IPO, News

Facebook Attracting Children, Retirees, Not Advertisers

A wonderful thing about the Facebook IPO is that there is a proliferation of imaginary markets in which to … well, not trade it exactly, but say what you would be doing if you could trade it, which is almost as good. Here is the Wall Street Journal’s imaginary market, with a “Current Price Prediction” of $52.43, off a touch from the $150.13 as of … yesterday. Admire their specificity! Elsewhere you get only binaries, or I guess ternaries, like CNBC’s “Do You Think Buying Facebook Shares Would Be a Good Investment?” [yes / no / don’t know], or Felix Salmon’s “Are you seriously thinking of buying Facebook shares?” [yes / no / umm, I’m buying them for a friend].

In the imaginary market that counts (I guess?), Facebook is up “an average of 14 percent” (!) as the underwriters raised the IPO range from $28-$35 to $34-$38 in a refiled S-1 this morning. This is good news if you bought in the imaginary market at $28-$35, as I suppose the underwriters imaginarily did, and also good news if you avoided the real market when it last cleared north of $44, as this guy who’s pissing away his child’s college money on Facebook did. If you like numbers, you could look at these numbers*:

One reason that the imaginary markets have captured the fancy of young and old is that it’s easy to have an opinion on Facebook. I am on Facebook, you think. I can analyze its business prospects. Can you? For example, here’s an easy one: would you buy a Chevy Volt because you saw it on Facebook? I would not, and I am not alone:

General Motors Co. plans to stop advertising on Facebook after the company’s marketing executives determined their paid ads had little impact on consumers, people familiar with the matter said, a move that comes as more companies question the effectiveness of advertising on the social networking site.

The article is amusing throughout; for some reason I especially enjoyed the fact that Facebook is going from 25% to 0% of GM’s Facebook budget:

Asked about the move, GM marketing chief Joel Ewanick said the auto maker, “is definitely reassessing our advertising on Facebook, although the content is effective and important.” Content refers to the unpaid Facebook pages many companies use to promote their products. …

GM spends about $40 million on its Facebook presence. About $10 million of that is paid to Facebook for advertising, the rest covers content created for the site, agencies that manage the content and daily maintenance of GM’s pages, people familiar with the figures said.

Left unanswered is why GM sources are telling this to the Journal now, instead of waiting a week and being able to insider trade on it.**

I’ve been sort of dismissive in the past about how hard it would be to successfully execute an IPO like this – I mean, 11- and 79-year-olds who’ve never bought stocks are clamoring to buy, and the book is supposedly 25x covered in Asia alone, which is kind of an amazing stat. Also, I cannot reiterate this enough, there is a movie about it. The $150mm or so that the banks stand to earn here is probably out of proportion to the difficulty of their task. And I and others have questioned whether going out with a relatively conservative initial price range was more for the banks’ benefit than for Facebook’s.

That said, though, there’s something to be said for the execution so far. This book is 25x covered. What does that suggest to you about the market-clearing price for Facebook shares?*** It suggests to me something like … well, let me draw you a picture:

That is, this deal is priced to generate frenzy despite problems ranging from dress code violations, through somewhat amazingly getting an HSR second request on Facebook’s $1bn purchase of a company that doesn’t sell anything to anyone, to Facebook’s only source of revenue being ineffective. The interaction of the current price range and the strong demand makes a pricing at the top of the range, and pop the next day, pretty bulletproof. Let’s say that GM’s announcement scares half of Facebook’s investors away altogether. That still leaves it 12x covered in Asia alone. 12x covered, especially on a company where no valuation metrics make particular sense (so why have limits?), suggests a top-of-range pricing and a whole lot of people buying in the market the next day.

For a company that lives on buzz, that relies on coolness and ubiquity not only for its capital markets strategy but also for its business strategy, that can’t be a bad thing. Much like … umm … Facebook, the IPO provides a limitless distraction. Bad news about the business? That’s okay, you can always make the story about the IPO price bump and attendant frenzy. And if everyone wants to blow their money on Facebook, there must be an advertising model in there somewhere.

Amendment No. 7 to Form S-1 [EDGAR]
GM to Stop Advertising on Facebook [WSJ]

* Note that I’m assuming that the greenshoe will be exercised; if there were an imaginary market for betting on that I would say yes.

** Right? The timing is weird. Maybe they’re hoping to get allocated in the IPO so want to soften demand?

*** I believe the correct answer is “it is greater than $34, but otherwise nothing!” Buyers at margins, etc. But don’t kid yourself, 25x covered probably gives you a wide range of limits, so the semi-correct answer is … that the greenshoe will be exercised, let us say, at a minimum. No position / not advice / do your own research / go away!

(hidden for your protection)
Show all comments

96 Responses to “Facebook Attracting Children, Retirees, Not Advertisers”

  1. guest says:

    too long to read Matt, as usual

  2. Texashedge says:

    I want the job where I get paid $40 million a year to maintain a free Facebook page.

  3. PermaGuestII says:

    Sounds great! I'll take 20mm shares.

    -P. Falcone

  4. UBS MD says:

    I don't like seeing free viagra on my Facebook page

  5. Guesttt says:

    The Whale's real trade: Shorting IPO-allotted shares below $30

  6. bookrunner says:

    Do you know how to post charts to facebook ?

  7. Beau Guest says:

    While we clearly overestimated the short-term market for chickens, we anticipate that our strong positions in corn and tomatoes will more than compensate for any losses.

    — UBS Farmville quant

  8. I like what you guys are usually up too. This type of clever work and coverage! Keep up the amazing works guys I’ve incorporated you guys to blogroll.

  9. crork says:

    8aQNLz Thank you ever so for you blog post. Will read on…

  10. King Glasser says:

    Thank you, I have just been looking for information approximately this topic for ages and yours is the greatest I’ve found out so far. But, what concerning the bottom line? Are you sure concerning the supply?

  11. lol says:

    wow, awesome blog article. Really Cool.

  12. Major thanks for the article post. Want more.

  13. Thanks so much for the blog.Much thanks again. Cool.

  14. kreditai says:

    Very informative blog.Really looking forward to read more. Want more.

  15. Really informative blog.Really thank you! Cool.

  16. Unplugged says:

    Thanks so much for the post.Really thank you! Keep writing.

  17. Really informative post. Really Great.

  18. A round of applause for your article post.Thanks Again. Fantastic.

  19. Dog Poop says:

    Im obliged for the blog.Much thanks again. Cool.

  20. diamant says:

    I cannot thank you enough for the article.Really looking forward to read more. Will read on…

  21. Really enjoyed this blog.Really thank you! Keep writing.

  22. Muchos Gracias for your article.Really looking forward to read more. Great.

  23. Im thankful for the blog post. Great.

  24. Thanks for the blog post. Awesome.

  25. Wow, great post.Really thank you! Cool.

  26. This is one awesome blog.Thanks Again. Fantastic.

  27. wedding DJ says:

    Wow, great blog article.Thanks Again. Really Cool.

  28. I simply wanted to thank you very much all over again. I’m not certain the things I would’ve undertaken in the absence of these creative ideas contributed by you about such a area of interest. This was the hard scenario for me personally, however , taking note of your specialized technique you dealt with the issue made me to jump with delight. I am just grateful for your guidance and then believe you are aware of an amazing job you have been providing instructing others via your web blog. I’m certain you’ve never met any of us.

  29. New audio began enjoying once i opened this webpage, so aggravating!

  30. crork says:

    tPGRwV Say, you got a nice blog.Really looking forward to read more. Cool.

  31. I real happy to find this website on bing, just what I was looking for : D besides saved to fav.

  32. Lots of thanks for all of the hard function on this weblog. My niece takes pleasure in engaging in internet research and it truly is simple to grasp why. We learn all relating to the compelling method you make useful suggestions by indicates of your blog and therefore attract contribution from visitors on this region even though my princess is discovering plenty of things. Have enjoyable with the rest with the new year. You’re carrying out a very excellent job.

  33. I value the article post.Really thank you! Really Cool.

  34. gay talk says:

    A big thank you for your blog article.Thanks Again. Fantastic.

  35. I loved your article post. Keep writing.

  36. I really like and appreciate your article.Really looking forward to read more. Want more.

  37. I really enjoy the post. Want more.

  38. amino acid says:

    Thanks for sharing excellent informations. Your web-site is very cool. I am impressed by the details that you’ve on this site. It reveals how nicely you understand this subject. Bookmarked this web page, will come back for extra articles. You, my pal, ROCK! I found simply the information I already searched all over the place and simply could not come across. What a perfect web site.

  39. Major thanks for the blog.Really thank you! Cool.

  40. Fantastic blog article.Really looking forward to read more. Keep writing.

  41. The team at Burriss and Ridgeway believes quality communication is a key to solving clients’ problems by keeping clients well informed at every stage of their personal injury or workers’ compensation case. Burriss and Ridgeway Injury Lawyers represent clients across South Carolina and are conveniently located in Columbia, Lexington and Orangeburg, South Carolina.

  42. bathmate says:

    Thanks-a-mundo for the article.Really looking forward to read more. Fantastic.

  43. I undoubtedly didn’t realize that. Learnt some thing new nowadays! Thanks for that.

  44. Thank you for your blog article.Thanks Again. Keep writing.

  45. Kirby Snooks says:

    Perfect work you have done, this web site is really cool with wonderful information.

  46. Feather Fret says:

    Nice site. I’m jealous. Save the ferrets!!

  47. Im obliged for the article.Much thanks again. Really Cool.

  48. Thank you for sharing superb information. Your web site is very cool. I am impressed by the info that you’ve on this web site. It reveals how nicely you understand this subject. Bookmarked this website page, will come back for extra articles.

  49. You may also surprise why it offers the capability to function out more nouveau riche than different markets within the World Extensive Web.

  50. Enjoyed reading through this, very good stuff, thanks . “Shared joys make a friend, not shared sufferings.” by Friedrich Wilhelm Nietzsche.

  51. Some genuinely great information , Gladiola I detected this.

  52. Betfair says:

    I got what you intend,saved to bookmarks, very nice site.

  53. Some truly prime content on this site, saved to favorites.

  54. genesisdaviszp says:

    You are my inspiration , I own few web logs and occasionally run out from to post .

  55. I am impressed, I must say. quite seldom do I stumble upon a blog thats both educational and entertaining, and let me tell you, youve hit the nail on the head. Your post is important; the matter is something that not several of us are speaking intelligently regarding. i’m really happy that I stumbled across this in my explore for one thing relating to it.

  56. so much fantastic info on here, : D.

  57. Wow! This could be one particular of the most beneficial blogs We’ve ever arrive across on this subject. Basically Great. I’m also an expert in this topic so I can understand your effort.

  58. Real nice style and superb content material, very little else we need :D.

  59. As soon as I found this website I went on reddit to share some of the love with them.

  60. My spouse and I definitely enjoy your blog and find almost all of your post’s to be exactly I’m searching for. Would you offer guest writers to write content material in your case? I wouldn’t mind publishing a post or elaborating on several the subjects you write related to here. Once more, awesome weblog!

  61. Perfectly composed articles, thanks for information. “Necessity is the mother of taking chances.” by Mark Twain.

  62. Oh my goodness! a tremendous article dude. Thank you Nonetheless I’m experiencing concern with ur rss . Don’t know why Unable to subscribe to it. Is there anybody getting equivalent rss downside? Anyone who is aware of kindly respond. Thnkx

  63. I like this web blog very much, Its a very nice billet to read and incur info . “Oregano is the spice of life.” by Henry J. Tillman.

  64. Dead pent articles, thank you for selective information. “You can do very little with faith, but you can do nothing without it.” by Samuel Butler.

  65. visit says:

    One of several adverse reactions that is getting talked about in Purple Bull electricity refreshments can be its caffeinated drinks subject material. You’ll find individuals that think that there are substantial quantities of caffeinated drinks becoming in one particular flask in this electrical power ingest.

  66. You have mentioned very interesting details ! ps nice internet site . “He that will not sail till all dangers are over must never put to sea.” by Thomas Fuller.

  67. You are my inspiration, I have few web logs and rarely run out from post :). “Follow your inclinations with due regard to the policeman round the corner.” by W. Somerset Maugham.

  68. knowing it says:

    Although and its popularity came up your speculations about it is negative effects. The objective happens when something is always that superior, after that there needs to be some thing inside ingredient that may bring the other effect. This could be one of several thoughts that the not-so-convinced buyers want.

  69. You got a very great website, Gladiola I found it through yahoo.

  70. Abbie Derk says:

    Perfect work you have done, this web site is really cool with fantastic info .

  71. like it says:

    One of many unwanted effects that is certainly becoming talked about inside Reddish Bull electricity refreshments is the caffeine content material. There are actually those that believe that you will find excessive amounts of caffeinated drinks becoming incorporated into 1 container in this electricity take in.

  72. jordanflemingjy says:

    F*ckin’ remarkable issues here. I am very glad to see your post. Thanks a lot and i am looking forward to contact you. Will you please drop me a e-mail?

  73. Generally I don’t read this kind of stuff, but this was genuinely interesting!

  74. rose wines says:

    How about You guys stay on target please. You’re makin me dizzy tryin to follow this tread.

  75. Following study a handful of the websites on your personal internet web site now, and that i truly like your technique for blogging. I bookmarked it to my bookmark site list and you are going to be checking back soon. Pls look at my web page too and told me what you believe.

  76. Thanks for the auspicious writeup. It in truth was a entertainment account it. Glance complicated to far brought agreeable from you! By the way, how could we be in contact?

  77. Reading all these tips is making me tired. Thanks to the ones that made the helpful ones.

  78. Useful info. Fortunate me I discovered your website by accident, and I’m shocked why this coincidence did not took place in advance! I bookmarked it.

  79. I really like this blog internet site, will certainly come back again. Make sure you carry on creating quality content material articles.

  80. Right after study numerous of the blog posts on your own internet website now, and i genuinely a lot like your indicates of blogging. I bookmarked it to my bookmark internet site list and are checking back soon. Pls take a look at my internet site as well and let me know what you believe.

  81. An incredibly fascinating read, I might not concur completely, but you do make some incredibly valid points.

  82. Cecile Shoat says:

    Glad to be one of the visitors on this awing website : D.

  83. exceltdeefs says:


  84. Nonetheless and its level of popularity got your speculations with regards to its uncomfortable side effects. The idea is actually something is very good, and then there should be a little something inside the ingredient that brings and the second effect. This can be among the opinions the fact that not-so-convinced shoppers want.

  85. Mitch Posen says:

    One thing is that when you find yourself searching for a education loan you may find that you will want a cosigner. There are many scenarios where this is true because you will find that you do not possess a past credit history so the lender will require you have someone cosign the financing for you. Thanks for your post.

  86. Facebook is missing a huge opportunity with advertisers and brands by making it near to impossible to build a brand on FB without paying…

  87. Great post! Thanks for sharing this great information!