OFFICIAL Facebook IPO Thread

[Unarmed Gunman]

Price and value are not the same thing.

In investing terms, price is set by the markets which is influenced by news, hysteria, cocaine, etc. Value is determined by cash flows and assets etc. The whole point of investing is to find the greatest divergence between price and value and invest accordingly.

In other words, when dchuck says Facebook isn't worth what it's trading at, what he is saying is that the price is higher than the value. When Warren Buffet buys 10 million shares of GM he is saying that the price is lower than the value.

If you don't understand this, you don't understand finance, and therefore have no clue about business valuation. With that - I'm out.

 

[clyde]

Price and value are not the same thing.

In investing terms, price is set by the markets which is influenced by news, hysteria, cocaine, etc. Value is determined by cash flows and assets etc. The whole point of investing is to find the greatest divergence between price and value and invest accordingly.

In other words, when dchuck says Facebook isn't worth what it's trading at, what he is saying is that the price is higher than the value. When Warren Buffet buys 10 million shares of GM he is saying that the price is lower than the value.

If you don't understand this, you don't understand finance, and therefore have no clue about business valuation. With that - I'm out.

The market decides what the value is. What you personally perceive as value is just your opinion vs everybody else's.

 

[guerilla]

Price and value are not the same thing.

This is right. Value is intrapersonal, price is interpersonal.

In investing terms, price is set by the markets which is influenced by news, hysteria, cocaine, etc. Value is determined by cash flows and assets etc.

Someone has to value those cash flows and assets. They are typically valued via the market either through (discounted) historical (purchase rate) or present (observed) prices. Again, even the choice of valuation methodology (how much we value different value methods) is subjective.

Obviously Warren Buffet used a different valuation methodology than the people he was buying from.

(And what Clyde said, which was more eloquent)

 

[Unarmed Gunman]

The market decides what the value is.

No, the market determines the price. Value is something different but I'm not going to keep repeating myself.

What you personally perceive as value is just your opinion vs everybody else's.

That is true from person to person. In other words it may be worth $1,000 to you personally to own a share of Facebook because you really think it's cool. Therefore to you personally, the value of that share is $1,000. That however has no bearing on the valuation of the business itself because it has no impact on cash flows, assets or anything else.

Obviously Warren Buffet used a different valuation methodology than the people he was buying from.

Generally it has nothing to do with the valuation of the underlying business, but more to do with the capital needs of the seller or the personal desire to do something else with the money or any other host of personal reasons for selling. I think that's what you mean when you say value. But in terms of finance that is not correct. The value of the business hasn't changed, just the price.

 

[guerilla]

The value of the business hasn't changed, just the price.

What you consider an "objective" value of the business, is ascertained by subjective actors coming up with arbitrary methodologies for reaching that conclusion.

The business has no value without human input. Values do not exist independent of actors.

 

[Unarmed Gunman]

What you consider an "objective" value of the business, is ascertained by subjective actors coming up with arbitrary methodologies for reaching that conclusion.

The methodologies are far from arbitrary.

The business has no value without human input. All human input is subjective.

I suppose if we took a poll on this forum of what 2+2 equals we may get more than one answer because it relies on human input and is therefore subjective. That wouldn't change the actual value though.

 

[guerilla]

The methodologies are far from arbitrary.

In that they are subjectively created and used, they are. They may be rational to you, but they aren't rational to me.

I suppose if we took a poll on this forum of what 2+2 equals we may get more than one answer because it relies on human input and is therefore subjective.

It doesn't rely on human input. You can ascertain the answer deductively.

That wouldn't change the actual value though.

Different kind of value.

The number 2 is value free. 4 + 4 as an equation is also value free.

I like the number 2 is a value statement. I do not like the number 2 is a value statement.

4 + 4 is a useful equation, is a value statement. 4 + 4 is a useless equation is also a value statement.

 

[r3p1v]

I don't think the underwriters are going to be supporting it again on Monday. Can't wait to see where it's going to go

 

[jonas33h]

Price and value are not the same thing.

In investing terms, price is set by the markets which is influenced by news, hysteria, cocaine, etc. Value is determined by cash flows and assets etc. The whole point of investing is to find the greatest divergence between price and value and invest accordingly.

In other words, when dchuck says Facebook isn't worth what it's trading at, what he is saying is that the price is higher than the value. When Warren Buffet buys 10 million shares of GM he is saying that the price is lower than the value.

If you don't understand this, you don't understand finance, and therefore have no clue about business valuation. With that - I'm out.

you still don't under stand that you are speaking of intrinsic value and when you reference price you are talking about market value (yes price is a value it is called market value) I didn't make these terms up investors use them all the time.


matter of fact I posted the definitions of each one of these diretly as stated from investopia.com.

I am confused why you two are arguing two different kinds of value. . .


and again as G already stated market value is the only one that matters and the only one that gets you paid. . . and yes that is subjective. . .

 

[guerilla]

I found this article about the potential upside for Facebook advertising to be interesting.

Why I’d bet my retirement on Facebook stock today - GeekWire

I find it interesting because I constantly get into arguments with people who cannot imagine the current paradigm changing. It's sort of like someone in the 80s laughing at the idea of text messaging and saying it is unrealistic and impractical. Or some of us 10 years ago who swore we would never get a cell phone because we didn't want people to be able to call us at any time.

Humans have a lot of stupid biases.

Anyway, interesting article.

 

[Gambit]

Epic semantics battle is epic

 

[pocketrockets]

I found this article about the potential upside for Facebook advertising to be interesting.

Why I’d bet my retirement on Facebook stock today - GeekWire

I find it interesting because I constantly get into arguments with people who cannot imagine the current paradigm changing. It's sort of like someone in the 80s laughing at the idea of text messaging and saying it is unrealistic and impractical. Or some of us 10 years ago who swore we would never get a cell phone because we didn't want people to be able to call us at any time.

Humans have a lot of stupid biases.

Anyway, interesting article.

There is nothing but speculation in that article. Full of "potential" and "could" type lingo. Same thing was said about Myspace. They became more aggressive with their ads to generate more revenue and tap into all that "potential" -- well, how did that work out for them?

Let's take a look at Facebooks "real numbers" and their current revenue growth... or in this case, decelerating revenue growth.

• Facebook revenue grew 45% in 1Q12 versus 55% in 4Q11, 104% in 3Q11, and 108% in 2Q11.

• Net income dropped to $205 million for the quarter, down from $233 last year.

• The company's first-quarter revenue was $1.06 billion, down 6% from the December quarter (they blamed it on "seasonal trends")

Now, let's compare some these numbers to Google:

• Google’s revenue in 2011 was $37 billion

• Facebook’s was just $3.7 billion

Google's market cap is $200B
Facebook market cap is already half that! ($100B)

Paying a $100Billion price for Facebook's stock based on the possibility that they might someday invent an amazing new business would be fairly described as speculative. Or nuts.


http://www.businessinsider.com/how-much-is-facebook-worth-2012-2

 

[mGrunin]

I can't stand when people compare Facebook to Myspace or any other prior social network. Facebook has gotten so much further than Myspace that you can't even compare them. It's like Apples to Oranges.

 

[pocketrockets]

I can't stand when people compare Facebook to Myspace or any other prior social network. Facebook has gotten so much further than Myspace that you can't even compare them. It's like Apples to Oranges.

There is no perfect comp but it certainly cannot be ignored.

 

[Unarmed Gunman]

I can't stand when people compare Facebook to Myspace or any other prior social network. Facebook has gotten so much further than Myspace that you can't even compare them. It's like Apples to Oranges.

I agree about that. I actually think Facebook is going to be around for a long time. I'm bullish on the company, but not at the current price. Unfortunately with all of the hype around the company it might be impossible to ever get the stock at a reasonable price. If you want to own it you have to resign yourself to either the hype keeping the price inflated long enough to cash out at a profit, or hold that shit for a loooong time. Kinda like Amazon back in the 90's.

 

[Kiopa_Matt]

Already down to $36.70 in pre-market. I predict a good sell off, with no underwriters to prop up the price today.

Good. That's what you get for being too greedy, and trying to value your company at $100bn.

 

[WhatupG]

Facebook isn't going anywhere. Talk about too big to fail. Facebook is the spooks biggest wet dream. It's the greatest spy-tool the few have to keep tabs on the many. They know more about someone in a few minutes than they did with 6 months of using other methods. They will not let it fail.

Same is true with the class action lawsuit mentioned earlier. It's surely the damn feds that pushed to have the code installed to track FB'ers even when they weren't on Facebook. There's no way any harm will come to FB from the evil activities they are involved in. Any questions just look at Google. Fuck, they were caught flat out hacking, mapping, and recording the passwords etc.. of shit-tons of access points all over the world. They just said "oh it was an accident, we didn't mean to hack into all those AP's." No charges were filed, no consequences. If you or I hack into just ONE AP and get caught, we are fucked. Google can do it on a large scale with immunity. :angryfire: Insane. Guess what, FB is in the same club. The spooks love FB and will never let anything happen to them.

This being said, it's simply a question of time frame, and price. Ten - Twenty years from now you fuckers will be kicking yourselves for not buying and holding.

Sure they need to work out the kinks and maximize revenues and profits, but that will surely happen now that they are public. This is just the start of their evil, greedy future. So many possible revenue streams available to them.

If it ever gets down to the low twenties I'm buying it like there's no tomorrow and holding until it's time to retire. I may have to buy at a higher price though, we will see.

 

[r3p1v]

Just opened around 36 and falling

 

[r3p1v]

It looks like there is a big bid at $35, could be the underwriters again.

 

[r3p1v]

It just fell below $35