back to article Ouch! Facebook slumps below IPO value on day 2

Facebook's stock tumbled below its initial public offering valuation to $37.46 per share in pre-trading figures on Wall Street this morning. Although technical problems at Nasdaq delayed the IPO, Mark Zuckerberg's web firm eventually floated last Friday, valued at $104bn with an opening price of $38. The dominant social …

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  1. Anonymous Coward
    Anonymous Coward

    The true price

    When they get to $0.01 then give me a bell.

    1. Ralph B
      Facepalm

      Re: The true price

      If it gets to $0.01 we'll be told that it was our pension fund money that was "invested" in it.

    2. LarsG
      Megaphone

      Re: The true price

      It's all down to their tangible assets, but what do they have except server space?

      The bubble burst once it may do so again, but why oh why to people forget so easily?

  2. jai

    shocker!

    Is there anyone who didn't see that happening? Admittedly, it's happened sooner than I thought, I figured the bubble would last for a few weeks at least.

  3. Anonymous Coward
    Anonymous Coward

    POP!

    That is all

  4. Tony S
    Facepalm

    Over priced

    There was a mad dash by people hoping to buy up shares purely to quickly re-sell and make a killing. Basically the ticket touts of the financial world. This has pushed the price of Facebook up to levels that are just not sustainable.

    It looks like many of the initial investors will lose out; I could chuckle at their distress, (OK, maybe I will) but I also worry that this will result in the media declaring another "dot com bubble" and predicting anotehr crash. This could then become a self fulfilling prophecy as others over react.

    The problem is that we all have pensions, savings etc. that are affected by the twerps who make these poor decisions.

    1. Charles Manning

      Bought by FaceBitches

      Everyone knew that the IPO would be skewed by FaceBitches wanting to buy a bit of history. These people buy based on emotion and wanting to score Likes for telling their friends about the purchase.

      Then there were a bunch of speculators hoping to cash in on the irrational actions of FaceBitches.

      What now? Likely the emotions will dissipate. People will find a wierd looking bit of paper in their hands and start wondering what it might really be worth. That is likely going to take them south.

  5. J. R. Hartley

    It's gonna end up looking like Bebo.

    I want out.

  6. JimmyPage Silver badge
    Unhappy

    Whilst I would love to smile ...

    how many of our big corporate investors (pensions, savings) have bought the Zuckerboy Kool-Aid, and splurged our money on this ?

    Is there a German word about "bitterly taking pleasure in others misfortunes" ?

    1. Andrew Moore

      Re: Whilst I would love to smile ...

      Backpfeifengesicht. Oh hang on, that's just Zuckerberg.

      1. beep54
        Happy

        Re: Whilst I would love to smile ...

        "A face that needs to be punched"

        Excellent word! Thank you.

    2. Anonymous Coward
      Anonymous Coward

      Re: Whilst I would love to smile ...

      Schadenfreude.

      1. Sporkinum

        Re: Whilst I would love to smile ...

        Schadenfreude! One of my all time favorite words.

        I am guessing the real current value is probably $10/share or less. Maybe under $5.

      2. JimmyPage Silver badge
        FAIL

        Re: Whilst I would love to smile ...

        I said *bitter* pleasure in others misfortunes. My knowledge of German is limited to say the least, but I suspect it would be another word tacked onto Schadenfreude ....

        1. Stoneshop
          Joke

          Re: I said *bitter* pleasure

          Vass ist dies "bitter" of vitch You speak? Schadenfreude ist an Emotionalstate, and Ich understand das dies "bitter" ist another Emotionalstate, aber zat goes not zogether. Nicht two Emotionalstates at ze zame Time, das ist against ze Rules. Ordnung muss sein, und two Emotionalstates gemixed ist not Ordnung. Also, Schadenfreude it is.

    3. JDX Gold badge

      Re: Whilst I would love to smile ...

      Pensions and funds are not normally looking for high risk and any new IPO is high-risk.

      1. Tony S

        Re: Whilst I would love to smile ...

        "Pensions and funds are not normally looking for high risk "

        True - but they often buy shares in those institutions suchs as investment banks, funds etc that DO buy the more high risk stuff. The whole financial market is still very incestuous, with all of the various institutions buying little chunks of each other. This is why things got so sticky a few years ago; and they haven't learned anything from the problems that they had then.

      2. Charlie Clark Silver badge

        Re: not normally looking for high risk

        Yes, they're nothing like those fools who invested other people's money in sub-prime mortgage derivatives... anyway everyone knows that lightning doesn't strike twice...

        Fact is that many pension funds are based on a calculation of 8 % returns from bonds, cash and equities. With "safe" US or German bonds paying less than 2 % this means piling into equities and derivatives in search of returns.

        This is all going to end in tears. Our tears.

    4. Local Group
      Trollface

      Re: Whilst I would love to smile ...

      "Is there a German word about "bitterly taking pleasure in others misfortunes?"

      SAUERKRAUTENSCHADENFREUDE

      1. r4co0n

        Re: Whilst I would love to smile ...

        I would suggest "hämische Schadenfreude", with hämisch meaning something like vicious. Though I would say that schadenfreude implies the 'bitterly' part. Just my two Pfennige.

      2. Trevor_Pott Gold badge
        Pint

        Re: Whilst I would love to smile ...

        @local group

        I legitmately laughed out loud. Drew wierd looks.

        Thank you. :)

  7. John A Blackley

    Easily explained

    Mark had to sell some shares to pay for the wedding,

  8. Anonymous Coward
    Anonymous Coward

    Hey Big Fat Dumb arsehole 555

    Said - I BOUGHT A COUPLE THOUSAND SHARES AT 375 HAHAHAHAHAH TOP THAT

    You still laughing?

    1. LinkOfHyrule
      Coffee/keyboard

      Re: Hey Big Fat Dumb arsehole 555

      I dunno if he's laughing but I am absolutely peeing myself - this post has made my day!

  9. The BigYin

    Oh kee-ryst

    So FB has dropped around 3% from an over-hyped opener. This is news? Really?

    Are we going to get El Reg stories every time the FB share fluctuates?

    Give me a call when some massive pump&dump/naked short bends Zucker over a barrel and has its wicked way with him.

    1. ItsNotMe
      FAIL

      Re: Oh kee-ryst

      The "slight" problem with your post is that the AVERAGE price of an IPO goes UP by 32% at the close of its first day of trading...Farcebook HAD TO BE PROPPED UP by its underwriters, just to stay above USD$38.00...barely.

      And they had to buy MILLIONS of shares just to do so.

    2. Anonymous Coward
      Anonymous Coward

      Re: Oh kee-ryst

      Really... the guy had probably taken billions in cash already - so basically he's set for life in a lifestyle you could probably only dream about as you work your 9 to 5. Now who is shafted??

    3. JDX Gold badge

      Re: Oh kee-ryst

      3% before the market opened. 8.5% 5min later.

  10. Khaptain Silver badge
    Unhappy

    MAQBAGTFOOH

    Make a quick buck and get the f**k out of here.

    A resumé of todays stock market.

  11. Robert Ramsay
    Coat

    Once upon a time...

    "You swapped the cow for a handful of WHAT?"

    1. Steven Roper
      Thumb Up

      Re: Once upon a time...

      Yeah, but that particular investment did eventually pay off as I recall, albeit only after a stiff climb and a few life-threatening situations endured by the investor.

      Investing in Facebook on the other hand...

  12. This post has been deleted by its author

  13. Anonymous Coward
    Anonymous Coward

    The real story here is the % the banks bought. Apparently 86% were bought by 5 key banks.

    1. tony2heads
      Pirate

      5 key bankd

      New banking crisis ahoy!

    2. Anonymous Coward
      Anonymous Coward

      Banks

      Well, why wouldn't they -- things go their way and the bankers get millions in bonuses, things go wrong and the taxpayer bails them out and the bankers get millions in bonuses.

    3. h4rm0ny

      "The real story here is the % the banks bought. Apparently 86% were bought by 5 key banks."

      Oh please, no. PLEASE tell me this isn't true. The banks, whose business is managing money and who have whole departments dedicated to analysing the stock markets... the can't not have seen coming what most of us all predicted.... Can they?

    4. Munchausen's proxy
      Pint

      Not really bought, per se

      As I understand it (I welcome correction by the knowledgeable), the underwriters (not 5 random banks) had a large fund that they used to prop up the price by buying at $38, and the amount of that fund they used was subtracted from the amount they owed FB. It seems to me they were just 'buying' from themselves and other insiders, and every share accounted that way was a share that wasn't flogged onto a retail rube at inflated price, so okay by me.

  14. Anonymous Coward
    Megaphone

    Really.

    What did people think would happen?

    It was always a overinflated IPO. The alarm bells should have gone off on all the silly press releases in the run up, trying to convince people Facebook had long-term legs and Google was dead in the water.

    Really people's stupidity stuns me sometimes. have they not heard of the dot com bubble?

    1. JDX Gold badge

      Re: Really.

      In the .com bubble prices went high at IPO and then later all collapsed. Collapsing at IPO is different.

  15. JDX Gold badge

    $35

    Ouch

    1. Silverburn

      Re: $35

      Or "Ha, ha!" depending on which side of the buying fence you sit.

    2. JDX Gold badge

      Re: $35

      Bloody 'ell I looked away for 30s and suddenly it's $34

      1. ItsNotMe

        Re: $35

        $33.64 & dropping.............$33.34............

        1. Thomas 4

          Re: $35

          Can anyone else hear a funny gurgling noise right now?

  16. Anonymous Coward
    Anonymous Coward

    Maybe they were greedy - they kept upping the IPO price right up to the launch and surprise, surprise people are finding it a bit too rich and the shares were bought by the underwriters instead.

    Makes Apple shares look positively cheap. Facebook have about a billion users and still make very little money (relatively) - Apple only have about 10% of the PC and phone market - so plenty of room to grow. FB are trading on a massive multiple of profits compared to Apple.

  17. Anonymous Coward
    Anonymous Coward

    elevator ...

    ... going down

  18. Anonymous Coward
    Anonymous Coward

    ...and it continues to fall. Ouch

    Beats watching Corronation Street.

    http://uk.finance.yahoo.com/echarts?s=FB#symbol=fb;range=5d;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

  19. Tom 7

    Oh shit

    that means we'll have to subsidise the banks again.

    I reckon for every £1 in my pension fund they will piss £5 up saving it over the next ten years and tell me I have to feel good about it.

  20. John70

    Just looked...

    Just looked and facebook is at: $ 33.4454 -4.7864 -12.52%

  21. Anonymous Coward
    FAIL

    What an investment!

    IPO on Friday @ $38.00...High today of $36.66...Low today of $33.00...hovering around $34.00.

    http://data.cnbc.com/quotes/FB

    Nice 10%+ DROP in your investment kids.

    1. ItsNotMe
      Unhappy

      Re: What an investment!

      And if you were one of the "lucky ones" to get in @ USD45 per share...how much fun are YOU having right now? Probably not much. (USD33.65 currently)

  22. HP Cynic

    No Schadenfreude here just relief that reality caught up with this bubble even faster than I thought: the valuation came out of thin air...

    Then again it was so massively over-valued that it can never really collapse below "stupidly high numbers" so there's something to be said for these attention grabbing, fictitious values.

  23. Anonymous Coward
    Anonymous Coward

    Predictions required for the price on Friday at noon

    I'm recokon £31.00. Anything approaching £30.00 will trigger some automated buying agents to kick in. Of course, as it's going down I'm not sure how useful a falling price can be to anyone !

    1. Charlie Clark Silver badge

      Re: Predictions required for the price on Friday at noon

      Back of an envelope calculation:

      With a 15 billion class action on them and P/E about 5 times historical highs: IPO at around 100 billion. Divide by 5 and subtract 15 billion. Would put the total company at around 5 billion and shares at around $ 2.

      That said, the data they have managed to amass should allow profits to grow significantly, assuming they know how and are legally allowed to monetise it. Facebook is a sort of credit check agency for people. Amazon has been successful despite being an utter failure for early investors.

  24. Anonymous Coward
    Anonymous Coward

    Place your bets on the close price today, in a month, in 6 months and in a year. I recon half price within 12 months and still over-priced.

    1. Anonymous Coward
      Anonymous Coward

      bets

      it's not logic that wins, just what people "think" the shares are worth... if you bought £50,000 at $37 then you might buy a lot more when they go to $32 - keeping the price high - there will be many like minded people who can't afford for the price to fall...

      1. Andrew Moore

        Re: bets

        I think the shares are worth around $1 each. So they've got a little further to drop.

  25. Anonymous Coward
    Anonymous Coward

    "Anything approaching £30.00 will trigger some automated buying agents to kick in."

    And you know that - how - or just a guess... thought so.

    1. Anonymous Coward
      Anonymous Coward

      Of course it's a guess - there are many brokers and agents and the software and configuration all vary - knowing how these things all work would make someone very rich !

      a $30 threshold seems logical from a psychological point of view, like £1.99 pricing.

      Has anyone worked out what the shares are worth looking at the key financial metrics - whatever they are (e.g. ROCE and the like) in comparison to say Google and say Salesforce ?

      1. Anonymous Coward
        Anonymous Coward

        $30 is meaningless as is $31 or $29 just because FB and their bankers decided they could increase it and increase it to $38 does not mean at $30 they represent good value or a buying opportunity.

        They made something like $1bn - on a more normal valuation like Apple or Microsoft that would value FB at perhaps 14-20bn - so maybe they are 5x over-valued?

        If (theoretically) someone asked you if I would rather have $10k of Apple or $10k of FB what would your answer be (neither is not a valid answer).

        1. h4rm0ny

          "If (theoretically) someone asked you if I would rather have $10k of Apple or $10k of FB what would your answer be (neither is not a valid answer)."

          The Apple shares. They are more likely to have the same value or better than the FB shares by the time I organize selling them. With Apple I would be sitting here thinking 'I'm going to sell those and buy something nice'. With FB shares I would be sitting here hurriedly clicking through web pages trying to offload them whilst they were still work $10K.

          Do I think <$30 by the end of the week? No - too many wealthy groups will keep propping the price up. Do I think <$30 by the end of the next week? Yes. They will only keep them propped up for as long as they need to to get out of there.

      2. Anonymous Coward
        Anonymous Coward

        "a $30 threshold seems logical from a psychological point of view, like £1.99 pricing."

        You used logical and psychological in the same sentence - and to describe a hyped IPO, brokers and agents...? ;)

      3. stanimir

        if there is a support level, it should be way above 30.

    2. Anonymous Coward
      Anonymous Coward

      The way its bouncing around 34 seems to suggest 34 is the current magic autobuy number.

      Wonder which bank is loading up on even more of this worthless stock?!

      1. JDX Gold badge

        It's not worthless you dullard. It's worth about $34.

  26. Anonymous Coward
    Anonymous Coward

    Low of $33 - currently hovering around $34.

  27. Anonymous Coward
    Anonymous Coward

    Is it possible some of the facebook employees who received shares couldn't wait to sell (at least enough of their shares to buy a ferrari, pay off their mortgage?) and are driving the price down?

    1. Anonymous Coward
      Anonymous Coward

      IIRC, there's generally a blackout period (180 days comes to mind) after an IPO during which insiders aren't allowed to sell the stock they acquired pre-IPO.

      1. Anonymous Coward
        Anonymous Coward

        I read that a large number of employee shares have an unusually short lock-up period of 91 days. Will be interesting to see what happens then.

  28. Tim Worstal

    Supports seems to be at $33

    My bet is (and it's only a very vaguely informaed one) that the underwriters are buying in when it looks like reaching $33, sending it back up again.

    But they're going to get tired of that game at some point.

    1. Anonymous Coward
      Anonymous Coward

      Re: Supports seems to be at $33

      <optimism> Or perhaps there is a demand but all the banks selling out of the shares they were forced to buy is depressing the price? </optimism>

    2. This post has been deleted by its author

    3. ItsNotMe
      Mushroom

      Re: Supports seems to be at $33...some "support"

      In the first 1 3/4 hours of trading...more than 97 MILLION shares (and climbing) have traded.

      That's nearly 925k shares A MINUTE changing hands. WOW!

    4. Anonymous Coward
      Anonymous Coward

      Re: Supports seems to be at $33

      Tired, and even more exposed!

  29. Anonymous Coward
    Anonymous Coward

    Zuckerburg has so far lost $2bn....

    HaHa.....

    1. Anonymous Coward
      Anonymous Coward

      Re: Zuckerburg has so far lost $2bn....

      Off his valuation for the whole company - only on 'paper' - he's still probably making more in a day than most people make in a lifetime.

      To put into perspective let's do the maths let's say you earn an average of 40k per year for a 50 year working life - that's 2m. Multiply that by 1000 and that's what he lost in a single day - if that's what he lost imagine what he's still worth.

  30. Joeman
    Pint

    Come on lads, fire up your spread betting software and start cashing in on the price movements!! we all know which way its going, so stop talking and start profiting! :)

    1. Anonymous Coward
      Anonymous Coward

      Make it easy...

      ... recommend a site, so all I have to do is click on a link and enter my debit card details and then reap the rewards.

    2. Munchausen's proxy
      Pint

      No options market available yet

      And I suspect December puts will be damn expensive when they start trading.

  31. Cliff

    West coast is waking up now - will they be pleased or sell?

    -10% at the mo - think there may have been some big meetings before lunch today about how to prop up the share price.

  32. Mike Bell
    Mushroom

    Crash Ahoy!

    It wouldn't surprise me in the least if the FB share price eventually crashes to below 1% of its current value, when the people who bought into this scheme realise that the site can't actually make them any money. Cue a mad panic bailout.

    The trouble is, the amount of cash involved is so huge that it's bound to have negative repercussions on the global economy.

    In the meantime, Zuckerberg, who got really lucky in the first place, is laughing all the way to the bank. Your dwindling pension will be propping up his lifestyle if the shares take a nosedive. Which is nice.

    1. JDX Gold badge

      Re: Crash Ahoy!

      There's a reason you're doing a £22k network admin job instead of working as a £220k trader.

      1. 5.antiago

        Re: Crash Ahoy!

        "There's a reason you're doing a £22k network admin job instead of working as a £220k trader."

        Are you suggesting that traders on £220k per year are more capable of spotting impending crashes than other observers? I can't help but notice that these "special" people keep on guessing wrong

  33. Cliff
    Thumb Up

    West coast likes this

  34. Smoking Man
    IT Angle

    Nasdaq IT?

    About the messages that the Nasdaq trading systems had been slow, maybe overloaded, at least unresponsive; does anybody happen to know which type of system(s) that trading runs on?

    Just curious.

    1. ItsNotMe

      Re: Nasdaq IT?

      Yep...Linux...

      http://lwn.net/Articles/411064/

      ...and looks like the bird laid an egg.

  35. ZAM
    Holmes

    BOLD CEO?

    When the young CEO purchases a company that hasn't made a dime for a BILLION dollars, apparently without bothering to bring the rest of the board in on the deal . . .

    Well, I am not going to be putting any of my money in his hands . . .

  36. Anonymous Coward
    Meh

    While I think FB has a real business model

    I'm not sold on the idea that the company should be valued more highly than McDonalds or Coca-Cola. I think their float may be higher than HPs (or at least it might have been before the drop)

    I'm staying away from FB shares until the employee lockout date ends, to see if more shares pour onto the market then, driving prices down further.

    And on a personal level I think FB is overly snooping and likes to arbitrage privacy in essence, but I think that concerns about that do not affect their business to teh point that it is not already embedded in their pricing.

    1. JDX Gold badge

      Re: While I think FB has a real business model

      Of course lots of employees will leave when the shares vest... they'll go from typical coders like us to multi-millionaires overnight. This is entirely normal.

  37. NoneSuch Silver badge
    Devil

    Die Facebook...

    Die... DIE!!!!

  38. Richard Jukes

    Down they go

    I think pretty much anyone with any sense is shorting this. Where is the money?

  39. Zippy the Pinhead
    WTF?

    Stupid people now a days

    Less than a billion members at less than 2 dollars revenue per user a quarter. The company is worth 5 to 10 billion max.

    Not to mention the revenue for the company per user is actually dropping as well!

  40. Richard Jukes

    heh

    My spread betting platform isnt letting me short them due to market conditions!

  41. The Alpha Klutz
    Megaphone

    i just sold all my facebook

    shares.

    this stink-boat is sinking.

  42. Anonymous Coward
    Anonymous Coward

    That how you make money in 4 easy steps

    1, Create a site that hundreds of people visit (compulsively) every day.

    2, Get some of the biggest, most profitable, web based firms to try and copy you.

    3, Float your site on the stock market before anyone realises there is no real way to turn popularity into profit.

    4, Sit back and chuckle at the big organisations who still don't understand the net.

  43. Anonymous Coward
    Anonymous Coward

    Facebook valued at 100 P/E ratio when the market av is 12

    Get rich quick for the insiders

  44. Patrick 8

    I can not find it!

    Where is the +1 Like button for this news?!

    No real news here, Facebook free (boy was that hell the hoops they make anyone jump through who dares to leave the flock of true believers)

    ... bloody cult!

  45. Local Group
    Meh

    "ONE TRADING DAY DOES NOT A CAPITAL LOSS MAKE."

    The banks are in this for the long haul.

    I wouldn't be surprized to see the stock continue it's downward trend until all the weak holders are shaken out. The stock hits $25. They quietly start buying it back to $38, Then come the rumors. The misleading stories about new and better technology and the phony revenue and profit figures. The banks buy the stock all the way up to $55. They sell it back down to $44 and with those profits buy it back up to $70. Then the most outrageous rumor of all. The stock spikes up and goes back down to $40. (Of course this works better when the whole market is bubbling and the economy is strong.)

    How many times have I seen that trick! I was even in on one in the first dotcom. Got in at $2. Got out in the mid $20s. Watched it go to into the 50's. A worthless company that made Facebook look like IBM.

  46. stanimir
    Coat

    What escapes me: why people try to make money investing and hoping for a bullish trend?

    Bearish and shorting is just (if not more) profitable.

    I, myself, did not expect the company to drop that quick (more money pumped by the banks) yet expecting an overvalued company to rise even higher or getting dividend is ludicrous .

    1. Anonymous Coward
      Anonymous Coward

      >>What escapes me: why people try to make money investing and hoping for a bullish trend?

      Some of it is just fake "bull" which gives an impression, but in reality, companies with no intrinsic value (like FB) are just a vehicle to make cash by those who knew what was going to happen, my $25k reverse spread turned into $27.5k in 45 mins, then another bet to $31k in 40 mins and then $36k 20 mins after opening Monday, $10k for a couple of hours work (probably a week prep), a few people with millions to play with make millions (from millions with a few $ to play with, my $25k could now have been worth $17k instead of $36k if I got it wrong, and believe me I've been very wrong in the past).

  47. Anonymous Coward
    Anonymous Coward

    Personally I prefer to buy BP shares.. at below £4 they are a steal and more likely to be worth something in a few years time.

  48. Alan Brown Silver badge

    Falling faster than an orbitally delivered anvil.

    Not that Zuckerberg cares. He's a sociopathic tosser of the highest order.

  49. Local Group
    Childcatcher

    Wachet auf ruft uns die stimme

    "In the U.S., in order to sell stocks short, the seller must arrange for a broker-dealer to confirm that it is able to make delivery of the shorted securities. This is referred to as a "locate.” Brokers have a variety of means to borrow stocks in order to facilitate locates and make good delivery of the shorted security."

    "The vast majority of stocks borrowed by U.S. brokers come from loans made by the leading custody banks and fund management companies."

    Ask yourself why would one of the bank/underwriters loan you the stocks for you to sell it (short)?" Especially if they're also selling the stock to drive the price down and buy it back at the lower price. And perhaps profiting from the sale because of the lower price that they paid for FaceBook stock as underwriter.

    @Richard Jukes. This was the 'market condition' that would not let you short the stock. No broker would loan your broker the stock to short.

    BTW "Underwriters are paid commissions, securities, or through a combination of fees and securities. In a firm commitment the price underwriters pay the company for the securities is expected to be less than the price offered to the public. This "underwriter's spread" compensates the underwriter for conducting the offering. The spread averages 10 percent or less and is dependent on the anticipated complexity and size of the offering. The maximum spread allowed by the National Association of Securities Dealers (NASD) is 10 percent."

    @stanimir. I assume you know this. If you by a stock for $25, all you can lose is $25. If you short a stock at $25 you can lose gazillions. The stock can go to $50, $100, $200 and eventually you'll have to cover.

    :-)

  50. Nameless Faceless Computer User
    Devil

    bwaa haa haa

    It's a "DOT COM!" Of course the stock price fell. For those of you who do not follow ancient history, it was the "Dot Com's" which crashed the stock market in 2000.

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