect in determining “vest date” and how much is vested…
a) People typically don’t vest fully 100% at one time. They typically vest anywhere between 20-40% of there awards every year…
b) Vest date does not necessarily equate IPO date.
Also, in most cases, the taxes owed on RSU’s have already been paid most likely by employees…The way RSU’s taxes work is follows.
1. RSU’s are stock shares given to employees. They aren’t options..They’re real shares..
2. The day you vest, you get taxed at ordinary income @ FMV * number of shares vested.
3. The day you sell those shares, you take a capital gain/loss between the FMV the day you sell and the FMV the day you vested.So let’s use a contrived example of what would cause people get into a mess.
a) You have 100 RSU shares of FB granted to you
b) You vest 1 year later, and the FMV of is $30 that day.
c) You sell 30 days later after that, and the FMV is $20 that day (because you were an idiot and thought the thing would keep going up, while everyone decided to dump)…*You would owe ordinary income of $30x 100 shares= or $3000.
*Later, when you sell the shares at $20…You would have a capital gain of $20-$30 x100 = -$1000. Or a capital loss of $1000.
Net effect is you would still be ahead $2000.
HOWEVER, The bad scenario is if if you have lots of shares vested.You would have a large ordinary income tax bill, BUT you would be limited to $3000 for capital loss and have to carry over the rest next year(s) .
For example example above, consider if you had 1000 shares….
*You would owe ordinary income of $30000 ($30 x1000shrs)
*Your capital loss would also be $10000, BUT IRS only allows you to recognize $3000 capital loss..You would be forced to carry over $7000 to next year.So, you would be taxed really heavily this year ($30000-3000=$27000 taxed at income), and carry over $7000 in losses
That’s how people sort of get screwed IF they don’t sell the same day the vest and the stock falls after the day they vest. BUT it’s a gamble, because the stock could go up more after the day you vest, and then you would come out ahead. So it depends.
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The one thing about the message board post that is incorrect though is the person(s) mentioned vest date = IPO date..That isn’t the case necessarily.
RSU’s are granted usually the day you join the company, and the vest date is typically X years (typically 1 year for 20-40%) from the date you are granted..IPO date is irrelevant.
For example, if I join in January 5 2012…Typically my RSU’s 25-30% would vest in January 5 2013…The oridinary income tax would be calculated based on the FMV on January 5 2013, not the IPO price….
So unless you happened to join FB earlier where your RSU vest exactly the day of the IPO, you won’t be seeing a $38/share FMV)…Also, for RSU’s typically the taxes are already paid for…Most companies automatically withhold the ordinary income the day you vest by selling enough shares to cover automatically the day you vest. For example, if you were due 1000 shares, most companies RSU system would automatically sell shares (maybe 100-200 shares) to cover the ordinary income automatically. (It’s called Net Issuance). IF you don’t want that to happen, the company typically requires you to pay the tax upfront….So while you do end up paying taxes on it, you don’t get a surprise tax bill at the end of the year.
The message board poster on Yahoo doesn’t know how RSU’s work, so this instead is not an issue to cause a panic sell… FB having crappy numbers, well that’s a different story.
August 20, 2012 at 6:20 AM #750559joec
ParticipantDoes the company pay the tax or the employee? I didn’t spend much time researching RSU’s since I don’t have any, but here’s an article on it with this blurb in it:
“Facebook faces a massive ($3 billion) tax bill related to its employee stock compensation and can no longer do what it planned to do, which was sell shares to raise this cash.”
August 20, 2012 at 7:22 AM #750560CoronitaParticipant[quote=joec]Does the company pay the tax or the employee? I didn’t spend much time researching RSU’s since I don’t have any, but here’s an article on it with this blurb in it:
“Facebook faces a massive ($3 billion) tax bill related to its employee stock compensation and can no longer do what it planned to do, which was sell shares to raise this cash.”
For RSU, you (the employee) pay the tax. However, the company often does it on your behalf by withholding the tax you elected…It can do this by selling shares that was going to delivered to you to pay for taxes.
Example: Suppose you vest Sept 1, 2012 1000 shares of FB.
The company might have a “net issuance” in that based on what you elected as your tax withholdings, deliver you only 700 shares of FB on Sept 1. The remaining 300 shares, it will “hold” and use to pay for taxes. (From your perspective, it’s as if the company sold 300 shares on Sept 1, and used the proceed to pay for the income tax on the 1000 shares vested on Sept1… MOST companies do this automatically. Some companies offer the employee the option to transfer cash into their account before the vest date, so that shares won’t be sold…This isn’t an issue for FB or a reason for why employees would be doing a panic sell. For practical purposes, employees most likely already paid for their taxes on the RSU shares. Second, RSU shares (unlike stock options) do have real value immediately at time of vesting..You own the shares delivered…They might lose value if you hold on to them, but they are real shares that you have. This is unlike an option contract in which you *might* have value only if the FMV is above the strike price of your option contract. In reality, I have a feeling that since some employees have seen their RSU shares plummet, they’ll probably end up holding on to them, hoping that the share price rebounds later…And people that joined less than a year probably have no vested RSU’s anyway.So they won’t pay any taxes until next year, when they vest, and the taxes will be determined based on the FMV of FB shares next year when they vest, not the IPO date…Again, the original poster on yahoo message board got that part wrong.
Side note: It’s kinda funny that FB would be issuing RSU’s instead of stock options…For me as an potential employee, it tells me there is a limited upside for a company that supposedly is targeted for marked growth… Fail!
Most companies are starting to offer RSU in lieu of stock options to normal employees…So for folks that end up switching employers some time in the future and wondering what it means in terms of taxes…Here… Better to be prepared first and plan accordingly.
http://www.mystockoptions.com/articles/index.cfm/objectid/FF6EE2A4-E567-4125-85C84EAEE1E7F20F
PDF explanation
http://www.mystockoptions.com/pdfs/Restricted%20Stock.pdfNote RSU differ from “restricted stock”…Most normal employees will most likely get RSU, not “restricted stock”.
Some key differences between RSU and “restricted stock” is for RSU, you don’t get dividend (typically) while you wait for vesting (although some companies do), there is no 83(b) election, and you don’t get voting rights while unvested.August 20, 2012 at 4:02 PM #750591CoronitaParticipantThiel unloads 20 million shares, that should tell you something…
http://finance.yahoo.com/news/investor-thiel-unloads-most-facebook-220056925.html
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