The Facebook apologists are shrinking; the hangover is deepening. Because underneath an underperforming public offering is a very damaging story, one that could last for years. And, one that could scorch the earth for otherwise promising startups, including several in music. "People have been burnt so badly; you can only screw the public so many times," Stanford Law fellow and longtime tech entrepreneur Vivek Wadhwa told Bloomberg. "Look at what we've done to them right now. Many people have lost a third of their savings by buying Facebook stock."
Which means the next amazing IPO may never happen - at least for a long, long time. "The public is getting disgusted with the tech industry," Wadhwa slammed. "I can't imagine the next IPO creating the same excitement that Facebook did. People aren't going to line up and buy stock in the IPO, when they know they can get it for half, or two-thirds less if they wait a few months."
All of which is incredibly bad news for music startups like Spotify, which are Facebook-dependent and courting hundreds of millions dollars based partly on a possible public offering. And all the while, skewing their model disproportionately towards big labels, big investors, and gigantic liquidity moments. "For the day traders and investment bankers, this is just a stock trade, it's an easy flip. For the venture capitalists it's a lot of money in the bank. Silicon Valley celebrates IPOs, but the public loses."
Which means it could take years before someone like Goldman Sachs can turn something like Spotify into gold. "We keep doing this over and over to the public. We're transferring billions of dollars of wealth from the middle class to the elite in Silicon Valley. This can't continue. This is damaging to the health of the tech sector. All these small startups which are building good companies, there are a lot of great companies which should be going public out there. They have reasonable valuations, they can't go public. So we're hurting truly good companies with all this insanity about IPOs."
But what about Facebook acquiring interesting companies - like Spotify - with all their newfound cash? There's a serious problem with that idea, according to Wadwha, simply because Wall Street demands profitability and earnings growth, every three months. And that is totally different than the Facebook culture right now, and inconsistent with Spotify's money-hemorrhaging, audience-growing mentality. "The startups [Facebook] buys typically don't have any revenue, and if they bought another Instagram or two right now with zero revenues, Facebook's stock would crash-and-burn."
dougp Monday, June 18, 2012
okay, if you invested your life savings of even a third of it into one stock, specifically facebook, then you're a moron and deserve to get burnt.
Yep Monday, June 18, 2012
+1. Anyone that would invest even 10% of their life savings into Facebook deserves to be "burned"
Mad Dog Thursday, August 09, 2012
i wouldn´t give them fuck all ! Fuck facebook alltogether!
Toy Needle Monday, June 18, 2012
FUD. Legitimate investors don't play with their life savings.
really. Monday, June 18, 2012
Only clowns on this site would invest 'Their Life Savings" into on single IPO. Historically, any IPO that trades near 50% lower on secondary market...goes bankrupt. We shall see if Facebook is bought out in the future.
henry ke done Monday, June 18, 2012
Thats good news for Grooveshark
steveh Monday, June 18, 2012
"And all the while, skewing their model disproportionately towards big labels, big investors, and gigantic liquidity moments."
I've been saying this about Spotify since 2009.
They are corporate cock-suckers to the max.
How can any one with an indie/artist run label possibly support them? - they are out to screw us!
Ek says "music is like water" - his game plan is to be the monopoly water utility!
Superanos Monday, June 18, 2012
Oh dear, he is going to restrict water to Facebook users only like he did with music?
All those Facebook updates whenever someone drinks water.
wallow-T Monday, June 18, 2012
Headline: "Recession-Plagued Nation Demands New Bubble To Invest In." -- The Onion, July 14 2008
Outside of the allegations that Facebook did not play fair in disclosing adverse information to insiders, I don't see why "tech", broadly speaking, is responsible for bad investor judgement and mania. I'm all in mutual funds, but if I were investing individually, I wouldn't touch a super-hype stock like Facebook with a ten foot pole.
I seem to recall that there were radio stocks which never again reached the heights of the mania running up to the 1929 crash; yet radio turned out to be an important technology and a decent business for a long time.
Still Confused Monday, June 18, 2012
Maybe I don't understand the market and how valuations work, but the thing that STILL confuses me is how people ever thought FB was worth that much to begin with. It seemed quite obvious to me when looking at the platform, service, and what they've done to monetize it that the valuation was GROSSLY inflated. Forget 'lost their life savings'—anyone that bought FB stock, even one option, should have known better...
Again, I may not understand how these valuations work—that's totally possible—but I was yelling for weeks and weeks before the IPO happened that it seemed disgusting outrageous. People were telling me I just didn't get it... At least I still have my money :)
@dromusic90 Monday, June 18, 2012
Facebook flopping is more damaging than I originally thought...
Christian Monday, June 18, 2012
Oh DMN... always trying to create controversy. I have to admit, you guys are quite good at generating web traffic.
The tech sector may take a blow because of a FB burn, but FB isn't dead yet, and most of us still want tech companies to succeed.
Though I feel bad for anybody who took a hit on FB stock, my guess is FB is going to be around a long time, and, because of FB's ingenuity, I think we'll see some of these same investors investing in tech companies in the future. Even against their better judgement.
Gary Catona Voice Builders Monday, June 18, 2012
Tech start-ups need to learn from Facebook. They must figure out a way to monetize their operations before the IPO.
@allysonss Tuesday, June 19, 2012
Mark Tuesday, June 19, 2012
Man, I like the idea that this site promotes the musicians'/labels' points of view, but ENOUGH WITH THE SENSATIONALISM. I want to like what you're writing about, but you give me no choice but to question your ability to facilitate respectable discourse.
You are almost as bad as Gawker, Techdirt and Fox News in the shit you try to stir. I can understand being inquisitive, but you guys are really no better than those shitty websites that just try to farm clicks out of people.
@theindiefeed Wednesday, June 20, 2012
“Many people have lost a third of their savings by buying Facebook stock"
Not sure thats accurate (US) but...
bossman Friday, June 22, 2012
Facebook did this as a deliberate move. It's called 'free money' (at someone else's expense. Thank Microsoft for the valuation figures. It's all a hustle, can't you see it?