OFFICIAL Facebook IPO Thread

[dchuk]

We wouldn't have any of these tech companies without that business principle. Facebook would not be what it is today if they focussed on monetisation from the very beginning. I explained exactly why it's new in terms of history too.

You could never do it before. Every business (except services.. but they're not high growth businesses anyway) had to own physical property and space to grow. That's extremely expensive. The web provides a platform for cheap exponential growth, which has never been possible before in the entirety of human history.

Therefore, with your costs low, you can neglect monetisation and raise the money from investors instead, with focus just on growing. If you build up a big enough website, that people love, you'll find a way to monetise it successfully.

I don't understand how people are actually arguing against the $100bn valuation to be honest. For a start, people are paying for it - so that is it's value.. Whether it's underwriters propping the price up or whatever, that is currently what people are paying for it, so that is what it's worth in a free market as of yesterday (as has been repeatedly echo'd by G).

Secondly, do you just have no concept as to Facebook's size? No social network has ever been remotely close to the size of Facebook, driven remotely close as much user engagement or successfully collected anywhere near as much data about its users. The data it's collecting is growing exponentially, too - which is more important than the user count.. Then with more and more sites using Facebook plugins, it's collecting massive data about user browsing habits, as well as the fuck off volume of info it has from every single status or wallpost you've ever made (imagine what they could do with AI to decipher all sorts of things from said posts?), things you've liked, etc..

They could release a web browser. (Get even more data on their users)

They could sell Facebook phones.

They could start a behavioural targeted external ad network.

Promoted statuses.

Find applications for FB credits externally.

Build a better search engine with more social input than Google, and display adcents style ads with behavioural, demographic and interest-based targeting on top of the purely contextual stuff adsense pushes..

Vastly improve the ads shown onsite as they get a better grips of data and how to market to the growing network.

& those are just random ideas from a 10 second think, and without knowing what FB is planning to do to the site over the next few years / where it plans it going from an interactivity perspective.

and this is the percent of people in the entire world using FB..

The network effects are massive. Unless FB royally fucks up, people aren't going anywhere. The company will make money. It wouldn't surprise me if in the next 5-10 years it's one of the biggest companies in the world.

There's a difference between a company in the 1950's starting and running at a loss for a few years but then attaining profitability versus a tech company launching with literally no revenue model at all. Traditional brick and mortar companies are still bringing in revenue, they just might have a delay before profiting because of having to recoup costs. The burn rate of these social networks is god damn absurd, yet it's ok because a big userbase is all you need.

that is what it's worth in a free market as of yesterday

That's what the stock is worth. Facebook itself is not worth that, it is grossly overvalued.

 

[dchuk]

I recall you recently telling me in T&C there are more important things than making money or something to that effect ...

the effect I was speaking to is I'd rather focus on building a brand for long term profitability instead of shooting for short term burn-your-customers profit like gurus do:

http://www.wickedfire.com/traffic-c...nalysis-trumps-guru-opinions.html#post1716731

EDIT: that is a screenshot up there, I can't add a border or anything so it's awkward looking, sorry

 

[Jeeta]

Or Aliens.

 

[Unarmed Gunman]

Also unarmed gunman, saying that Guerilla has aspergers isn't making your argument anymore compelling. It just makes you look like an asshole.

He attacked me personally in 3 straight posts, so I was just pointing out to him and others that's it's not his fault that he's a dick to people it's just part of his condition. When I'm an asshole however, it is my fault and I accept full responsibility.

No need for a bet

I figured as much.

That's not a price control. You would be hard pressed to find one economist in the world that would call the underwriters a price control.

Not the underwriters per se, but the actions they took on the IPO launch was. No investors were buying at the $38 price near the end of trading - they were all selling at the price. So they spent $2 billion dollars in a couple of hours strictly to artificially prevent the price from dropping below the $38 mark yesterday. The market was pricing the stock below $38, but they were not allowing it to drop below that price because they had buy orders across the board at $38 preventing the actual market price from being determined. They weren't behaving as market actors in that instance, they were acting as a price control.

If they were buying at $38 because they thought the stock was worth $38 that would be one thing, but that wasn't the case. They were protecting their reputations and future business, so the $2 billion spent on the $38 price control was actually an investment in Goldman Sachs, not Facebook. I could get into their theory of the irrationality of markets and psychology of the opening day price but unless you want to put up some money my time is better spent picking my nose.

Now if you don't want to call it a price control because it wasn't "state sanctioned" that's up to you, but it's semantics. Besides, Goldman Sachs bought and paid for our President so they may as well be the State.

Where is your degree from?

My BS is in Business Administration with a major in Marketing and a minor in Accounting. But that's kinda irrelevant. It doesn't make me an expert anymore than you not having a degree makes you not an expert. Not sure why you're going down that path of discussion but it's not going to help your cause or hurt mine that's for sure.

Try reading Mises.

I would but just last week in your historical defense of child porn you said:

I stopped reading mises.org almost 2 years ago.

...so now I don't know what to do. Please give me guidance, great forum master.

like a previous posted pointed out, aren't intrinsic value and market value obvious distinctions? Ie: Just because a stock is selling for $38 doesn't mean it actually carries that value/worth?

Seems these whole thread is one big semantic, dick swinging circle jerk. (sounds like my kinda party)

You're correct. dchuk was just pointing out that he didn't think Facebook was worth what it was trading at. There is an entire school of investing built on the theory that many companies do not trade at their actual value and they make money by buying up companies that are trading at below their actual value with the assumption that the markets price will eventually catch up to the actual value. Markets are not right at all times, there are inefficiencies in them and market manipulation and it takes time for all information to be factored into pricing. Some rich asshole named Warren Buffet has done ok with value investing.

 

[r3p1v]

Yeah, I think we are all arguing about different definitions of value. There is the current market value (which I think we all agree is currently $38 for FB). And there there are different opinions, perceptions, projections, models, book values, for the value of a company.

But there is no guarantee that the market value will ever match or approach anything. Usually that happens, but not always.

I had a similar problem when trying to get homeowners insurance. I wanted to get insurance for the market value, the price I just paid for the house. But the insurance company would only allow me to buy insurance for the replacement cost of the house (what it costs to build a new one). At the time, the replacement cost was like 2x the market value, which is crazy.

Also if you want to read a cool story, look up what happened to the price of Volkswagen shares a few years ago. Porsche was buying their stock and had a huge percentage control of the stock. Hedge funds were mostly unaware of this and noticed that the price of vw wasn't falling with the rest of the car market. So the hedge funds started to heavily short the stock because they thought it was overvalued, but the price still didn't move down. Soon some of the hedge funds started to buy the stock back to get out of their position and this sent the price of the stock up. This caused the other hedge funds to panic and try to get out of their short positions too. But because Porsche owned so much of the stock, there were almost no shares for the hedge funds to buy back. But the hedge funds had to buy it back, so this sent the price of vw soaring to insane levels, it became the most valuable company ever haha. Then Porsche started to sell some of their shares at the insane levels and made huge amounts of money. Coolstorybro.jpg

 

[JakeStratham]

Regarding value subjectivity: I bought a cup of coffee this morning. The price? $2.25.

Suppose you and I had the following conversation:

You: What's the value of that cup o' joe?

Me: I paid $2.25.

You: Yeah, but how much is it worth?

Me: To me?

You: Yes.

Me: $2.25.

You: What if that guy over there gave you $5 for the coffee? Then it would suddenly be worth $5 to you?!

Me: It would apparently be worth $5 to him.

You: Yeah, but how much would it be worth to you?

Me: $2.25

You: Why not $5?

Me: Because I could walk 5 feet and get another cup for $2.25. A better question is to ask why this other guy is willing to pay $5 when he can easily get a cup for $2.25.

You: Let me get this straight. You're saying the value you place on the cup o' joe is different than the value he places on that same cup?

Me: Given the limited scenario you have presented, yes.

You: So basically, the coffee's value is whatever a person is willing to pay for it.

Me: Yes.

You: But Starbucks's financial models say it is worth $2.25.

Me: To whom?

You: To the people who buy it.

Me: Right.

If that confuses the matter of value subjectivity and by extension, fluctuations in stock prices, please ignore.

 

[dchuk]

Regarding value subjectivity: I bought a cup of coffee this morning. The price? $2.25.

Suppose you and I had the following conversation:

You: What's the value of that cup o' joe?

Me: I paid $2.25.

You: Yeah, but how much is it worth?

Me: To me?

You: Yes.

Me: $2.25.

You: What if that guy over there gave you $5 for the coffee? Then it would suddenly be worth $5 to you?!

Me: It would apparently be worth $5 to him.

You: Yeah, but how much would it be worth to you?

Me: $2.25

You: Why not $5?

Me: Because I could walk 5 feet and get another cup for $2.25. A better question is to ask why this other guy is willing to pay $5 when he can easily get a cup for $2.25.

You: Let me get this straight. You're saying the value you place on the cup o' joe is different than the value he places on that same cup?

Me: Given the limited scenario you have presented, yes.

You: So basically, the coffee's value is whatever a person is willing to pay for it.

Me: Yes.

You: But Starbucks's financial models say it is worth $2.25.

Me: To whom?

You: To the people who buy it.

Me: Right.

If that confuses the matter of value subjectivity and by extension, fluctuations in stock prices, please ignore.

this is a good example, and I understand it and understand value subjectivity quite a bit (I'm a philosophy geek). However, the price of Facebook's stock right now is being determined by two things: 1) underwriters 2) bandwagoners. I doubt any serious long term fundamental investors are pouring money in that stock because they know it's not fundamentally sound. So all of a sudden we have the value of a company and its stock being determined by people who are not using the common metrics of business valuation to set that value.

It's like if Facebook laid out all of their financials on a table and someone said "this is what they are worth" and then 10,000 fools ran in and flipped the table over and said "no, it's worth $38 per share!" and a bunch of bankers holding out hundreds behind them just nodded in agreement.

Yesterday was not an evaluation of Facebook's true value, it was a bunch of people clicking the buy button because Facebook is cool to them. I saw so many fucking posts on facebook of friends who know fuck all about business asking whether they should buy some facebook stock. It was just sad.

also, next week should be fun: Facebook IPO fight-back begins: share price 'implausible', says analyst - Telegraph

 

[r3p1v]

I'm going to lol hard if FB goes up next week.

 

[Moxie]

All value is subjective. All.

This is such a basic, fundamental, key point. Without understanding that, it is impossible for anyone to construct a coherent and intelligent theory about prices.

It should be considered a law. Like gravity, that way anytime someone makes a conclusion where there is a hint of objective value, someone can go,

"Dude, you're violating the 10th law of economics"

Scientific laws are based on obvious black and white causal relationships in the physical world.

"Value" is a dictionary word that doesn't have just one strict definition. Even in the world of economics it is interpreted in different ways - it's a shade of grey.

What is the value of a human life? What is the value of the moon?

 

[ChrisS]

Scientific laws are based on obvious black and white causal relationships in the physical world.

"Value" is a dictionary word that doesn't have just one strict definition. Even in the world of economics it is interpreted in different ways - it's a shade of grey.

What is the value of a human life? What is the value of the moon?

Yes, but that just proves that it's completely subjective.

I'm sure the Mongolian Hordes put a different value on human life than say, Franciscan Monks.

 

[dchuk]

Yes, but that just proves that it's completely subjective.

I'm sure the Mongolian Hordes put a different value on human life than say, Franciscan Monks.

yeah because monks are assholes

 

[guerilla]

When I'm an asshole however, it is my fault and I accept full responsibility.

Have you ever taken responsibility for being wrong on this forum? If you have, I have never read it.

I figured as much.

It's cheap theatrics, you set the bet high enough you figure I won't go for it and it's another way for you to score mindless points in the imaginary game you think you're playing with someone you also seem to think has Aspergers (if true, what does that say about you and your perception of self worth?).

Not the underwriters per se, but the actions they took on the IPO launch was.

It's not a price control. Please learn economics.

My BS is in Business Administration with a major in Marketing and a minor in Accounting. But that's kinda irrelevant. It doesn't make me an expert anymore than you not having a degree makes you not an expert. Not sure why you're going down that path of discussion but it's not going to help your cause or hurt mine that's for sure.

You're the one who brought up your degrees bro. Not me. Why did you bring them up if you think they aren't relevant?

I would but just last week in your historical defense of child porn you said:

...so now I don't know what to do. Please give me guidance, great forum master.

I meant read Ludwig von Mises, not mises.org. You're supposedly into Austrian economics, it seems it would make sense for you to read THE Austrian of the 20th century, yes?

Some rich asshole named Warren Buffet has done ok with value investing.

Warren Buffet is an exception, not the norm. The majority of investors lose money over the long run, before you factor for inflation.

this is a good example, and I understand it and understand value subjectivity quite a bit (I'm a philosophy geek). However, the price of Facebook's stock right now is being determined by two things: 1) underwriters 2) bandwagoners.

Those are arbitrary labels you have constructed to define a particular behavior. I am less interested in labels, and more interested in the actual behavior.

I doubt any serious long term fundamental investors are pouring money in that stock because they know it's not fundamentally sound.

How do you know that?

So all of a sudden we have the value of a company and its stock being determined by people who are not using the common metrics of business valuation to set that value.

There are people who buy cars who know absolutely nothing about the business of manufacturing cars.

Yesterday was not an evaluation of Facebook's true value, it was a bunch of people clicking the buy button because Facebook is cool to them. I saw so many fucking posts on facebook of friends who know fuck all about business asking whether they should buy some facebook stock. It was just sad.

Right, but like you, they aren't putting their money where their mouth is. The people who are putting their money where their mouth is set the price.

Not you, not me and not UG. The people with skin in the game. That is how a market works.

I'm going to lol hard if FB goes up next week.

You won't see the objective valuists admitting their wrong. They will just find someone or something else to blame for why reality doesn't match their theories.

We have always been at war with Eastasia. Eurasia. Eastasia. Eurasia.

 

[ChrisS]

yeah because monks are assholes

By jove, you're right!

Separated from functional society, think they are always right, holier-than-thou attitudes, bad dressers...Maybe they have Asperger's.

 

[mattseh]

There are people who buy cars who know absolutely nothing about the business of manufacturing cars.

Please think about how buying a consumable good is different from investing in a business.

 

[dchuk]

There are people who buy cars who know absolutely nothing about the business of manufacturing cars.

oh come on, that was a poor example and you know it. Cars are nearly a requirement to exist in society. No one needs stock, and a lot of people buy it so they have something to talk about at happy hour to show off they have stock.

 

[guerilla]

What is the value of a human life? What is the value of the moon?

That is my point. Value is subjective and intrapersonal.

I don't see a semantic debate in this thread. I see a debate over values, with one group claiming there is such a thing as an objective value for Facebook, and another group claiming that as the market determines value (marginalism), so it is.

 

[guerilla]

Please think about how buying a consumable good is different from investing in a business.

Please explain it.

oh come on, that was a poor example and you know it.

I thought it was a great example.

Cars are nearly a requirement to exist in society.

There are plenty of people in the world who don't have cars. Try visiting NY sometime. Not that your point was relevant, just saying.

No one needs stock, and a lot of people buy it so they have something to talk about at happy hour to show off they have stock.

Once again, you're claiming that certain goods have objective value and that value is greater than another.

You completely do not understand value subjectivity at all. It's mind boggling, because you're a bright guy. Your position is obviously epistemically suspect and you of all people should be on top of that.

You can only determine value for you. You can't determine value for me. You don't have access to my psychological and physical existence.

 

[dchuk]

Please explain it.


I thought it was a great example.


There are plenty of people in the world who don't have cars. Try visiting NY sometime. Not that your point was relevant, just saying.


Once again, you're claiming that certain goods have objective value and that value is greater than other.

You completely do not understand value subjectivity at all. It's mind boggling, because you're a bright guy. Your position is obviously epistemically suspect and you of all people should be on top of that.

People in LA need cars to buy groceries, get to work, pick up their kids at school, etc. People in LA don't need stock to do anything.

They are fundamentally different things to purchase.

 

[guerilla]

People in LA need cars to buy groceries, get to work, pick up their kids at school, etc.

Not people who work from home. Or don't have kids. Or their kids have moved on. Or they get groceries delivered, or order delivery regularly.

See, for your point to be true, it has to always be true. Obviously it isn't.

So why claim it's objectively true?

They are fundamentally different things to purchase.

They are because you're used to creating abstractions with which to classify things. The problem becomes, every other single human being creates slightly or greatly different abstractions, and has different needs and wants, at different times, based on different amounts of purchasing power and opportunity costs.

Yes, it would be nice if the world was neat and tidy and we were all robots. We could all have the same opinion you do.

Of course, there wouldn't be any arbitrage if everyone valued everything the same, and thus there wouldn't be any trade or social cooperation, but why let that stand in the way of creating PlanetDChuk?

 

[dchuk]

Not that your point was relevant, just saying.

also, my point was perfectly relevant. You're making the assertion that cars are the economical equivalent to company stock, so please, explain that to me. Then direct me to the closest used stock lot so I can pick one up today.

ready when you are