They can't say Facebook didn't warn them

[jducoeur]

This week's LinkedIn links contains a delightful piece from Business Insider, on the subject of Facebook's IPO, taking the whining investors to task. 

 

The message, repeatedly, is, "Did any of you people read the freaking prospectus?". It's a fine point.  He includes an annotated version of the letter Mark Zuckerberg sent to prospective investors, which boiled down to pointing out that they are more interested in building cool products than making money, structured things intentionally so that Zuck would retain control, and weren't making any promises about valuation.

 

I confess, I kinda like the letter.  When I think about Querki, I'm mostly focused on building a cool, smaller private company than something that will make billions in the stock market, for many of the same reasons.  Given the letter, I'm honestly mystified why anybody bought the stock - but then, I've been saying for months that this IPO made no sense.  And it really does look like people bought with deliberate blinders on - the scandal about inside information aside, it was pretty clear from the *public* statements that this was an iffy investment...

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Comments

[jducoeur]

It would help to include the link: http://www.businessinsider.com/facebook-stock-letter-shareholders

[goldsquare.livejournal.com]

Never Buy House Product

He cites, by way of example:

I was reminded of this advice while read a WSJ article on the Facebook IPO (you may have missed it during vacation week). FB is now down more than 50% from its offering price of $38. As it turns out, holdings data revealed that “eight of the top nine U.S. mutual funds with Facebook shares as a percentage of total assets are run by Morgan Stanley’s asset-management arm, according to fund tracker Morningstar“. So the biggest holders of Facebook stock are Morgan Stanley Mutual Funds, and — not coincidentally — Morgan Stanley was the lead underwriter of the Facebook IPO.

[jtdiii.livejournal.com]

I just look at the old AOL closed environment where the whole internet was out there. Facebook is essentially the same thing all over again. Users are not locked in to one service and if/when they realize there is now better they will migrate to others.

In the mean time all he can offer is ads which he is not doing well.

[goldsquare.livejournal.com]

True, but the comment was more about what the customers if investment banks should buy. They don't call them muppets for nothing.

If you are an investor, don't buy house product. Facebook was a house product for most of it's buyers

[jtdiii.livejournal.com]

Very true, but even more so as the reasons they were giving as to why it was worth anything were seriously flawed.

[laurion]

No kidding. For starters, pre-prospectus, even, FB said flat out they are turning a lot of focus to the emerging mobile market. And that pretty much a known fact that traditional advertising revenues -do not work- on mobile platforms. Translation? Less revenues. And Facebook is fine with that. Money is a positive side effect of being a household word. As long as they keep getting enough to keep doing what they want to do (be a part of every person's daily life, and reflect glory on Zuck), investors don't matter.

[querldox.livejournal.com]

The points you bring up were all pretty much the same in Google's IPO letter. The difference is that our numbers (and earnings curve) were much better than Facebook's, and we IPOed earlier in the lifecycle.

The problem with the stock being so overvalued at IPO is that, unless they're offering a *lot* in terms of restricted stock units, they'll have a problem attracting the best eng talent from here on out.