Facebook Could Spawn Thousands of Milionaires 434
Hugh Pickens writes "Retuers reports that the world's No. 1 online social network is preparing for a blockbuster initial public offering that could create thousands of millionaires as Facebook employees past and present begin hatching plans on how to spend their anticipated new wealth. 'There's been discussions of sort of bucket list ideas that people are putting together of things they always wanted to do and now we'll be able to do it,' says one former employee who expects his shares to be worth $50 million and is planning to book a trip to space with Virgin Galactic that would cost $200,000 or more. 'It's been a childhood dream.' Another group of Facebook workers has begun laying the groundwork for its own jungle expedition to excavate a relatively untouched site of Mayan ruins in Mexico that sounds like Raiders of the Lost Ark. But for many of Facebook's staffers, the IPO will provide the means to pay off school loans and buy a house or new car and many homeowners and real-estate agents are eagerly anticipating a surge of new buyers that could push prime real estate to new heights. 'If a Facebook guy buys a house and wants to remodel it, maybe the contractor will buy another car,' says Buff Giurlani. 'Maybe the realtor will put a car in. There's a trickle-down effect.'"
Yeah right. (Score:5, Insightful)
This is exactly what everyone needs, a bunch of people believing they are going to be rich soon.
Trickle down? (Score:5, Insightful)
As opposed to the spending that would have been done had the money not been looted from the workers to begin with. If we're serious about getting out of the recession, perhaps we ought to do something radical like beef up worker protections and protections for small businesses.
As for FB, my bet is still that it goes the way of MySpace before too long.
The smart ones... (Score:5, Insightful)
No, that is not how it works (Score:5, Insightful)
Instead, IF this were to even happen, and I thought trickle down economics died when Reagan's body finally followed his brain, then what would REALLY happen is that the 1% become 0.9%.
Average income, ever heard of it? Well, average income is the total of all income divivded by the number of people with an income. The more people have a high income, the more people need to make a low income to compensate.
If you got 10 people and they average an income of 1000 then the total is 10.000. But if one of them makes 10.000, then the average is still a 1000 as long as the others make zero.
Now, do a fun lookup. Research the average wage in the US and look up how much say a Bill Gates make. Then realize how many people are begging on the street so Bill Gate can be so rich.
That is how the whole 1% vs 99% works. And more people becoming millionaires doesn't do anything but make far more people poor.
Re:The smart ones... (Score:5, Insightful)
Typically employees can't sell their shares until at least six months post-IPO. Which, yes, can put you in a very bad position if you start spending "your" money right after the IPO in anticipation of the future wealth, and then the stock tanks and you're now in debt.
Trickle down doesnt mean you deify the wealthy. (Score:5, Insightful)
That doesnt mean you treat the people on top like deities while treating regular US citizens with contempt.
Re:Yeah right. (Score:5, Insightful)
Re:Bull (Score:5, Insightful)
Re:Yeah right. (Score:5, Insightful)
Nonsense. This article only serves as a warning for everyone to prepare 'new' prices for when it actually does IPO. Read the article...these people speak of trickle-down economics, but they're really salivating at the prospect of luring an idiot into their store with waaaay too much money and apparently very little common sense. Long-lost relatives and forgotten friends will come running with their hats in their hands, doing what they can to get some of that money.
A fool and his money, soon parted. And you've got the cream of the crop of thieves reporting in here...let's see...real-estate agents...car salesmen....home contractors....all we're missing are some dead-end charities and a handful of political operatives, and that money will be gone.
Fun on two levels: 1.) there's only one IPO, not a dozen of them in quick succession (don't expect the good times to last) 2.) I still question what Facebook's worth will be in 3 years.
Re:The smart ones... (Score:5, Insightful)
Social networking itself is not the bubble. Facebook might die out, but it needs a real competitor first. Saying social netsorking will die out is like saying word processing applications will die out. Sure, they may turn into digital scribes with us just speaking what we want to write or something, but the basic function they provide is something that lots of people find useful, and will continue to find useful. Even Slashdot itself is a kind of social network, all web forums are. People like to share news and ideas.
Re:No, that is not how it works (Score:5, Insightful)
Average income does not rise for a very, very long time -- there is slow and somewhat uneven inflation, but same job's salary buys same things, so it's just inflation, and therefore US economy is a zero-sum game.
It also can be seen by the importance of advertising in modern US economy -- when products are already known to the consumers, spending on advertising is the closest thing a company can do to biting a chunk out of a competitor.
Re:No, that is not how it works (Score:3, Insightful)
Nobody is begging on the street so Bill Gates can be so rich. It's not zero-sum.
A month? (Score:5, Insightful)
Really ? I think you have maybe a couple of hours.
Note, there will almost certainly be a hold clause on the stock for normal employees. The ordinary employees will have to hold the shares for a specfic minimum period. This allows the management to dump their shares at the peak price, before the bulk of the supply of shares kicks in.
Groupon dropped from 26 to 16 inside a week. They're still making a loss but there's some muppet out there buying them.
Re:Trickle down (Score:4, Insightful)
Before the Fed (which was instigated by the business community who wanted the regulation), the economy was extremely volatile and risky (which business hated). We didn't have recessions and expansions - we had booms and busts where people were filthy rich one month and then begging for food the next.
Once government starts 'regulating business', it means it's there to steal power and sell it and the business that is closest to the trough (the Fed) becomes the government. Since it becomes a part of government that is not beholden to the voters, it can steal without any impunity.
That's overstating it a bit. Before the Fed you still had very powerful people controlling the economy - see any Bio of JP Morgan.The Fed was also created to remove power from people like that.
I like Ron Paul. He brings up some very interesting points and I agree the Fed system needs to be tweeked. But when I read what Ron Paul and the things you have written, there's an obvious lack of knowledge of pre-Fed economic history.
If you haven't read this yet, read Lords of Finance [amazon.com]. It's about the Post WWI World Economic collapse and has a wonderful explanation of why we can't be on the gold standard, btw.
I would honestly like to see your take on it. - you're a sharp person who just needs to take a break from the Ron Paul Kool-Aid.
Re:No, that is not how it works (Score:5, Insightful)
It's hypocritical that you know what the problem is but you're bitching about the people that are actually raising awareness of the problem.
Re:Trickle down? (Score:4, Insightful)
Effect on the Economy (Score:4, Insightful)
Could someone explain to me how this has a net positive effect on the economy when the reason that the facebook employee made money was because he sold some of his shares to an investor, meaning the investor moved money *into* the stock (which suggests that the investor moved money out of the economy* and into the stock)? Now I suppose the investor has a finite amount of investment money, so he probably shifted money out of other stocks (rather than the economy*) which suggests that other stocks would take a small hit in stock price (since there's a relatively less demand for them), which affects other investors. It just sounds like the whole process would result in a net neutral effect on the economy - i.e. a Facebook employee might buy a new car which helps the economy, but another investor somewhere bought that facebook stock which takes the same amount of money out of the economy (at a different geographical location).
* By "the economy" I mean spending it on consumption.
Re:Yeah right. (Score:5, Insightful)
It's a pump and dump. Although out in the open, in the press, with reputable banks doing it, so people are misled.
Re:What money? (Score:5, Insightful)
Wall Street investors don't make money, they take it. You think those dollars are just appearing out of nowhere? If you "make" a million bucks off an IPO, it's because you sold your shares to a sucker who paid more than they're worth. Or maybe your a fund manager, and you just take a few percent off every American's retirement fund every year, as payment for your "skill" at investment (even though you're all but certain to underperform the index in the long run).
Buying and holding a stock for dividends or growth are legit. Venture capital and angel investments are legit. But this IPO pump-n-dump crap is a scam. It's theft. Ditto mutual fund fees and high frequency trading. The robber barons at Wall Street are just siphoning off tiny bits of everyone else's savings every day. It's nice and slow, so you won't notice, but in aggregate it's enough money for them to live like gods.
Re:What money? (Score:5, Insightful)
and so ipo has become the endgame for investors to get out rather than to get _investment_ money into the company.
realistically they don't seem to need an ipo, in the sense that there's nothing they could buy with that 100 billion that would further their business and they don't need the money to keep in operation.
Re:The smart ones... (Score:2, Insightful)
The IPO will kill Facebook. They will be publicly owned and have shareholders to answer to, shareholders who want the company to make more money. Facebook will have to charge more for their worthless advertising, charge game and app developers, and eventually even charge users, even $1 a month from each user would be 500 million a month revenue. People will eventually tired of it and move to whatever the next Facebook is.
Re:Trickle down (Score:5, Insightful)
(1) People want to earn money.
(2) People are based their predictions of the future on past experience. This means if a stock went up in the past, they expect it to do well in the future. While not everyone falls prey to this all the time, it happens often enough in a market to cause the population, in general, to make very bad decisions, and drive the economy into bubbles.
not the US Fed obviously, but the same idea exactly - people threw everything into tulip growing and flooded the market
No that's not "the same idea exactly" because it happens without government intervention, it happened in the free market, and THAT'S EXACTLY MY POINT.
Re:The smart ones... (Score:4, Insightful)
Social networking itself is not the bubble
I beg to differ.
Facebook might die out, but it needs a real competitor first
Not necessarily. Products have previously risen and fallen in terms of hype and excitement without being replaced.
Saying social netsorking will die out is like saying word processing applications will die out
Word processors are important business tools. Facebook is not.
I think a better comparison for facebook is the segway human transporter. Remember how much hype went to "IT" before we knew what "IT" was? Then we found it cost $5,000 and almost nobody was interested any more. It didn't need to be replaced by anything, because we realized it wasn't that important to begin with and it wasn't much better than options we already had.
Similarly, facebook isn't really that important, and not any better than options we already had.
Even Slashdot itself is a kind of social network
And slashdot is, undoubtedly, dying. It just didn't reach the large number of readers/victims that facebook had, so nobody really paid that much attention to it's demise.
People like to share news and ideas.
Which, strangely enough, we were able to do before facebook, and we can still do without facebook.
Re:Bull (Score:5, Insightful)
yes, I'm a victim of the requirement to have somewhere to live when I retire. I had this requirement as a juvenile, and I still have it now as an adult.
Re:Yeah right. (Score:5, Insightful)
1. Read the terms of the document giving you the shares to see when they vest;
2. Figure out where you'll get the money to buy the shares so you can sell them (sometimes you can do a cashless exchange but you have to know
a. who will arrange this for you, and
b. how much money it's going to cost you to have someone make the exchange
3. Realize that there are insider lock out periods after the IPO and before and after every quarterly report (any employee with options is an insider)
4. Profit? ?
Re:Yeah right. (Score:5, Insightful)
I still question what Facebook's worth will be in 3 years.
For anyone thinking Facebook will necessarily still be significant in three years, I have one word to say:
MySpace
Sure, maybe Facebook will remain a massive success and control most of the social-media market. Then again, maybe it won't be anything more than an old, burnt-out, irrelevant website inhabited mainly by bands that haven't been successful in years (if ever) and teenagers.
Re:No bubble here. (Score:5, Insightful)
You make the mistake of thinking users are their customers. They don't need to grow their userbase to grow their customerbase. Customerbase is what is relevant here.
Re:I didn't get any money from the Fed (Score:5, Insightful)
Bullshit. The additional product was what the company sold, which increased its profits, which increased its valuation.
What additional product? Companies whose stock he had bought, or used as a collateral didn't get a single cent from it. The only way anything ended up doing any additional production is if someone else who sold him stocks through some chain of trades ended up buying actually new investment somewhere else. But those money, as I have explained before, are ones injected into the system with a loan. A direct loan to the company that got "real" investment out of this would be far more efficient, so the rest of money just dissipated between investors, brokerages and banks.
Re:Bull (Score:5, Insightful)
No, you're a victim of wanting to own a house in a horendously expensive area.
There are plenty of depressed areas. Detroit is the one people hear about the most, but there are LOTS of others. Because there are few or no jobs available in the area (after a plant closing, or whatnot) homes are very nearly given away. I think everyone can muster $1,000 for a place to live, and a little bit more for maintenance. No slavery needed. If you're already set for retirement, the problem of no jobs is a non-issue, and the savings is huge.
That's not the only choice, either. Here in CA, moving to Arizona or Colorado after retirement is pretty common.
And if you insist on living in an expensive area, you still have options. Moving out a bit further from the city centers always helps. Living high-density, ala condos or long-term apartment rental might end up cheaper. There's even the option of mobile homes.
So, you're not a slave of needing a place to live. You're a slave of your desire to live in a certain style and location.
Re:No bubble here. (Score:5, Insightful)
Precisely why investors should steer clear...
Re:Effect on the Economy (Score:4, Insightful)
This is why it is not an immediate zero sum game. If the company continues to grow revenues, and investors continue to anticipate growth, the value/wealth will continue to increase. When investors sour, the company stumbles, the revenues dry up, etc, which could be 1 year or 100 years later, the previously generated wealth evaporates.
One would argue - if the wealth eventually "evaporates", was it ever really there, or were people trading stocks just pretending it to be?
Frankly, it's why I don't really understand the stock market as it is. The original concept - buying stocks meaning investing into the company, and getting dividends normally proportional to how well it does later - makes perfect sense. You give someone money to fund their profitable activity, they earn more money, and they share some of it back with you at a pre-arranged rate. Everyone profits. I can see how this is good for economy, as well.
But buying stocks that don't pay anything, on the premise that you can find another sucker to sell them to for a bigger price later? No matter how I slice it, it looks like a pyramid scheme to me.
Re:No bubble here. (Score:5, Insightful)
The users of FB are the _product_ and not customers. The customers are the advertisers.
Now I think it is unlikely that the number of users is going to increase significantly. Certainly not by say 100%.
So is the amount of advertising revenue going to increase by 100% - I doubt it.
I suggest you apply the term toxic to this beast - you will lose, its well over valued.
Re:Trickle down (Score:4, Insightful)
I have to disagree with this idea. If other people lose money it affects everyone. We are very interconnected. People who argue for free markets also agree with this idea of people being interconnected. If a bunch of people in an economy waste a bunch of money, then they have less wealth to spend and invest. This makes it difficult for other people trying to sell stuff. If I'm running a business in Detroit or Flint Michigan and suddenly the auto industry leaves, then people have less money and that makes my living as a business-owner much harder. My living as a business-owner depends on what money other people have.
To put this argument in a more modern context: if a bunch of people get over their heads in their mortgage and then default, it causes problems for the economy. That situation can happen whether or not the government provides "easy money". It's easy to imagine real-estate bubbles happening in any economy where home prices are rising quickly, causing people to buy-up expensive homes because they think they can resell them in 5 years for 50% more money - therefore, you should by the most expensive home you can since a larger loan equals a larger return when you sell it again. In that situation, a feeding-frenzy happens and it does not depend on whether the US government is loaning money at 0% interest or 4% interest - in both cases, the value of the real estate is outpacing any 4% interest rate that the US government is offering.
So, I'd take your original statement, "Yes, bubbles form and they burst, but
Re:Trickle down? (Score:5, Insightful)
Love him or hate him, Zuckerberg is the closest thing to a Steve Jobs or Bill Gates or Larry Ellison right now
What a load of BULLSHIT. DoucheBagBerg is the cause of the biggest invasion of privacy and shallowness of society to-date. In no way has he, or facebook, contributed any technology or any forward progress in the computer industry whatsoever.
Re:No bubble here. (Score:5, Insightful)