Can anyone else see Bubble V2.0 yet...?
Market Capitalization = x24 revenue?
Here we go again!
Social-networking-for-suits site LinkedIn saw its shares go ballistic to double in price yesterday after the company's IPO. The offering set a $45 per share price but in early trading the stock was changing hands for more than $120. The price settled at $94.25 on the New York Stock Exchange making the whole company worth just …
Presuming the vastly inflated price that LinkedIn managed (flooked?) isn't just a drain for some of the trillions of quantitative easing that's sloshing around the financial world. Once the shares have been sold and the founders have finished counting their loot, what happens next?
The problem with the last tech bubble was that there wasn't anything after the IPO. The "floaters" got their money, but the investors wanted a return on their investment and there just wasn't any opportunity to make one.
For LinkedIn and their $9 Bil, sooner or later someone's going to be asking them to start making money - and an ask of around 8% would be about right, historically speaking. So: how could a website like LinkedIn possibly earn 9Bn * 0.08 = $700 million a year for the investors. Worse, the word regarding Facebook is a valuation of $60Bn (that's from before LinkedIn, maybe more now) which would imply their investors would expect to trouser several billion USD a year for their troubles.
Until someone can show where FB and all the others could possibly make those sorts of returns for their investors, I can't see any end to this - except tears, followed by bed time.
I keep getting 'reminders about an invitation' from someone I don't know. I've never used it and don't want to know anyway - it's yet another 'networking' bollocks thing that will be pwnd and all its data will belong to someone else.
'Linkedin' is about to become the name of a spam filter.
Saw Evan Davis talking about the fall of fashion retailer Boo.com last night on his Business Nightmares programme. Yes, it was over-inflated before having sold a thing or even launching, whereas LinkedIn is established, but the parallels are there.
I think they said that despite a worldwide launch and much hype they took 80 orders in the first day.
As a commenter asked in another story, how can I make money from knowing the value of tech shares are due to fall off a cliff?
I'd be more inclined to compare LinkedIn with TheGlobe.com, which provided web space for homepages to people but didn't do it quite as well as Geocities, much like LinkedIn provides social networking to people but doesn't do it quite as well as Facebook.
If I remember, TheGlobe.com floated in 1998 at $9 and was trading at $98 by lunchtime, valuing what was basically a few students and a bunch of servers in a shed at a few billion dollars. A couple of years later it was trading for a couple of cents, and the founders had been kicked out.
It still exists as a shell company. Its homepage is rather sad and describes itself - entirely incorrectly - as having been a 'social media' company. Wonder what the current bubble's flavour of the month can possibly be.
Linked in actually have a cash flow that can be made to work for them - corporate recruiters and corporations who pay for access levels on the website. I'd say they probably are OVER valued, but not that they are a complete puffball like many of the dot com era.
Share prices are no longer related to any inherent value in the company and instead have become a separate entity, as can be seen here, and similar cases.
The shares have been valued at the level they are for two reasons, one is that speculators are speculating that the share price will rise and then they can sell and make money - which causes other people to buy to get in on the act which in turn causes the price to rise - sort of like a legal pyramid scheme, and at some point it is clear the price will be unsustainable and will crash.
Secondly people are buying shares because they want them, and are valuing them according to what they feel they want to pay rather than any inherent worth - in the same way some people will pay $1000 for an iPad (with intrinsic component value well less than that) or $200,000 for a sportscar.
It just shows how shafted we are with our special brand of capitalism.
just nitpicking your example of the iPad, but any gadget, or really any item applies. So let's take the Snow Leopard DVD (though you could use the Windows 7 Starter DVD). The intrinsic value is basically pennies for recycling. But if you wanted to put a Snow Leopard DVD together entirely on your own you'd spend more than your entire lifetime to align the bits that Apple pressed into it. So buying it for a few dollars in the Apple Store is a bargain (again, likewise with getting your Windows 7 DVD).
$1000 dollars to me is significant. To someone else it might be insignificant. To another person it might as well be $1Trillion. It's not just our brand of capitalism, it's universal human nature.
Most of these things are disguises for Ponzi schemes and people doing naked shorts.
Some people will make a lot. The majority at the end of the day will lose their shirt.
Apple are an example of a company deliberately encouraging speculation as they do not pay a dividend.
The only long term model which is not destructive is investment to get a return from real profits.
Anything else leads to Ponzi schemes, speculation, naked shorts and asset stripping. Look at eircom in Ireland, Anglo Irish Bank or Enron.
You would think they would split their stock in that case. A stock price over $300 is hardly friendly to speculation.
IMO, Apple is not giving a dividend because they believe they can still grow. They are using a fair share of their cash to ensure they have enough components for that growth, so it is not like they are not using it. I don't see how a dividend would make them a more valuable stock.
dividends make a company less valuable as a stock. The net effect of a company paying a dividend is that it pays taxes on its profit. Then the recipient of the dividend pays tax again on his income taxes. Therefore most companies funnel their profits into expansion, which is what sets off the boom-bust cycles. Fix the tax code so dividends don't result in a tax penalty then companies have an easier time making a choice about paying or not paying dividends. And companies that pay dividends under such a system will give a real indication to their stock owners of how well they are doing, which in turn will make stock valuations more realistic.
A lot of members are on there (including myself) on the free option. Any moves by owners/shareholders to recoup some of that investment by moving it to a paid/charged model (which has been suggested in the past) would kill the social network as less people would be in the overall network.
At work - whilst people have been on LinkedIn - a large number of people are now also setting up work-based Facebook accounts in order to network.
I prefer LinkedIn as it allows a simple way of networking however its not unique and ultimately rivals will come out that replace it should their business model change.
Yes, this seems to be the crucial issue that the money boys (and girls) seem to be incapable of grasping. Put a product on the 'net for free and you'll get a lot of takers. Charge 1p for it and you'll get none. The difference in popularity between 0p and 1p is infinite (if not more :)) and the popularity between a free online service LinkedIn/FB/all-the-others and their paid-for cousins at least as great.
There is no possibility of predicting the popularity or RoI a service will attain when it stops being free (or goes behind a paywall) from the number of freetards who use it for nowt. You can't say that the value of advertising on these sites will recoup the investment (does LinkedIn show adverts - I don't ever see any, but that might just be my ad-blocker doing its job) as if it was already making money from them, what would an extra few $Bil get you - and why would you want to share that with investors?
None of these social websites appear to offer any value-add, nor do they have any products to monetise, so I am at a complete loss to see where their income can come from. It does seem that the "balanced portfolio" excuse is the only reason institutional investors (i.e. pension plans in the UK) would want these mega-IPOs, but surely long-term profitability is more important than balance? If not, I can see a lot of surprised retirees feeling the pinch in the near future.
is a bit different because of casual gaming, which millions are playing and most paying real money for virtual currency and objects .. it's also become an advertising platform with currently larger fees (pay per click) than Google (by far)
none-the-less, facebook is greatly overvalued for the money it's pulling in, and unique in it's popularity and use .. it will likely survive the coming bubble burst, as Amazon and Ebay survived the .com bubble
Frankly, I don't see the use of this site.
And you can't even get it to stop sending you invites as people you don't like try to add you as a contact, not without registering.
Those who need to get in contact with me already have my email addy or mobile phone number. If they can't reach me on those, why do they think I would be reachable any other way?
Stop, because... I wish they would...
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