Facebook IPO Seen Deepening Investor Distrust Of Stocks

Whats interesting about this though is your average person doesn't have that perspective.

These companies (most companies not just tech companies or just facebook) are largely black boxes to them.

They aren't thinking about how there are lots of hardworking people at them who deserve to be rewarded for their work.

I've been thinking a lot recently about this. How even myself I didn't really have a good perspective on how a company's stock price / ipo relates to them.

But with facebook its different though. I've known about facebook since I joined it in 2006 as a senior in high school.

And now I know people who work there. I even have a friend who works for Morgan Stanley.

So now im in a unique position to really understand where these numbers come from and the value they do or don't represent.

If you never learn that kind of stuff; either on your own, from others who have seen it, or don't have the benefit of the collective knowledge of a community like hacker news.

All you would have is:

"High stock price good, low stock price bad"

And the rabbit hole is actually much deeper than that.

Like in this instance even though the stock price didn't rise greatly it was actually good for the company. Because that's what an intial public offering is supposed to be about. A way for the company to raise capital. If the stock price doubles after that its all well and good but the company itself doesn't get to benefit from that aside from good press.

And I think a lot of people keep taking for granted that facebook is not public now because it wants to be but because it has to be, but thats a whole other conversation

Surely there should be a middle road between FB's IPO and "exploding". Perhaps 'preforming as expected'?

Here's how real people think about a hyped, flop of an IPO:

People don't like the feeling of being sold something for more than it's worth. We call that being "ripped off," and most folks don't take too kindly to it. I believe you described this as getting a "fair amount."

People also don't like the folks who rip off other people. It's kind of a dick move to rip someone off. Those folks tend to do quite well, yes. That's FB in this case, who as you note made out just swell.

People especially resent it when those guys get incredibly wealthy by ripping off millions of people.

> Facebook is obviously smart enough to think for the long term. I don't trust the financial machinery to do that.

I think we can all agree - there's nobody we can trust more than Facebook to rip us off properly.

Yes, it is. On an absolute basis, the Facebook IPO resulted in the lowest 5-day return of any US IPO in the past century. The qualifier "largest" was used only because FB lost more capital in 5 days than the total market caps of the companies involved in the worst IPOs, so it is not the worst IPO on a relative basis. Even then, Facebook still ranks among the worst IPOs in the past decade.

It's not all good. Facebook employees are locked up for 3 months right? So the winners here were the VC's and other "preferred stock holders" who were allowed to sell their stock as part of the IPO. And the banks/underwriters who apparently always profit from ipo's even if they are mispriced.

The losers for the most part were retail investors and various funds/traders who believed the banks that the IPO was correctly priced, and probably facebook employees who will have to sell at a lower price now because this botched IPO has sown a lot of distrust in facebook stock.

The goal for an IPO is to correctly price the offering. Usually tech stocks are wildly over-valued and speculated on when they IPO, that doesn't make the banks wrong for setting a reasonable price.

Shrug it's all bullshit anyway. When your talking in the scale of billions of dollars, capitalism can get pretty inefficient. Internet bubbles just highlight the most absurd parts of it. $1B for a 1 month project on iOS(instagram)? $100B for a monopoly on the social graph?(facebook) It makes no sense, but it's really just the tip of the iceberg when it comes to market inefficiencies and the huge amount of capital some companies have compared to the value they provide to society.

That is exactly what they are considering...

"The IPO produced the worst five-day return among the largest U.S. deals of the past decade."

Is there one that is worse that they missed? Article seems to suggest that MF Global Holdings Inc. had the second worst opening week.

Why? Like it or not, FB is the bellwether for the current technology/economic climate. It's one of the biggest IPOs ever, not just in size, but in renown. There was a mainstream movie made about it before it was even public. It's a huge story.

It's important to gauge these things as they happen, so the next time around you get to be the one saying, "I've seen this before." These stories may all turn out to be moot, and in 10 years Facebook could be a huge brand, in which case you can look back and remember how Bloomberg labelled it the worst performing IPO of the decade. Or, it could go south....