Zuckerberg loses $8bn in Facebook IPO fiasco File this under "Problems you'll never have": Facebook headman Mark Zuckerberg lost over $8bn of his net worth due to his company's wretched IPO. This news comes from The Forbes 400, that magazine's annual list of the 400 richest Americans. This year, Zuckerberg sank from 2011's ranking of 14th on the list with a net worth of …
>>We all know Facebook is heading for a miserable end.
Do we? Facebook doesn't exist in isolation, for many people it has replaced forums, review sites, email, personal websites, blogs, photo scrapbooks, all these things have a market, bebo, myspace were destroyed in less than six months by Facebook, even if Facebook lost 90% of its users it would still have more users than either of them ever had (put together).
The only way Facebook would have a miserable end is if;
1. Something bigger comes along
or
2. They destroy themselves (e.g. paid membership)
The "value" might be slashed in half, the magic money that IPO's produce might vanish, but all that advertising, infrastructure etc. will be used, you might not use Facebook, you might have used it, got bored etc. but it's not a pyramid sale that has to grow to survive.
I remember using Altavista before Google, it was pretty good, but it didn't grow the way Google did, if it did then Google wouldn't have come along, Facebook is the same, I don't see Google being replaced as "the search engine" (despite clever ones like Wolfram), and I don't see anything to challenge Facebook (yet ;-)
It's known as the "Dead Cat Bounce" (ie it's said that even a dead cat will bounce if it falls far enough)
There's always someone willing to look at the long term investment prospects and consider a share like that worth a punt even if it takes several years to recover its value.
Many 'dead cat bounces' are the result of 'short covering' which occurs when traders who sold the stock short at a higher price now buy the stock back more cheaply to close their positions and take their profits.
More profiting on the hapless stock of FaceBook? Well, there are many ways to skin a cat. We have seen a couple so far. But the show isn't over yet.
Not only that, but the new figure is post-IPO and so some of the "losses" (on wealth that never was) have been crystallised, resulting in a far more accurate estimate.
Basically the story here is that Forbes over-valued this guy by 8 billion or so (so the previous estimate was about 50% too high) and have now been forced to admit it. But hey, what's a 50% error between friends? We still trust everything Forbes says, right?
The economy (any economy) won't feel the effect of anything the Fed does today for at least another two years. That's how this works in the US, much the same as the BOE in the UK, or any other comparable economy. Without justifications your statement has about as much cred as the weather report.
Inflation helps those in debt because it decreases the burden of debt. You can therefore be confident that when governments are in heavy debt, inflation will increase one way or the other.
It's a double win for homeowners — those with the most burdensome debt most people will ever experience — since not only do their wages go up to make their mortgage repayments look smaller but the value of their house goes up so that not only does the bit they already own scale with inflation but they get the benefit of the inflation on the bit they don't own.
In summary: unusual increases in inflation is to redistribute wealth from lenders to borrowers.
So inflation is a short-term pain (wages being a trailing indicator, unlike the price of bread) and becomes a serious problem if it goes on long term (lenders factor it in, debt becomes harder to obtain, the economy slows down) but in the medium term it's good for debtors.
In the US — similarly to most western nations — more than two-thirds of properties are owned by the residents. That means that inflation, if controlled, is a good thing for the majority of people even if it doesn't immediately feel like one.
It isn't just inflation, let's not forget the international impact of printing $40B per month. It means that in order to remain competitive everyone else has to do something similar or their economy will stall. Compare the Yen which was over ¥100/$ before the first round of QE and now it's all of ¥78/$.
Now look at seniors who are looking at retirement and watching their nest egg evaporate. These aren't people who really have a long-term interest like most of the debtors do. Even Greenspan had to admit his surprise at how ineffective the past rounds of QE have been. Sure it drives the stock market up because nobody wants to be holding cash as the dollar value plummets but it doesn't change the facts.
I don't believe Ben is going to get his reflation because the economic data is so bad. The reports are trickling out and even oil has taken a hit because supply is plentiful and demand is low even with the low and dropping dollar value. I see it everyday on my morning commute which has steadily gotten easier over the past year. We may get stagflation but the road we're on seems pretty clear, double dip ahead.
The real 'dead cat bounce' usually occurs when a company is going bankrupt. The stock which was a 'high flyer' is barely over a dollar and there is no good news. After it hits sixty cents -- depending on the size of the short position -- there may be a serendipitous rush to cover. Suddenly the fall is halted. Then traders who play 'dead cat bounces' move in and start buying this now worthless penny stock.
Some of the shorts are covering and the 'dead cat bouncers' are buying and the worthless stock starts to levitate. Suddenly rumors are afoot that there is a white knight coming on a charger and a check book. Many shorts who shorted the stock at $20 or $30, have no scruples about covering at 40, 50, or 60 cents more than the stock's very recent low.
The stock is back up to $1.35 and the traders who jumped in at .60 cents have doubled their money and are selling to those still covering their shorts and to those who believe the rumors about the knight.
A few weeks later the company announces bankruptcy. The cat is dead.
Old Zuck will be just fine but the little investors are the ones who get hurt in this situation. That's why it is far batter to get involved pre-IPO if you can and even better if you can do it with no money at risk. For example, service providers can use Stock4Services.com as a way to get equity in quality emerging companies just for performing their services. This way is no cash risk and still pays off if the company goes gangbusters.
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