It’s finally here, the most celebrated – and expensive – IPO in U.S. history. Facebook priced last night at $38/share, making Mark Zuckerberg – at age 28 – one of the world’s richest men. Despite pro-forma, annualized EPS projections of roughly $0.40 per share, the stock is opening at roughly $40/share, representing an initial forward P/E of around 100x range. I am knowledgeable of Facebook’s earnings outlook – the only thing that should matter to stock investors – but at its initial (~$110 billion) market cap, it certainly isn’t cheap.
Facebook IPO valuation sets record: Is it really worth $104 billion?
In a nation where nearly all major banks are INSOLVENT, the $176 million of underwriter fees are the most important aspect of the IPO – particularly when the lead “bookrunners” are among the industry’s most insolvent – Morgan Stanley, JP Morgan, and Goldman Sachs. Not that $176 million – split between 33 investment banks – is much more than pennies in the begging cup, but as they say, “something is better than nothing.”
Facebook underwriters set to split about $176 billion in fees
One of the best newsletter writers in the business is “GERALD CELENTE, PATRIOT,” a lone wolf in our “shadow world,’ as he reports principally on big picture macro trends. Early this week, he dispatched a brief missive titled “Financial Markets Panic, Euro Riots Rage, While the US Obsesses Over Gay Marriage.” Below is an excerpt from this excellent piece, which just as easily could have focused on Facebook’s IPO…
It was just another inane episode on “The Presidential Reality Show:” the issue of gay marriage had become a major national issue, in fact, it was the issue! And yet it worked! Each moment spent on gay marriage deflected the nation’s attention from everything that was consequential: US soldiers sacrificing life and limbs in futile ongoing wars, while new futile wars were in the making; tens of millions of homes foreclosed, millions jobless and homeless; the nation in debt, consumers in debt, and college grads drowning in debt … as the global economy comes under renewed attack. These are the real issues.
No matter which medium you prefer – TV, radio, newspapers, or the internet – the MSM (Mainstream Media) is programmed to ignore real issues and highlight the “bread and circuses” that mask the ominous present and uncertainly future. Fortunately, I am one of the few that stopped watching CNBC (except quotes on muted TVs while working out) – or reading the Wall Street Journal – many years ago. However, my kind are few and far between – such as those reading this RANT – while the majority is far more interested in unimportant issues like gay marriage, reality TV, video games, iPhones, and Facebook. Not that gay marriage is not important in its own community, but just 5% of the world’s population is gay, and whether or not gay marriage is “legal,” no one’s life or welfare is endangered.
Part of this recurring “ignorance is bliss” phenomenon – throughout history – relates to man’s psychological tendency to deny the presence of danger, preferring to focus on the innocuous during times of maximum stress. I have written on this topic numerous times, which well explains why government PROPAGANDA denigrating PMs works so well. In the “big boy” world of politics and banking, gold is bad for business, while for the “proletariats” and “poor,” PMs are not affordable. In other words, when ALL fiat currencies inevitably collapse, “precious” few will benefit – and they will face a far more difficult world, per David Schectman’s prescient comment Friday:
Yes, your wealth can increase and at the same time your standard of living can fall and that is where we are all headed. The worst case scenario is to lose you money and try and deal with the crushing inflation and social unrest that will accompany it. Money ain’t everything, but you’re gonna need a lot of it to get by.
Frankly, I don’t care if Facebook is a bubble– and don’t be surprised if it’s not. After all, many thought Google was just a ship passing in the night, but it is now earning more than $30/share each year – growing rapidly – and thus, reasonably justifying its $640 share price. However, I do view the Facebook IPO hype as ominous – particularly given what I view as its hypnotic, counter-productive role in society – making gay marriage appear to be an important issue after all.
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FaceBook or FacePlant? Good arguments can be made for both scenarios. Personally, I have zero interest in ever using FaceBook, so why would I desire its shares? It’s a non-event in my event-filled life.
I do recognize that it was very well hyped, packaged, and sold to a lot of silly people who had no real idea what it was that they were actually getting when they handed over their money. A lot of Internet stocks are like this. Who really knows what their finances look like? Without knowing this, it is not possible to put a true value on this company or its shares.
The Herd jumped on it right out of the gate, however, and started to run madly with it. Soon thereafter, there seemed to be some group buyer’s remorse. I can well imagine many comments of the type, “Wait a second! We sold our Apple stock to buy… THIS? What were we thinking?”.
The clear winners here are those who had FB stock and sold it at $40+ per share. Now that was one helluva good sales job! I do not blame Zuckerberg or anyone else involved in the FaceBook IPO. They did their job and that was moving lots of shares at the highest price possible, which they did.
To those who bought these shares at too high a price – Boo Hoo! Do your honest due diligence instead of just running with the herd next time and maybe you won’t get financially screwed! Until then, suck it up and learn to live with your mistakes.
Ed,
I agree and disagree.
To start, you say “who really knows what their finances look like?” We all do, as it is public info. Not only that, they are profitable, so P/E’s are very calculable.
The herd absolutely did what they do, but the IPO underwriters should be SHOT for pricing it so badly. Netting their trading losses from supporting it at $38, their overall fees would have been the same if they priced it at $32, only the public wouldn’t have been raped.
Not that I feel “bad” for the public, but this monstrosity is primarily on the usual scum – MS, JPM, and GS – all rewarded with soaring stock prices today!
Andy
One of my favorite daily reads is you rant. Blunt, concise and highly informative. Keep up the good work.
You must get tired of the IRA questions, but I’ve just gotta ask…
The bulk of my retirement is in money purchase and profit sharing plans. Being self-employed I have had little other choice over the last 20+ years.
I have terminated my plans (will roll them into an IRA shortly) and buy bullion (mostly silver) every month. I’m just not sure what to do with the retirement funds. I talked to my accountant about an IRA LLC but he’s a little leary of it due to the stringent rules. I’d like to get money out but the penalties are hard to swallow, not to mention the tax bracket busting that would entail. Taxes will eventually go up so anything I do I should do soon. I certainly don’t trust the banksters and think direct registration of PSLV and PHYS is perhaps my best option at the moment. I could take loans but not sure if that will protect me if Big Brother confiscates these.
As I sort-of heard in a move….Help me Andy-Wan Kenobi, your my only hope! Well, not my only hope, but I trust your honesty!
All the best and God bless
Tim O’Brien
Tim,
Thanks for the kind words – and the Star Wars reference!
As for your questions, you answered it already when you wrote “taxes will eventually go up.” In fact, the Bush tax cuts will expire this year, so the 3%+ increase will offset nearly half the 10% penalty.
Also, I too don’t trust ANYTHING, and last week sold ALL my remaining GTU and SVRZF b/c I believe (have believed for some time) the Cartel is naked shorting them to keep the premiums down.
When worried at IRA withdrawal taxes and fees, the best way to look at it is to realize your $100,000 IRA (for instance) was NEVER worth $100,000, but $100,000 less taxes. In other words, closer to $65,000. And the difference between $65,000 and the $55,000 you’ll get after the 10% penalty is not that much, particulalrly (per above) taxes are raised to the levels seen in ALL OTHER SOCIALIST NATIONS ON EARTH.
Plus, you have the freedom and safety of holding it yourself, not to mention the GIFT of this year’s massive Cartel attack, yielding ridiculously low PM prices.
Andy