The Failure of Facebook IPO

At the onset, I was verbal in saying I was never interested in the Facebook IPO.  But I failed to explain why.  My guts told me it would be crazy to subscribe to its IPO.  But it was only yesterday, that a very good friend posted the question to me again on why the Facebook IPO failed.  I didn't answer.  Emotions were pouring but I owe this person an explanation that is more than emotional reasons.  I have to give him a valid logical story.

And so here goes my personal effort in explaining the now famous fiasco of the facebook IPO.

Facebook has a very impressive record of 900 million users, that naturally attracted the attention of every major advertisers in town.   Not only do they have 900 million users, but more than half of them log in to the site on a daily basis.  Such loyal followers only whet the appetites of the advertisers.  

But then, a few weeks before the IPO is launching, news came out that advertisers have doubts on continuing to put their green bucks in this popular social networking site.  Why?  because without a proper tool for measuring the return on investment, the big bosses of these advertising agencies are not keen in writing the checks without proof that this is indeed a wise investment.  This is such a serious concern that Facebook changed its prospectus to reflect the expected decline in revenue growth.  But Morgan Stanley continued to be enthusiastic about the IPO that it still recommended to set the IPO price at the higher range of $38.

Now, this opens another question to me.  How did they value the firm?  When a company is going public, the first order of business is to value the firm.  (I never participated in any IPO's or worked in any investment banks much to my lamentation. But I just guess this is an important exercise for them.  So if Im wrong, do forgive me, dear readers) .  To continue, if I try to do due diligence , sit down, take out my calculator and spreadsheets, to value this firm, I would face a blank wall.  I wouldn't know where to start.  I know it has 900 million users.  But my revenue forecast comes from advertisers who are now in a wishy-washy stage in spending money in this company.  So, who can truly answer with confidence, what will Facebook be 10 years from now?  I can be bullish and bank on those 900 million users and the revenue growth they can generate from the advertisers.  But I can go the other way and I can be bearish too and say, maybe when my daughter celebrates her debut (18th birthday), she would say "What is facebook, mama?"  Thing is it can go either way.  The possibility is just too wide an open field to truly create a valid forecast of revenues and proper valuation for this company.  So, how do you value Facebook Inc.   I do not know.  And because I do not know, Im not betting my child's trust fund in this.   I'd rather invest it in a company I understand.  And it does not help that our market is continuously plagued with crisis one after another that puts the 10 Plagues of Egypt to shame.  Investors are more afraid than optimistic.  Gone are the days when investing in IPO's is a sure-ball thing.  And Wall Street rookies celebrate their profits with vacations in Aspen.

And NASDAQ's unexplainable failure to complete trades at the early hours of the first trading day of Facebook cast a shadow of doubt to those short-time investors.   (And it did seem that all investors were merely day traders who just subscribed to the IPO for a quick buck).  NASDAQ couldn't handle the massive number of trades on the early  hours of that day, and they encountered a technical difficulty that nobody can seem to answer until now.  They say they don't know what happened and why they were only able to start trading at 11:30AM.   Well, if they don't know, I sure don't know too.   Such professional answers.

Now, let's look at the main man, Mark Zuckerberg, founder of Facebook.  He controls 57% of the company and is chairman of the board.  We all saw the movie and know he is intelligent. But what we need right now is the confidence that he would run his business and make decisions with the intention of creating shareholder value.  This is what every investor is looking for.   So far, the only thing we saw was his purchase of Instagram, a social networking site for sharing photos.  But the rumors circulating on Wall Street on how this decision came about shows us a chairman who snubs protocols and procedures.  Scary.  We aren't in the halls of Harvard anymore where one person can do the project meant for a team.  

And lastly, let's look at the product of this company: the facebook site.   We all know how ecstatic we were when Facebook was launched. Suddenly, we become re-acquainted with our high school classmates, old neighbors and relatives we don't see except on holidays.   We happily post pictures of our families and of ourselves dining in this fancy places showing our Hermes bag.   But Facebook NOW faces serious issues of privacy risk to its users. And more and more users are becoming conscious and aware of the malevolence of letting the whole world know of all our activities of every hour every day.  Suddenly, it isn't fun anymore when you bump into a classmate you haven't seen in 10 years know more about you and your family than your own mother.   And let's not even count those eager stupid mistresses who happily posts sweet pictures of you (and worse, tag you in the picture).  Now, every Tom, Dick and Harry know you are carrying an affair with this 20 year old leggy creature. That would be such an ego booster for you.  Well, at least until the Mrs learns of it and throws you out of the house.

Today, the pain in the ass of Facebook is the increased usage of Facebook on mobile devices.  The problem is that if facebook users continue to access Facebook mobile products as a substitute for access through personal computers, the company will fail to earn anything from it.  OR if they do something about it ,it would increase their operational expense.  Either way, their forecasted revenue growth would be negatively affected.

But what of tomorrow?  What will be their problem next year? in 3 years?  Let's face facts: Netizens, like you and me,  are not a loyal bunch of people.   This is like fashion.  We keep changing our minds.  And we go to what's hot.  Can you say that in 10 years time, facebook will continue to be a hot item?  Hmm....  do i really need to think this over?  We are like a herd of sheep.  Where one goes, everyone goes.  

An Open Letter to Dad

Dear Papa,

We are so alike in many ways that people around us call us twins.  Remember the time when you found the book of Lee Kuan Yew on my bedside table and you showed me that you bought the same book , only yours is in Mandarin, and you also put it on your bedside table.  We had a great time discussing this Singapore statesman at length in the days after that.  Or the time you were shocked I was sporting your Lacoste white jacket when in fact, I bought the same thing on the same day as yours.   We have similar behaviors and interests as well that amazes our family to no end.  We are both avid sports fans and we interrogate people in the same way that a drop of inconsistency would make us nail the lie in their stories. And remember the time when you barged in when I was taking a shower because you were so excited in telling me that we actually applied for the same course in college: BS Mathematics.   Only you were too poor and sick to continue your scholarship.  I was luckier because I was able to pursue it with your help.  How many times have I seen you steal my books in the middle of the night so you can peruse them at your own leisure.  That is why I know that even if you didn't take an accounting course in your life, we are on equal footing when we discuss accounting issues and financial concepts.

I gave up a lucrative career in banking to be by your side, because you asked me to.  Your blinding trust and immense generosity in people makes you vulnerable so I make sure you are protected from these sharks, at least as much as you let me.  When I told you your 8 year mistress was cheating on you, your pain was my pain.  I cried so much the night before I told you because I know how much you love her.   Like any other crisis in your life, you are able to deal well with it.  You are resilient in that way.  But I know the times when you miss her very much.  You don't know it but I still keep tabs on her activities till now, at least until the day I see that you have gotten over her completely.

How can I explain to you that I lost my ambition because my happiest days were our struggling years.  Do you remember when you brought me to the cinema to watch Ice Castle?  I asked you why we aren't seated in the balcony and you said "coz we are too poor to afford the balcony seats".  But then you proceeded to carry me on your shoulders so I could watch the movie better.  That was my best movie date so far.   Or when you bought your first car, you were so excited coming home to show me your first car and we drove around the city, opening the windows to feel the air around us.   But I don't even get to sit beside you in your car now because you have so many cars.  Maybe that is why until now, I find exhilarating driving my car with windows down.  It makes me feel the air and remember the time when it was such a joy just to feel the wind in your face.

You affected so many of my decisions.  When you frowned on a suitor, the next day, I didn't even speak to that person anymore.  Poor chap.   When I wanted to study Civil Engineering, you said its not for girls, so I applied for Home Economics instead.  That one would surely be for girls.   And now you wanted me to pursue a venture that I hardly understand, much less like.  But I'm doing it the best I could because you wanted me to do it.

Many of your friends say that you always talk about me and that I must be your favorite daughter.  How come I never felt that.  We rarely talk when we are together.  Nevertheless, it does not matter because my love for you is great enough for the two of us, twice over.

Happy Birthday , Papa.

Sweeney Todd : a Review

Every time I go to London, I make sure I watch a play or musicale at West End. But instead of sticking to the old classics like Phantom of the Opera or Victor Hugo's Les Miserables, I ventured into the works of the new talents of West End this time around. I was initially doubtful if I'm going to watch Sweeney Todd. In my mind, a horror drama hardly entertains the audience when the set is predominantly dark, actors are scowling and music is chilling. One only needs to be reminded of "The Woman in Black" to stay away from musicals with horror themes. But Sweeney Todd is a revelation. Michael Ball plays as the title role and he not only possesses a great voice but he is an excellent actor as well. His transformation from a man mourning the loss of his wife and child to a lunatic who brings out his revenge to the innocent bystanders is gradual and subtle. Mrs. Lovett, played by Imelda Staunton, provides a great comic relief with her disgusting pies and yet she delivers more than that. There are scenes when she has to sing horribly and she did without sounding really off. The musicale showed off her versality as an actress with the range of emotions required for the role. She was a friendly comic at the start advising everyone of her disgusting pies and "to better just spit it out". Then she transformed into a desperate woman lusting over Sweeney Todd She slowly slipped into moral degradation when at the start she gasped loudly upon seeing the dead body in the trunk changed into delight in the killings afterwards to succumb to her greedy antics by gaining profit for her store. Her clever portrayal of Mrs. Lovett leaves one to guess if she is not right in the head or merely a woman desperately in love with a man. The music was fantastic. It has the right mix of gloom and bloom. This musicale has brilliantly executed an old piece into something still relevant to us. It has the Victorian echoes of the old era but still maintains the recurring issues of the working class woes. It was a showcase of excellence in the first act that transcends into brilliance in the second act. How the director was able to maintain such perfection throughtout the play is truly a remarkable feat. I simply applaud to his genius. If there is something I would apologize for, it is my limited vocabulary on the superlatives I can shower for this great musicale.