Will It Never End?

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Short-selling is a procedure used by hedge funds to profit from an expected fall in the price of a company's shares.

I mean c'mon, people. We had to endure pretty brain-dead short selling definitions before but this is beyond the pale.

The FSA banned the practice following the bankruptcy of the US bank Lehman Brothers because it was seen as a possible cause of falling share prices among banks when these were viewed as undermining the UK's financial system. But the continued fall of banking shares - prompting the Government's bailout in October - has led many to view the ban as unnecessary and ineffective.

Took them long enough.
FSA plans to repeal ban on financial short-selling [The Independent]


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Mark Zuckerberg Will Never Make It As A Banking Analyst

The best part of this morning's Journal story about Facebook buying Instagram is clearly Mark Zuckerberg's valuation approach, which I hope will be taught in future M&A banker training sessions: Now, however, Mr. [Instagram CEO Kevin] Systrom found himself in Mr. Zuckerberg's house asking $2 billion for Instagram. Mr. Zuckerberg suggested looking at the value of Instagram as a percentage of the value of Facebook, people familiar with the matter said. Mr. Zuckerberg, who planned to pay for Instagram mostly with stock, asked Mr. Systrom what he thought Facebook would be worth, the people said. If he believed Facebook would one day be worth as much as a company like Google at $200 billion or more, then the equivalent of 1% of Facebook would be sufficient to meet his price, Mr. Zuckerberg told Mr. Systrom, the people said. It was as good an argument as any, considering that traditional ways of valuing a company — by its cash flow, or the sum of its parts — are ineffective when that company makes only one product and gives it away free. "It was as good an argument as any" given that it is a TERRIBLE ARGUMENT. Here it is as best I can make out: (1) Instagram is worth $2bn (2) Facebook is worth $100bn (3) At some point in the future Facebook will be worth $200bn, I guess (4) Therefore $100bn = $200bn (5) Therefore $1bn = $2bn (6) Therefore you should accept $1bn because it's $2bn B+ students in those future M&A banker training sessions will object to using a zero discount rate (for equity!) and/or the failure to probability-weight Facebook's future $200bn valuation; the more advanced may notice that this argument proves that 1 = 2 and is thus a reductio ad absurdum of itself. These numbers are all sort of imaginary anyway so I will concede that this "was as good an argument as any" so long as we recognize that it is also literally the worst argument that it is possible for anyone to make about anything.*