Quantcast
Latest Stories

Facebook deflates any thought of new tech bubble – analysis

By

NEW YORK – The horrendous stock market debut for Facebook suggests investors are not ready to jump in and create another tech bubble despite big expectations for social media, analysts say.

A financial news stock ticker on Morgan Stanley headquarters carries a headline about Facebook, Wednesday, May 23, 2012 in New York. Regulators are examining whether Morgan Stanley, the investment bank that shepherded Facebook through its highly publicized stock offering last week, selectively informed clients of an analyst's negative report about the company before the stock started trading. (AP Photo/Mark Lennihan)

Facebook closed out its first full week of trade with a loss of 16 percent from its offering price of $38, in a huge disappointment after a much-hyped initial public offering worth $16 billion, the biggest for a tech firm.

The stock failed to live up to the anticipation of some who thought investors would be stampeding to get a piece of the network which has 900 million users.

“When you see Facebook share prices tank, it does get people back on to a more foundational basis, in terms of real revenues, real profits,” said Nick Landell-Mills at Indigo Equity Research.

Mark Heesen, president of the National Venture Capital Association, said investors are being more cautious than during the tech bubble of the late 1990s.

“This is by no means the end of social media. It is going to continue to grow and expand,” he said.

But he said that during the tech bubble, “venture capitalists invested $150 billion in two years. In the last two years we invested about $60 billion. There is much, much less money in the system right now. That’s critically important.”

Gerard Hoberg, professor of finance at the University of Maryland, said he does not expect a new bubble, given today’s market sentiment.

“I think it’s very healthy and I think people learned the lessons from the 1990s,” he said. “It’s preventing a bubble from forming.”

Facebook appeared to be the driving force in a surge into social media. But some of its social media brethren are also being watched cautiously.

Zynga, the social gaming website which has strong ties with Facebook, has lost some 35 percent, and the online deals firm Groupon has slid nearly 40 percent. But the professional social network LinkedIn has doubled in a year since its IPO.

Heesen said the mixed reaction to these IPOs has taken some of the froth out of the market.

“If Facebook languishes, that does send a signal to others (tech firms) that maybe going public is not the best option – maybe getting acquired or trying to wait out this volatile period is better,” he said.

“The whole social media arena is still ripe for investment,” he added, but cautioned there will be “bumps along the road.”

Landell-Mills said that even though investors appear unwilling to chase share prices, they will flock to a company that makes real profits, like Apple, up 67 percent in the past year.

“I’d never call Apple a bubble,” he said.

The analyst said that Facebook still has a lofty valuation when measured by earnings, unlike some firms such as Google.

“When Google went to its IPO there were some very clear data points which suggested that it added value,” he said. “With Facebook, we don’t know.”

But Hoberg said the market does not have the exuberance of the 1990s.

“People are not going to let a frothy stock keep going, they’re pushing back,” he said.

He maintained that any new IPO will have to take into account the Facebook fiasco.

“This reaction is so negative, and the underwriters are getting so much bad press that they really cannot afford to have that happen again, so they’re going to take steps to underprice the next one even more just to make it so that the investment machine returns to health,” he said.


Follow Us


Follow us on Facebook Follow on Twitter Follow on Twitter


Recent Stories:

Complete stories on our Digital Edition newsstand for tablets, netbooks and mobile phones; 14-issue free trial. About to step out? Get breaking alerts on your mobile.phone. Text ON INQ BREAKING to 4467, for Globe, Smart and Sun subscribers in the Philippines.

Tags: Facebook , Social networking , Stock Market

  • IanAlera

    BOYCOTT EVERYTHING made in China — people, products, language.

    People let us fight back, and take control of our economy from these chinese.

    BUY LOCAL, support local industries. The Philippine government should
    make it a priority to source primarily from Philippine suppliers, and
    from friendly countries.  BAN CHINA PURCHASES.

    • http://alasfilipinas.blogspot.com/ Pepe Alas

      I’m with you, man. The Chinese government is filled with evil, greedy men. But what has your comment got anything to do with this news thread about Facebook?

      • IanAlera

        Replying to Pepe Alas,

        My post is not so much about china, as it is about the Philippine economy. 

        Just spreading the idea.. Invest in the Philippines/  Filipinos.



Copyright © 2014, .
To subscribe to the Philippine Daily Inquirer newspaper in the Philippines, call +63 2 896-6000 for Metro Manila and Metro Cebu or email your subscription request here.
Factual errors? Contact the Philippine Daily Inquirer's day desk. Believe this article violates journalistic ethics? Contact the Inquirer's Reader's Advocate. Or write The Readers' Advocate:
c/o Philippine Daily Inquirer Chino Roces Avenue corner Yague and Mascardo Streets, Makati City, Metro Manila, Philippines Or fax nos. +63 2 8974793 to 94
Advertisement
Advertisement

News

  • How other faiths observe Holy Week
  • No noise, partying in Boracay on Good Friday
  • More legal woes for Cedric Lee
  • NATO ups military presence amid Russian threat
  • DOH issues official statement on confirmed case of MERS-CoV
  • Sports

  • Tenacious Iran frustrates Qatar to retain Asian Club volleyball crown
  • Floyd Mayweather is ESPN’s top-paid athlete
  • Pistorius trial: Judge sets 2-week adjournment
  • China, Taiwan rout foes for 3rd, 5th places in Asian Club volleyball
  • Ginebra’s new import Freeman arrives, makes PBA return vs ROS
  • Lifestyle

  • Are your favorite malls open this Holy Week break?
  • Celebrate Easter Sunday at Buddha-Bar Manila
  • Moriones feast: A slow, steady transformation
  • Weaving ‘palaspas’ a tradition kept alive in Tayabas City
  • Finalists announced for best translated books
  • Entertainment

  • Filipino rock icons to hold silent concert
  • Mommy Dionisia Pacquiao’s greatest hits
  • Deniece Cornejo posts bail—report
  • Miley Cyrus hospitalized, cancels US concert
  • Otaku Summer Jam 2014: Summer’s hottest J-rock/Cosplay event
  • Business

  • Russian economy hit by Ukraine turmoil
  • PSEi firms up ahead of Lenten break
  • I-Remit teams up with Lakhoo for remittances from Oman
  • Megawide nets P1.4 B in 2013
  • Longer TRO sought on rate hike
  • Technology

  • Smart phone apps and sites perfect for the Holy Week
  • Tech company: Change passwords or suffer ‘Heartbleed’
  • Filling the digital talent gap
  • SSS to shut down website for Holy Week
  • Another reason to quit social media this Holy Week: your safety
  • Opinion

  • We may never know
  • Couple of things
  • Mommy D’s magic
  • Stop bizarre and bloody Good Friday rituals
  • Holy Week taboos
  • Global Nation

  • Netizens welcome Japan’s visa-free travel plan
  • Visa-free travel by Filipinos to Japan still a proposal
  • Visa-free travel to Japan could boost tourism
  • 2 PCG men ordered arrested over Balintang Channel shooting
  • US Embassy closed on Holy Thursday, Good Friday
  • Marketplace