What’s The Point?November 23, 2011
As we wrote two weeks ago and for which we took a bit of heat:
“Just when the financial markets seemed to have recovered from the Great Greek Debacle, the S&P 500 dropped 3.67 percent today stoked by uncertainty over Italy and the stability of the Euro as a whole.”
The S&P 500 has dropped 8.93 percent since November 9 and is now down 1.60 percent year-over-year. And no, it’s not the daily moves we’re focused on, nor simply the dips, but rather potential turning points, be they bearish or bullish, and the trends.
And with respect to the IPO market and its ups and downs, let’s consider this a safe place to discuss and debate its impact on the San Francisco real estate market as we try to keep our other discussions on topic and track.
Comments from Plugged-In Readers
Well, the trend is down, unless something completely unexpected happens.
Such as the ECB deciding to take the bull by the horns and issue a Euro-wide bond. Since they’re looking like they’re not amenable to doing something like that…well, I won’t say the S&:P 500 is going to hit 800 next year, but it’s going to be a long slide in the general downward direction until the Euro zone gets its act together. Probably no year-end rally in 2011.
As far as the wealth effect on the local real estate market; people slowly but surely losing their retirement money in the stock market will probably ease up on housing consumption if the overall housing price level is dropping.
SPX below 1180 = sell and bearish. It’s that simple.
Consensus seems to be that this domestic and global de-leveraging will take more than a few years to unwind.
I’m going on record that I believe it will be a double dip. Governments are not moving in the right direction. Companies have the hatches battened firmly and are trying to stay afloat.
Everywhere you look, politicians aspire to higher office, and are averse to any effective policies because of the political fallout of cutting benefits or raising taxes, or both.
Hence, extend and pretend, and spinning to mislead.
My next read on the subject: The Age of Austerity: How Scarcity Will Remake American Politics – Thomas Edsall (http://www.amazon.com/Age-Austerity-Scarcity-American-Politics/dp/0385535198)
Observations addressing the broad market and the primo market:
1) Across the board, lots of “exit” sales – Buyers who purchased in 2004-2007 selling to avoid any further loss.
Agreeing with Brahma, purchasing is also impacted. I see this trend continuing, and worsening as a result of wealth lost in equity markets.
2) Funny money – but not so much.
The IPO market makes for good conversation for agents aspiring to sell a house to a CEO, but there are not enough IPO windfalls to impact the broader SF market.
3) San Francisco’s limited supply creates a market unto itself, with greater scarcity than Manhattan, at both the broad market and worse at the high end.
Focusing on Primo Pacific Heights or Presidio Heights, inventory is in fact more limited than the east side of NYC.
Happy Thanksgiving, All.
Though not local IMHO the groupon IPO was a very big deal for the local tech economy. Because they got the freaking money. It was a successful IPO–it means one can once again IPO warty non-profitable web companies. This will continue the flood of VC money into the valley and SF. I had assumed it would be 30 years before a new generation of suckers, er, retail investors would touch this kind of premie stock. Instead it was just 11 years.
GRPN’s post-IPO track has been worth watching. A huge short interest accumulated, there appears to have been a short squeeze last week including a very entertaining episode of tape-painting from 3:30-4PM Friday, and then this week the stock has cratered each day, including a nasty gap down Wednesday.
The shorts were sweated last weekend. Now the longs are stressing during Thanksgiving. Pass the popcorn.
Groupon may have got the freaking money, they only sold a tiny amount of the company and if they want to sell more, they are going to get less of the freaking money than they initially agreed to sell for.
And now that so many of the recent IPOs have done so poorly, the people with the freaking money are willing to part with a whole lot less of it. Zynga was supposed to be public by now, but didn’t want to sell the company with the currently available valuations. It’s only going to get worse.
That is, until there is a “Loudcloud” event, where the IPO goes straight downhill from minute one and it’s all over. The tech IPOs existed to soak up all the QE cash from the fed. With no place to invest, unprofitable dot coms were as good a place as any.
Now, the European banks are soaking up all that cash and then some. With no need to park excess cash, it’s flowing out of unprofitable dot coms.
If the fed floods more cash, silicon valley will be happy to take it. If not, the floodgates will close.
But we need way more cash to sustain these prices. In 1999, there were multiple IPOs per week and every employee got lots of shares. Now? Nowhere near that level, but prices are still higher than 1999 prices. Secondmarket helps, but prices have to be sustained by incomes and loans and neither is higher than 1999.
So where you puttin your money? coffee cans.
For those that think things might get better in the near future you might want to watch this interview with Hedge fund manager Ray Dialo from Charlie Rose…
“This lucid explanation of reality from the biggest hedge fund manager in the world explains precisely why the status-quo coopted media continues to retrench itself in lies and propaganda: in attempting to avoid panic and the realization that the entire system is now hollow, the lies will literally continue until morale improves.”
No one really thinks its “going to get better”. Mostly it’s a debate about how bad it is, and how much worse it may get.
Worst interview ever
Over in the previous thread linked to above, ‘R’ wrote:
On the 11th, The S & P 500 was at 1,263.85 (the ‘recovery’ from the preceding Wednesday’s drop) and this week, on the 25th, it finished at 1,158.67, or 5.7% lower than the 9th and 8.3% lower than the 11th.
I only bring that up not to say that ‘R’ was wrong, but because I half expect to see a rally sometime during the first half of this week; the nominal “Black Friday” sales were up 6.6% from where they were the year before, according to ShopperTrak. But as I said in the first comment up top, the overall trend is down. We might have another blip upward, like the Wednesday ‘R’ mentioned, but I personally don’t see it lasting all that long given all the other things in the news. I’d be happy to be proven wrong.
khkjhjkhjk, I think the interview with Ray Dalio was the victim of some pretty ham-fisted editing. Hopefully it didn’t originally air this way.
“I think the interview with Ray Dalio was the victim of some pretty ham-fisted editing. Hopefully it didn’t originally air this way.”…..unfortunately it did.
Worst interview ever…Dalio never had a chance. Rose couldn’t get past his bias and allow Dalio to expound on the reality and gravity of the world situation as he sees it. Rose kept wandering off topic.
My take away if you listened close…Dalio pays for intelligence and knows all too well the real story and how broken the markets are. The Deleveraging is real…the pain is real….and the failed European model is real.
And Dalio nailed it….it’s politics standing in the way of the fix, which means a prolonged downward spiral into the abyss of civil unrest and broken markets. The longer the idiots in Washington stand in the way..the longer the pain….
Here’s another guy with a handle on reality who doesn’t get much attention…
Itmightbetoolate: what, pray tell, is the oh-so-obvious “fix” that politics in Washington is standing in the way of?
Politics in Washington isn’t standing in the way of “a fix”, because there isn’t one “fix” that is acceptable or even identifiable. The fact that all throughout the interview Dalio insists that he can sit down at a table with people that disagree and explain to them how “the economic machine works” convinced me that he may be a very capable hedge fund manager, but not at all that knowledgeable about how the rest of the world works. I find this kind of intellectual hubris pretty common among people working in finance.
I think the actual empirical evidence in favor of fiscal austerity, for example, at best contradicts those who advocate it. People come down in favor or against it because of their prior deeply-held ideological beliefs. John Boehner wants it because he’s in thrall to Republican lobbyist Grover Norquist, and he wants a smaller government and less expansive social safety net, not because austerity will lead to economic growth. Empirical evidence that contradicts his view of how the economy works is irrelevant. Sitting down with Ray Dalio for a one on one talk about how the “economic machine” works isn’t going to convince him if Dalio didn’t already agree with that world view.
I agree that a lot of painful debt paydown is in most of our collective future. I try to not use the term “deleveraging” like Dialo does because to me “leverage” implies that you borrowed to make an investment in the expectation of future gains. We (and here I mean the U.S. government, funded by our taxes) borrowed to finance a war of choice and tax cuts for rich people.
But hey, I guess those rich people will take all that money they have and buy large expensive houses in S.F. Let’s all watch and see how that plays out over the course of the next few years. Case-Shiller Index 300, here we come!
Mwah hah hah! You stupid bears didn’t see what I saw: a big uptick in the market. Look at the Nasdaq!! Up 3+ percent in one day!!
The recent IPOs are going to the moon, and with it, housing prices. Let’s look at how our favorite IPOs did on this fantastic day as an indicator of how far Zigna is going to shoot up, and with it, SF real estate prices!!
Wha?? LNKD DOWN almost 5% today?!?! My $122.7 shares are now at 60??
Huh?? GRPN DOWN 9%?!?! My $31.14 shares are at 15.94?
WTF?? Pandora DOWN also!? My $26.00 shares are at 10.52?
Well, so much for my downpayment money! And someone with 100,000 LNKD options at 59.99 went from having $6,218,000 to $1000. 100,000 Pandora options at $10.50 went from $1,550,000 to $2000. That should really add some zip to the declining housing prices!!
And so much for Zygna’s IPO returning much of anything to all but the earliest insiders.
Lucky thing the market didn’t actually go down today! It could have been even worse.
What an unexpected post from you tipster. For all the negativity you have about future values I think it is odd you bought all that stock in LNKD and GRPN.
Tipster has the uncanny ability to buy every IPO right at its highest point.
…annnnd now we’re back up +3.67 percent today…
[Editor’s Note Don’t worry, we’ll have a post once the markets close.]
Right on DanRH!! My Pandora shares are up 4 cents!!!
Woohoo only 400 more instances of quantitative easing by the fed and yippee, I’ll have all my money back!
Tipster I can’t believe you haven’t mentioned your American Airlines stock yet.
And I can’t believe you haven’t mentioned the near certainty of 400 more instances of quantitative esing by the fed!
I’ve never said “quantitative easing”, but you mention fake stocks you own all the time.
oh no! Tipster is using exclamation points again!!
Tipster, u must be excited about upcoming Zynga as well, no? (!!!)
on at November 23, 2011 4:07 PM, I wrote:
I think I didn’t get the “long slide in the general downward direction” part right, at least so far what with the whipsawing up and down, but the absence of a year end rally prediction came to pass.
The S&P 500 closed on Fri, Dec 31, 2010 (final day of trading for the year) at 1,257.64. The same index closed today at 1,257.60; essentially flat for the year in nominal terms.
The MSCI US REIT Index closed last year at 760.96 and this year at 796.76 for a 4.7 percent increase.
A Happy and Prosperous New Year to all of you readers of socketsite!
What’s this? My Pandora shares are at an all time low. Groupon? All time low.
Lnkd is only 20% under my purchase price, and Zynga is off 40% from 6 weeks ago.
Someone with 100,000 Zynga options at $10 went from having $591,000 six weeks ago to having $9400. Maybe they can buy a used Buick with their stock option riches!
Fun times for the stock option crowd.
Who would have ever guessed that a company that burns through a ton of cash and loses more money the bigger it gets would not be a great investment? Never, in the history of the world, has that situation ever come up before, so it’s pretty easy to see why nobody saw it coming with these tech companies.
Tipster, you needed
to change perspective three times
to say that. So weak.
My $26 pandora IPO shares are at $7.97. Someone with 100,000 options at $8 went from having $1.8M to having $3000. This sucks!
imagine that?? $1.3 Billion+ Valuation and it has Sales!
Instagram = NO Sales and $1 Billion Valuation
The dots don’t connect and in fullness of time the bubble will pop and RE valuations “up and down” from SF to SJ will fall
If Instagram makes FB more enjoyable it could help FB being the one stop to the Web that they ultimately want to be.
Google offers a lot of free services and yet they make tons of profit. You search something, you can locate it on a map, have a video of that stuff, see user reviews of that stuff, have access to professional advice, etc… They offer added value and this is why people set it up as their default search engine. Not everything can be monetized and yet many of these free tools have value.
Also, some people buy competing companies to shut them down. It worked for Microsoft. I don’t think it is the case w/Instagram.
yeah, and Sun Microsystems was an excellent value at 30x Sales in 2000
Instagram (AND Facebook btw)are bubbles and they will pop in the fullness of time and take down many others and thus take down RE up and down from Marin to San Jose
OK, I got caught into a bear rant trap. There was no actual discussion going on. My bad.
And Zygna, the latest in a long line of saviors of SF real estate, falls into single digits, 7 cents above its disastrous first day close.
Eddy thought it would be a monster IPO. It was: the kind of monster that eats downpayments.
You just have to laugh at the sellers in the article from 6 months ago, holding their homes for all the zynga millionaires. How out of touch they were: the founder sold shares for $14.00 before the IPO. Zynga employees were more flush 6 months ago than they are now!
The S-1 said the overwhelming majority of options were granted at $10 or more, so the employees that soldthe made a little money as it approached $16 inearly February, but that appears to be over now. If any bought houses, they’ll be closing soon, and that money will be off the table.
The S-1 said the overwhelming majority of options were granted at $10 or more, so the employees that soldthe made a little money as it approached $16 inearly February, but that appears to be over now. If any bought houses, they’ll be closing soon, and that money will be off the table.
Tipster, you can’t sell shares in your company until after the lock-up period, which is usually six months. So we won’t start seeing any serious Zynga money until after June 15.
Some people sold shares on the secondary market pre-IPO, so that will dilute the effect somewhat, granted. But I still predict that we will see an uptick in D5 and D7 home prices during Q3 this year compared to the rest of The City.
I meant D5 and D9 sorry. Zynga hipsters wouldn’t be caught dead in D7.
And the market is up! Except for zynga. I think they are more likely to continue to keep sleeping on some friend’s couch in the inner sunset.
Zynga comes out at 8/share and currently trades at 9.67. I forget if I called the IPO a “monster” or not; maybe I did; but it was based on the premise that Zynga is a real business with real revenue, etc… My best guess is they continue to grow and stabilize over time. Groupon? Who knows. Wouldn’t touch that with a ten foot pole.
zynga’s IPO was at $10.
Got to hand it to Pincus and the big insiders. They sold shares to Morgan Stanley at $14 right before the ugly IPO. Then sold again at $12 right before this latest dive. Awesome for them! Not so good for the rank and file who are now looking to get little to nothing.
There were millions of stock grants issued, all of which are still worth the full value of the stock.
NVJ, as I recall, they appear to have mostly done options for the employees, RSUs for superstar lateral hires who would have walked away from options at other companies worth an equivalent amount.
The RSUs just replaced the value of the options the guy was walking away from, so the net to the new employee was zero, unless there was an increase in the stock price since the employee got the RSUs. And if there was a decrease in the stock price, the employee actually got less than he would have had by staying where he was.
There were different valuations for the RSUs. Some got them at a valuation above the current stock price, which means they are behind, some got them at a valuation below the current price, which means they are ahead, of where they would be if they had stayed at their prior positions.
It looks to me like overall it was about a wash between the money they got and the money they would have gotten.
Net increase in wealth due to RSUs? Zero. Now add the friction of a relocation, change in employment, and the malaise of being on a sinking ship, and I suspect it’s a net loss.
Maybe Apple stock will make up for that. I heard an analyst say it was going to $1000. Right before it dropped by $60 per share.
Have we given up on having any factual basis for our ramblings on this site?
actually the tone of the “ramblings” here are quite accurate for the most part – they may not be what “R” likes to hear, but they are the truth
ZNGA is an overrated pig and will be discounted as such in the fullness of time
why would anyone buy any stock from this group at Issuer ZNGA? pathetic
R is correct here. RSUs don’t have different “valuations” they are equivalent to a share of stock once vested.
I am a little surprised that tipster claims to have insider knowledge of compensation at Zynga. Usually this is pretty tightly held knowledge. Mind sharing with the rest of us or at least let us know how you got this info so we can decide for ourselves the likelihood of veracity?
noevalleyjim, of course there was a valuation when the RSU was granted. The employee may or may not have had to pay that price at the time of the grant. If not, it’s taxed as income at the valuation price.
You don’t understand the difference between a stock option and a stock grant. An RSU is a stock grant, they are given to employees outright. Of course, they are taxed as income. You don’t have to pay to get a grant, that is why it is called a “grant.”
A stock option gives you the right to purchase stock at a certain price. You can be underwater in an option, where the market price is less than the option strike price.
noevalleyjim, sometimes you pay to get a “grant” and sometimes you don’t. I deal with this stuff all the time. You apparently think it is way simpler than it, in fact, is. At the grant (and vesting) date, the stock has a given “valuation” (which the employee may be required to pay — or not — to get the stock) and that is critical for tax purposes. That is why your criticism of tipster’s explanation above is wrong. Tipster said nothing at all that is inaccurate. A grant at $14 for a stock that is now worth 9.3 is not likely going to mint any homebuyers.
It’s hardly confidential information that most restricted stock awards are provided to get people to jump ship, and otherwise, people get options.
One example from Yelp’s S-1 (highlighting is mine):
As a privately-held company, we have historically used options as the principal component of our executive compensation program. Consistent with our compensation objectives, we believe this approach has allowed us to attract and retain key talent in our industry and aligned our executive team’s focus and contributions with the long-term interests of the company and our stockholders. We grant stock options with an exercise price not less than the fair market value of our common stock on the date of grant, so these options will have value to our executive officers only if the fair market value of our common stock increases after the date of grant. Typically, stock options granted to our executive officers vest over four or five years, allowing them to serve as an effective retention tool. We have also started to use, on a limited basis, restricted stock awards, in order to attract key talent. These restricted stock awards have a multi-year (generally over four years) time-based vesting condition, allowing them to serve as an effective retention tool.
RSUs are basically the right to get stock over a specified schedule. The company guarantees that at the end of the first year, you’ll get X shares of their stock, and so many shares each month thereafter for 3 to 5 more years. They differ from options in that options essentially give you the right to the difference in the share price over the strike price of the options, but RSUs have an effective strike price of zero – you get the entire price of the shares. There are also differences in taxation.
NVJ gets strike price and valuation confused: BOTH have a valuation at any given time, but only options have a strike price.
The way it is usually done is this. You try to get someone to jump from a public company competitor, like Zynga (I’ve switched companies in my example – obviously Yelp would go the other way). They tell you they would love to come, but they have 20,000 unvested options in their current publicly traded company at a price $14 per share under the current price of that company. If they leave, they are walking away from $280,000 even if the share price goes nowhere. If they take options and the new company’s share price goes nowhere, they get $0.
“No problem,” you say. “Come to Zynga, and we’ll give you 20,000 restricted stock units that will vest at the same schedule as your stock options. Our stock is trading on sharespost for $14.00, so it’s exactly the same. If our shares go nowhere, you’ll get the same $280,000”
So first, NVJ, you frankly sound like you don’t really know much about this subject – it sounds like you have a minimal grasp of the concepts and not much else. There IS a valuation of the RSUs, it just doesn’t involve subtracting a strike price. Not exactly difficult math. And I gave you the textbook example of how people generally use the valuations. Second, the Yelp language shows the S1s makes it pretty clear what these things are used for. You really don’t need confidential inside super secret info to figure this stuff out.
So in our example above, the person jumps to Zynga, and Zynga stock dives to $9.00 a share. The $280K at the other company has now been exchanged for $180K. NVJ, according to your logic, that is good for bay area real estate. The guy has $180K! But of course he traded $280K to get there.
So you’ve been arguing that it doesn’t matter, because this is just found money. But that’s wrong: the only reason they gave him those RSUs is because he had even more valuable options that he gave up.
Now all RSUs were not handed out at $14, so my example is admittedly extreme. The average appears to be around $10, so the few that they gave RSUs to have only lost about 8% on average, and by the time they vest, who knows where it will go.
But the facts remain the facts: these things are handed out in large numbers only to a few key people, and if the stock goes down more than the stock in the company they left behind, they lose. Someone who went from Apple to Zynga lost big time. Someone who went from EA to Zynga in 2011 has lost about 1/3 of what they had if they had stayed.
You just contradicted yourself tipster:
From your post of April 20, 2012 12:41 PM:
There were different valuations for the RSUs. Some got them at a valuation above the current stock price, which means they are behind, some got them at a valuation below the current price, which means they are ahead, of where they would be if they had stayed at their prior positions.
Then on April 22, 2012 3:34 PM you said:
…RSUs have an effective strike price of zero – you get the entire price of the shares.
Which one is it?
You aren’t understanding this at all NVJ, there isn’t any contradiction.
If I get an RSU and the share price on sharespost is $14 on that day, that’s what the valuation is on the day I decide to stay or leave my current company. If I got them years earlier and the share price on sharespost is $8, that’s what the valuation is when I make my decision to stay or leave my former company. You might get more or less than the valuation, but most people when evaluating what they are giving up and what they are getting would want to get an equivalent valuation to what they are giving up at the same time.
The current share price is about $9 and change. Thus, some got them at a valuation below the current share price and others got them at a valuation above the current share price.
Again, there is no strike price. The valuation is the share price on the day you get them because that’s what you use in your analysis to stay or go. The valuation does not affect what you are going to get: but here is the important part, it affects what you are willing to give up when you leave one company and join a new one.
The valuation lets you compare it to what you are giving up. Both valuations (the one you have at your current company and the one Zynga offers you) may fluctuate, but that is unknowable, though it may have been assumed that Zynga would go up more because it was pre-IPO, for those people who are stuck in the past and don’t understand that isn’t the case any longer with Sharespost and the like. So you typically compare the current valuation to the current value of what you are giving up, at least as a first order approximation.
If you are giving up $280K from your old company, and getting $280K from Zynga, then at least it takes what you are giving up, out of the equation as to whether you jump ship to Zynga, in spite of the fact that you may do better or worse than $280K at either place. Then you would look at which company might do better, but that’s a much more difficult analysis and subject to all sorts of factors beyond your control.
A better, more extreme, example might be the following: Lets say you have 10,000 options for a stock that is trading at $10, and your options are at $9. That means if the stock goes nowhere, you’ll get $10,000, the number of shares times the difference of the current price less the strike price of the options.
Now, Zynga comes along and offers you exactly 1 RSU to jump ship on a date the Zynga share price was $10 on sharespost, meaning you’d get $10 if it vested today, though it will actually vest much later. You would not take that deal because $10 is much less than the $10,000 you are giving up, and the price is unlikely to ever rise high enough to make the deal worthwhile.
On the other hand, if they offer you a million RSUs, you would take it instantly, because at the current price, the valuation of what you are getting is $10M, which is much greater than $10K you’d give up by walking away from options to switch jobs.
So you see, you can value RSUs before they vest just the same way that people believe they have paper wealth of $10,000 in unvested stock options. The fact that the valuation you assign might be wrong later doesn’t stop you from assigning one.
Now the company is not going to offer you either extreme amount, they are going to a) try to convince you their stock will rise faster than the stock of your current company, and then b) give you a little less than you have now at the current valuations, to make up for the fact that their stock will rise faster. There would be some tax differences I have ignored for simplicity, but it wouldn’t change the basic premise.
If they are right, you come out even or a little ahead. They would also give you options as a sweetener, and they might be worthless, but at least you’ll have the RSUs which will likely not be worthless in the remaining vesting period you have at your current company.
If however the share price drops to $9 a year later, you’ve been royally screwed. Your options are worthless and your RSUs are worth less than you valued them at $10. If your former company stock stayed the same, you lost. That’s because, in your original analysis to stay or go, you used $10 per share for RSUs as the valuation, the then current share price, but the actual current price is now $9. At the very least, you should have waited to jump ship. They would have had to give you more RSUs to make up for the lower valuation.
Thus the valuation you used in your analysis ($10) can be different from the current share price ($9), even though RSUs have a strike price of zero, typically.
The higher the difference, the more screwed you are. If the share price drops from $15 to $9, that’s pretty bad if your old company’s share price stays the same.
I’ve said all I need to say on this subject NVJ. If you are still confused, maybe you can speak to an accountant or something.
I understand what you are trying to say now tipster. You believe that people are willing to leave on the table stock grants from profitable established companies in return for pre-IPO stock valued on the secondary market at a one to one ratio of value.
This seems pretty unlikely to me, but I wouldn’t be surprised if someone decided to do it.
And yes if someone did do such a thing they would be behind if they accepted Zynga’s $14/share valuation.
It turns out that Zynga is screwing the rank and file even further: the founders are being allowed to sell stock as part of the IPO, while everyone else is having to wait.
Normal employees are still going to have to wait until the lockup expires though. I am surprised that such a thing is legal, but it apparently is.
You will be heartened to hear that Facebook just reported some mediocre earnings just ahead of their IPO: they reported a 6% quarterly decline and a big increase in expenses. I doubt that it will make their IPO a bust, but I am keeping very far away from it personally.
the valley is a bubble – all of the ipos – facebook, znga, etc – all of em – no way they compound w/in 10 years at current valuations.
the only value in the “valley” (i.e. San Jose to the south and SF to the North) is “old tech” – example, Intel – combination of dividends, buybacks combined w/existing valuation will reward typical investors w/in their lifetime. Even Apple is a better valuation than the “social media” stuff
“tipster” is right
Zynga could perfectly be the less representative of the tech industry. They built their business selling virtual assets for actual cash for Chrissake. Rip-off is ingrained in their business model.
Zynga: down 9.55% in one day.
Ha ha, someone with 100,000 options at 8.55 went from having $700,000 to having $3,000 in three months.
Cue the realtors who will soon tell us “Yes but that means the BMR market is ON FIRE!!”.
Zynga! The bigger they get the more money they lose. So they try to make it up by overspending on start-ups that also lose money! We’ve all seen that movie before and it does not end well. Too bad for all the eager sellers-in-waiting.
I didn’t expect this bubble to deflate until a while after the facebook IPO, but it’s already underway. Groupon down another 10%. Zynga down again and flirting with a new low. Pandora down again also near a new low. D*mn, usually the bubbles pop long after I call them (and I miss out on the last of the bubble upside). This time even I was too optimistic.
What a bunch of, um, opinion. ^ Negative? check. Web? Check. “Why it’s the same thing!” Nonsense.
boy, anon1, the stocks I mentioned are down from half to 2/3 in a very short time. That is an extremely fast and hard crash. What do you call it? “buy now or be priced out forever?”
The fact that you’re linking three totally unlike companies together is bizarre. Natural gas is down too you know.
oh, OK, right. These companies have nothing to do with one another. Like comparing zynga with a natural gas supplier. Just random stock market fluctuations, I guess.
When was this bubble that you called?
Just February and March I assume, since that’s when Zynga was up before coming back down to where it had been since IPO?
Not much of a bubble if it’s just two months.
started about the middle of last year, maybe a little earlier. VC money started flowing big then, but has since slowed quite a bit.
Then why did Zynga’s IPO crap out when they went public in December? According to you the bubble would have been frothing for 6+ months..
Just maybe two weeks ago there were several articles touting SF VC. (There is an article on it on the Washington Post blog now, from Thursday.) You simply make things up, “anon.” Readers here look at the Business Times at least casually. You can’t just say whatever and not get challenged.
VC fundraising (money flowing in to VCs) is down 35% from last year (inflows are seasonal).
VC Investment (money flowing out of VCs to tech companies) is down 19% from last quarter (outflows tend to be less seasonal).
Glad your article “touts” SF VC, but the fact is that the brakes have been slammed on for money flowing in, and money flowing out has slowed dramatically.
That’s not regional, one, (other than mentioning the leader Andreesen is indeed local) and you misrepresented the gist of the article, two, as it speaks to a “more optimistic”fundrising environment. So thanks for corroborating my point.
No one who is optimistic slashes lending by nearly 20%.
The valley is running scared right now. Bubble 2.0 looks to be ending before very many employees get a chance to cash out.
Zynga has lost about half its value in three months. Pandora is off 67% from its peak. Groupon is off about 65% from it’s recent peak. Splunk – off 6.2% in a week and a half and below its first day close. Yelp, off 20% from a few months ago and below its first day close.
Your link clearly states that Andreesen’s latest fund is the largest to date by that local group. Thinking you usually post on huge boards like newspapers where people don’t bother to check whether trolls misrepresent links.
anon1, why do you thinks these stocks are tanking? Because money is flowing into them and the prospects are strong? By the way, you can verify the stock prices at any number of public sources, Mr. troll.
Huh? VC time has past for those. Revenue is indeed flowing into some of these. I’m not going to concede that linking groupon, yelp, pandora, and now splunk, and VC is a valid point. It’s not. Those companies are totally different and Groupon isn’t even local.
Wow, Tipster thinks it’s scary times! Shocking! If I had a nickel for every time he found something positive in any economic news, I’d have like, um, wait, divide by four, carry the two…. um nothing.
Zynga has lost about half its value in three months. Pandora is off 67% from its peak. Groupon is off about 65% from it’s recent peak. Splunk – off 6.2% in a week and a half and below its first day close two weeks ago. Yelp, off 20% from a few months ago and below its first day close. VC inflows are off 35% and VC outflows are off 19%.
That’s hardly good news for tech and Bay Area real estate.
And Apple up over 40% this year. IBM is up 15%. NASDAQ is up 16%.
Clearly tech is in the midst of “scary times”.
Let’s just focus on local IPOs, shall we. Groupon might be interesting for someone investing in the stock market, but it is unlikely to impact local real estate much.
The Zynga lock up expires on 6/13, that is the one mostly likely to impact local real estate soon. It is currently trading below its IPO price of $10, mostly due to Pincus advantaging himself and his bankers by flooding the market with shares back in March when it was trading at $14+. If it stays below $10 until June this will mute the impact somewhat, but the large number of RSUs will likely still be felt on the local market. There were 2789 employees here at IPO. I am not sure how many are local but that could be a lot of home buyers.
Yelp has been doing well: it is trading about 50% above its IPO price of $15. The lockup for Yelp expires on 8/29. Yelp had 918 employees at IPO, and had 5 rounds of funding before going public. It was also an 8 year old company, so I am going to guess that more of the gain from the IPO is going to go to early investors than employees. Let’s keep an eye on this one.
Splunk is up 100% from its IPO price of $17, which itself was adjusted up from an initial pricing of $8-10. So we know employees are sitting on big gains there on both RSUs and options. There were only 418 employees, potentially muting its impact, but also meaning that there is more for each employee. It also only had three rounds of funding before going public. It’s lockup expires on 10/19.
On a purely personal note, I applied for a job at Splunk 2 years ago but did not get an interview. Oh well.
The Big Kahuna of course will be Facebook, which should file this month, unless they pissed off the SEC and have to wait until June. The first 400 employees have been able to sell shares on the secondary market for a while, but everyone else will have to wait until the lockup expires at the end of the year. Facebook has both a large number of employees (3539) and a large valuation, so it should have a big impact everywhere, but most extremely near Palo Alto.
Are there any other big local companies going public that I missed? Pandora is in East Bay and relatively small and I am running out of time on my morning commute, but I will research other companies if there is interest. WAGE and PRSS are Peninsula companies that might worth looking at.
drawdowns typically originate with the most speculative getting damaged with the damage working its way down to the least speculative, ie, IBM, APPL, etc.
you will note the public equity markets then private equity markets will correct substantially in the fullness of time – my prediction is that the substantial damage to equity prices of both public and private will not happen until post election
politicians and banks are powerful to the extent they can delay the inevitable, but they cannot Stop the inevitable – implementing fiscal gimmicks and printing $2 trillion in money off a base of $800 billion will “delay the inevitable” but will not stop the forces of nature and that is what an economy is
NVJ, the IPO price is an irrelevant asking price designed to cause a first day pop. They sell those shares to friends of the company and let them soak up the first day gain.
They are set low. Very low. They can be far lower than the strike price of most of the options.
Case in point: Zynga. According to the S-1, the majority of the options for employees were issued at a strike price of more than $10. The IPO price was $10.
Thus, pointing out the difference between the current price and the IPO price is not indicative of any employee gains, because the IPO price is just a made up number to provide favorable publicity. You have to read the S-1s to get a sense what the option prices are.
Groupon has about 100 developers in Palo Alto. It’s about a third the size of the bay area presence as Splunk.
this guy knows what he’s talking about:
Jim Rogers says the United States’ hefty debt load will make the coming recession worse than the 2008 downturn. The Fed is only making the situation worse, he says.
“The 2008 slowdown was worse than 2002 slowdown because the debt was high,” Rogers says. “Next time, the debt’s going to be up there (gestures) and it’s going to be much worse.”
And in response to a question about what the Fed should do next, Rogers says, “They should all abolish the Fed and resign. The Fed is making the world much worse and making the United States worse.”
who cares about ZNGA – it’s a pig and will be slaughtered
@Johnny & Tippy: OK, so we’re ignoring the more established companies (less “speculative”), their bubble hasn’t burst yet?
But the bubble has burst for all recent IPO companies liked LNKD?
They’re only up 70% this year.
That is an interesting point, tipster. In most companies, the bulk of the stock options are given to employees with a strike price below the IPO price, but not in Zynga’s case.
I will check the YELP and SPLK S-1s and see if I can figure out what the strike price for the options is and how many RSUs were issued to employees.
LNKD = Short!
LNKD trading @ $118 in after hour trades on news that it crushed Q1 earnings. Revenue for the first quarter was $188.5 million, an increase of 101% versus $93.9 million in the Q1’11. Net income for the Q1 was $5 million, compared to net income of $2.1 million for the Q1’11, in increase of 140%. Non-GAAP EPS for the Q1 was $0.15. Analysts expected earnings of $0.09 cents per share, with quarterly revenue in at $179 million.
Wish I had 100,000 LNKD options at 59.99. That would fund a few homes.
I thought the bubble burst? I shorted my LNKD because Johnny said to. Now you’re telling me they’re up?
Excellent. My 122.70 LNKD shares are almost back to zero.
Yelp down 10+% today. Splk down 7+% today. Happy days=here again.
Yep, if you shorted zynga, yelp, pandora, opentable, and all the other losers, and bought lnkd a couple months ago, you’re okay! lnkd is up about 20% while the rest is down 1/3 to 2/3 (or more). Because you found the exception to the rule, there is obviously no bursting bubble here!
yeah, LNKD – “hella value at over 20x sales” – lol
+10 off 110 base – big deal
LNKD = short and payoff Q1 2013
just wait till the other pig FB comes – that’t the topper
nice to see steady eddy in the mix here!
I strongly caution anyone with any money to invest to NOT pay attention to the shorting sills tipster, johnny, or the other shorting shill.
“I strongly caution anyone with any money to invest to NOT pay attention to the shorting sills tipster, johnny, or the other shorting shill.”
Why? explain yourself. you offer no facts here. I want to know your argument
NASDAQ down 2.25% today
The shorts continue to do well!
znga dipped below its all-time low before closing just above it.
But the shorts need clueless cheerleaders on the other side, so keep buying anon1! Treasuries, at least, continue to gain. There’s a sure sign of confidence in the stock market.
I’m not suggesting anyone short anything. I’m merely pointing out that stocks that go down don’t make many people very much money.
Zynga was the IPO that the real estate cheerleaders were telling everyone to fear, and I was telling people from before the IPO that the Zynga IPO would be a non event and I was exactly right.
The employees could have sold their shares BEFORE the IPO at $14 on sharespost. Thus, the effects of the Zynga IPO on bay area real estate would be minimal. The existence of their shares on the bay area real estate market was already baked in to real estate prices before the IPO.
As it turned out I was exactly right. eddy jumps from company to company, pointing out this one or that one that is up, only to have the shares tank before many, if any, of the employees can sell. Zynga employees could freely sell up to about two weeks before the IPO. Then they got locked out. Now most cannot sell at all because their options are completely underwater.
My point has not been to short this stock or that, my point is that the effects of the IPO are no longer as great with secondary markets in pre-IPO stock like sharespost. The companies have generally dropped in value from what the employess could have sold before the IPOs. Yes, Linked In has done well, but overall, the amount of wealth has gone down from before the date when these companies went public.
Thus, the net effect has been to reduce the wealth of bay area employees that is available to be invested in real estate because for most, their shares were freely tradeable, and at a higher price, before the IPOs.
You still have no idea what you are talking about tipster. The Zynga shares are still locked up.
Very few employees at Zynga (and most other companies) had a chance to sell shares on sharepost because later employees were given ZSUs not shares.
And most companies these days give rank and file employees RSUs, not options.
The Zynga shares are locked up because that is a condition of the IPO. They were not locked up before the IPO. The companies will ask sharespost and secondmarket to delist their shares about two weeks before the IPO.
Although I certainly don’t know the details of every company, I do know what I am talking about. Your pointing out that the Zynga shares are currently temporarily locked up tells me that, once again, you are missing my point.
Before the IPO, the Zynga shares were not locked up. They were trading for $14 on sharespost. The buyers on sharespost thought they had some super limited access to below market-priced shares, but they were quite mistaken. They were overpaying by a wide margin.
And that was my whole point: when the supply is restricted, the shares usually go up for a while. But by the time most employees can sell, the shares are lower than what they could have been sold for on sharespost. Thus, the IPO doesn’t usually increase employee wealth in and of itself.
Companies switch from options to RSUs to stay under the 500 shareholder limit of non public companies. So Facebook has been using RSUs. Until then, most employees want options because the tax treatment is more favorable.
Options are not taxed until sold, and if held for more than a year, are subject to the reduced long term capital gains tax rates. RSUs are taxed when vested and are all subject to the higher short term capital gains rate. So someone who vests a linked in RSU today will get taxed at $117 per share today, even if they sell it at a time when it trades lower. Someone who got an option instead would not be taxed until it was sold, would only be taxed on the difference between the strike price and the sold price, and if held for one year after vesting, would be subject to the lower long term capital gains rate. So most employees prefer options, not RSUs.
Facebook had granted options but they stopped. I pointed out that Yelp never reached the point of RSUs for rank and file employees, they did the IPO before they reached the limit.
The RSU is a private bonus contract between the company and the employee. It details a bonus paid that is based on the price of the shares. There isn’t any need for an IPO to price the shares, as one can use the last round of funding valuation or the private trading price on sharespost or secondmarket. You don’t need an IPO to get the bonus, though the contract could be written to require it.
My point is that the world has changed. IPO is not the only way to get payment for vesting employee compensation. When an IPO occurs, poor employees don’t become rich like they used to. It has recently been the other way around.
Employees have plenty of channels to monetize their value in companies. Certain banks will lend against just about anything vested that you have. Someone with vested facebook RSUs can go get a loan on a house today. The IPO isn’t required. Thus, there is no before or after IPO effect like there used to be. The only difference is the valuations have, on average, been lower after the IPO than before it. $14 for a Zynga RSU is now a distant memory.
“Very few employees at Zynga (and most other companies) had a chance to sell shares on sharepost because later employees were given ZSUs not shares.”
Second Market Sellers
18% Current Employees
Oh, I did the research I said I was going to, here are the results:
For YELP, the average option was granted at $5.38, the highest price option was priced at $11.40 They have a nice table in the S-1 under the following heading if you want to do the math yourself.
“We granted stock options with the following exercise prices between January 1, 2010 and September 30, 2011:”
Just those shares listed are 7.34M, with an average strike price of all under $5.38 that equals $116M new dollars that will be floating around at today’s stock price.
Now granted, this will come out over the next four years, but about half of it will all be sellable on the day YELP’s lock-up expires.
And this is just the stuff issued since 2010! They say that they have issued another 2M share as part of the 2005 incentive plan, worth another $42M.
YELP *is* a company that traded on sharespost and also tended to offer options instead of RSUs, so some of this stock may have already been sold on the secondary market, potentially blunting the effect of the lock-up.
Does anyone know how to find out how many shares were sold on secondary markets?
Splunk also never valued any of their options below their IPO price either. From their S-1:
From February 1, 2009 through January 31, 2012, the Registrant granted to its directors, employees, consultants and other service providers options to purchase an aggregate of 17,844,092 shares of common stock under the Registrant’s 2003 Equity Incentive Plan, or the 2003 Plan, at exercise prices ranging from $0.62 to $4.82 per share, for an aggregate exercise price of $41.7 million.
From February 1, 2009 through January 31, 2012, the Registrant issued and sold to its directors, employees, consultants and other service providers an aggregate of 9,962,504 shares of common stock upon the exercise of options under the 2003 Plan at exercise prices ranging from $0.025 to $2.94 per share, for an aggregate exercise price of $5.8 million.
So 26M shares with the highest strike price at $4.82. 26M * (32-4.82) = $706M from Splunk.
There are also another 2M grants but I will ignore them as a rounding error.
This is another company that potentially had employees sell shares on the secondary market but since Splunk’s valuation has shot up so much since IPO, there will be much more money available at the end of its lockup.
Watcher’s link supports my belief that not many current Zynga employees were able or willing to sell on the secondarymarket. Only 18% of shares sold there were by current employees.
noevalleyjim, the thing is those big numbers of grants are going to a small number of VCs and founders. The rank and file may be getting 100 or 1000 or (to a very select few) 10,000. Unless these stocks go up 10X after the IPO, very few are getting anything of note. It’s not like 1999-2000 when there were 20 IPOs every month (literally) with hundreds of employees of each holding lots of options, and the stocks routinely popping 10X or 20X post-IPO. The VCs learned their lesson. They are keeping the upside to themselves rather than handing it out to fungible plebes. Yes, you may see a few thousand locals (the vast majority in silicon valley, not SF) coming out with $20,000 – $200,000. Not bad. But not causing a run on homes. And then you have a very few coming out with scads.
Do you have any data, anon? Or are you merely offering lay + biased opinion because that is how it looks.
I did a big long analysis if anyone wants to see my work, just ask for it, but I concluded this:
It really depends. Companies that have had many rounds of funding (which means lots of stock issued to investors), lots of employees and a lower valuation, tend to have smaller cashouts for the employees. Yelp falls in that category, so your $20-200k is probably about right there. The analysis tells me that total stock minus founder+exec shares equals about $100k/employee.
Splunk is on the other end and they are going to be distributing about $1M in stock per employee.
Zynga is kind of a strange case, since Pincus kept more of the proceeds himself and it is an unusual company in that many employees are underwater.
Facebook is going to have a very large number of freshly minted millionaires, but it is questionable how many are going to want to buy here. I happen to know two, but that is just anecdotal evidence.
And execs and founders have to live somewhere. Many of them probably already have homes, but some, perhaps most of them, will want to move up. So it might have more of an impact on the high end. There aren’t really that many homes sold at the high end anyway.
Redfin tells me that there were 7 SFH sold over $2M last year, which can’t be right. Does anyone know the true number?
My redfin said 265 houses and condos over $2M in the last year
Did anyone notice Lnkd gave up virtually all its gains within only a few days. Back down to 111 and change.
Oh well, so much for getting my money back. Sigh. Nice dream while it lasted.
yeah, I did. it’s a Pig getting fed for slaughter
Q1 2013 is my prediction
nice people, I’m sure, and nice service, but financially as well as in the grand scheme of things, it is a Pig in the same league as ZNGA and FB
Yes, it plummeted from up 86% for the year to only up 76% for the year.
yeah, you get to ride it from “up 76% for the year” to down 76% over the next year!
pigs get slaughtered, man!
Zynga below 8? Already? Linked in has given up all its recent gains and then some.
Market is generally down and commodities are falling too. Interest rates down? If I was paying attention, I’d think another recession was being priced into the market.
Either another recession is being priced into the market or the market is working with the Fed to create the conditions that will allow for some more QE before the election. I sold some of my equities last week in anticipation of the early summer downturn. I’ll probably be looking to get back in around July for a nice pre-election pop in the market.
We’ve promoted NoeValleyJim’s comment with respect to 3928 20th Street: Have You Heard The One About The House With Over 50 Offers?
tipster’s angle on this one will be prove correct
in the fullness of time
not sure what “SocketSite’s” agenda is w/its comment here, but it feels like cheerleading – not good if your interest is to preserve and promote your capital
My friends at the FB roadshow tell me the investors are practically laughing in MZ’s face, the company’s financials are so weak.
Should be an interesting IPO. Meanwhile, Zynga closed in the high 7s today. The employees could have sold all they wanted for 14 six months ago.
Tippy must have millions of friends. He always has “a friend” that proves his negative point. It’s almost like he just makes them up.
“Facebook Inc. (FB)’s initial public offering has so far generated lower-than-expected demand from institutional investors who are concerned about the company’s growth prospects, people with knowledge of the matter said.”
Bloomberg making things up too?
JS: don’t get ahead of yourself… I don’t think anyone was arguing that FB is a great company, were they?
znga down again. New low.
Guess those code monkeys will have to stay on their friends’ couches a few more years. No big deal as long as there is a bag of Doritos within reach.
I love how people speculate and post things like they know the real story. At this point different sources are saying different things.
So we have reports of weaker demand then expected by the institutional investors followed by sources reporting that its already oversold due to institional investors buying it all up.
“Facebook’s record initial public offering is already oversubscribed, a source familiar with the share listing said,”
“institutional investors have so far indicated demand for more shares than Facebook has available, the source told Reuters.”
“One large institutional investor had put in a major order for shares on Wednesday and was calling around syndicate desks trying to acquire more, a second source familiar with the IPO’s progress told Reuters, declining to be identified because the details are not public.”
Which version is the truth? I don’t know, guess we won’t know for sure until it starts trading on the market and instead of anonymous sources we will get to see how it actually performs.
FB already peaked.
Its a pig just getting fed for slaughter.
I’d rather own APPL or MSFT or GOOG before I ever touched this pig.
Do you really believe FB’s “growth” deserves the IPO valuation it will likely get when compared the the 3 I identified above??
I think history will ultimately evidence otherwise
BragBook is incrementally cranking up means to extract more cash from their members. Did you know that if you “like” a commercial entity on FB that your photo can appear on your friend’s pages endorsing their product? “Joann really loves the freedom and comfort that Stay Free Maxi Pads provides”. And then they are experimenting with ways to pay to boost your ego out on an isolated island in the south Pacific : http://www.stuff.co.nz/technology/digital-living/6904136/Facebook-running-test-for-highlighted-posts
Maybe this stuff will pay off. Or maybe it will backfire and alienate their user base.
Zynga just continues to sink daily. Closed under 7.5. How many dozens of employees saw their stock options go under water today I don’t know.
If a rank and file employee started early enough, they probably got 10,000 options at 3 or so, so that guy still has $45K, but he probably took a $100K hit to his salary over the years to get there. This is probably no more than a couple of dozen employees. After taxes, these people are in the hole. Had they gone to a run of the mill company that gave few, if any, options, they’d have more in combined salary and stock than they have through Zynga.
However, most of their employees now have zilch.
The handful of very early people, founders, and the like, probably did little better. They may have options at 50 cents, and 10,000 options would be worth $70,000, but they took an even bigger hit to their salary because of the longer period of time that they had to accept a below market salary. After taxes, these people will be in the hole too.
5 weeks to go before the lockup expires, so it’s pretty academic, but the trend is clearly not good. They all had more money before the IPO 5 months ago than they do today.
My point remains the same: because shares are tradeable before an IPO, and you can get a home loan against RSUs that may or may not be tradeable, how many IPOs have occurred is meaningless. In this case, the IPO was a de-liquidity event.
I wonder how many home loans went to znga employees that were made against RSUs? And now they won’t have the cash to pay their mortgages? Now that would be an awesome irony if the znga IPO ended up causing a small increase in desperate sellers rather than the touted mass of cash-laden buyers!
seriously the most pathetic thread I’ve ever read here… tipster repeating himself over, and over and over… and conveniently leaving out this one:
“Well, so much for my downpayment money! And someone with 100,000 LNKD options at 59.99 went from having $6,218,000 to $1000.”
Posted by: tipster at November 28, 2011 2:08 PM
That “someone” now has $4.7 million. Nice downpayment there genius.
Meanwhile if you bought the S&P that day you’d be up 14% today, or Apple you’d be up 50%, or a home in SF you’d be up 5% to 10% from last Oct.
The S&P bottomed Oct 2011 and the SF RE market was pretty dead during what is normally one of the hot selling seasons. Coincidence???? The S&P then ran up 29% and is still up 23% since that bottom, and the SF RE market is on fire. Coincidence???? Groupon and Zynga are down huge, but the SF RE market is raging right now. And that’s the meaningless point you’ve repeated ad nauseum.
The SF RE market is a helluva lot more reliant on the overall stock market than a few IPOs – buyers’ downpayment money has more likely been sitting in a mutual fund or S&P index fund rather than one stock. So if you want to know where the RE market here is going… just tell me where the stock market is going, not a few IPO’s from companies that a blind idiot could tell you had no shot.
yeah, even more amazing that dictator Editor doesn’t shut it down!
Ha ha! My point is now conceded!
Before the IPOs it was all about “Better buy now!” Now that they are in the toilet, it’s all “oh pshaw! IPOs? Won’t make a difference!”
If you’re right, and it’s the S&P, then that is down 5% since April, which would start becoming reflected in closings in about a month. So you are saying real estate prices will start to fall?
Thanks for the tip!
I remember last summer you were going on about GOOG tanking. But once that rebounded you moved on to another target, I am sure we’ll get crickets from you if ZNGA rebounds.
“My friends at the FB roadshow tell me the investors are practically laughing in MZ’s face, the company’s financials are so weak.”
I think maybe you heard the story from your “friends” wrong… He was probably laughing in their faces as they begged to buy more…
They have upped the price target, now they’ve upped the number of shares 25%…
Wow! They upped the price target? I’m shocked, shocked! You do realize that they do that for almost every deal, right? Increased the allocation? You mean just like Groupon? Groupon priced above its initial range and sold more shares than initially offered.
You do realize that fb was trading on sharespost for $42 per share before they pulled it for the IPO. Assume it’s worth somewhere between $45 and $50 now. So they initially price at a range of $28-32 and now they “raise” it to $34-38, and this is a surprise.
Who do you think set the initial price, genius? They did. And they set it low so they could “raise” it just before the IPO, and everybody acts all surprised. And when a $50 stock that they are going to sell for $38 is oversubscribed, everyone will act shocked again. And when it goes up on the first day, you guessed it, another surprise.
The whole idea is to provide an aura. The aura will bring in the dumb money. And dumb money overpays. So the hope is to push a $50 stock to $60 or more through some well planned “surprises”. The headlines will read very positively for them while everyone is paying attention.
They do this nearly every time. Tell me you aren’t falling for it again. That’s not to say that it won’t go up from all that dumb money. But dumb money usually doesn’t keep it up for very long.
BTW, what’s next after the IPO? Well, the IPO is a small enough number of shares that each of the underwriters will have the ability to prop it up if it starts falling and the supply will be restricted to make any fall less likely. But then, there will be a follow on offering of more shares.
And who will be the underwriters for the follow on offering? Why that will be the ones who took the most actions to prop the stock up. If they convince their clients to buy (or they buy themselves) between the IPO and the follow on offering, well that’s who gets that lucrative follow on business.
There are many billion of dollars at stake. Nothing is being left to chance here. Your link to the article is laughable, anyone could have told you that was going to happen. The stock should be trading around $50 or more per share. Go out on the street and offer $20 bills out of your bank’s ATM for $15 and then see how shocked you are at the results.
But the investors are going to hold their shares for a long time, past the secondary offering, and that’s when the prices usually start falling. Because then there are enough shares to satisfy the demand, there are usually too many shares for the underwriters to prop it up, and there is little motivation for anyone to pump it up to their investors or to buy the dips to try to keep the price high because the secondary offering is over.
That’s what the investors were talking about. Not the theatrical IPO-secondary offering period. That’s for the amateurs, some of whom will of course make money. The investors are basically required to hold. If they sell when the bankers are all frantically trying to prop up the prices through any means they can, no banker is ever going to sell them another IPO.
Wow, now tipster has upped his usual rebuttal of good news by 50 to 60%. I guess he beats FB.
Seriously, if FB ends up in the stratosphere like GOOG or AAPL, expect tipster to post a 10-pager frustrated rant!
FB could be worth 100B. 10 years ago it did not exist. Much of this wealth is in the BA. SF will benefit from it just like many other cities in the region.
Why does tipster get so frustrated when he sees other people being successful? I am personally pretty happy, unless someone makes their fortune behaving illegally or unethically, as a booming economy helps everyone.
So Tippy, if you are so smart and knew all this was happening, why did you say the investors were laughing in his face when clearly they are not?
Or are you just making this up as you go?
“In a Bloomberg Global Poll of 1,253 investors, analysts and traders, 79 percent said Facebook doesn’t deserve a valuation so high.”
I’m not predicting what the amateurs do over the next few months, but my friends statements seemed pretty accurate when 79% said the same thing in a poll.
and heavier than air will never fly.
Clearly, 80% of all investors, analysts and traders think it’s overvalued and are not buying…
That’s why the IPO is oversubscribed. Must be all the little amateurs with the $18.5 Billion to invest.
Just like people who will go for a high end Bimmer instead of a Toyota. They’ll tell you it’s totally overpriced but they just had to have it.
And Facebook stock falls another 5% in yet another two week period. Can you believe it?
Someone with a million options at 39.99 went from having options worth ten million dollars four weeks ago to having options worth ten thousand dollars today.
Woohooo! Ten thousand dollars! I’m rich, I tells ya!
Posted by: tipster at February 29, 2012 10:38 PM
You do realize that fb was trading on sharespost for $42 per share before they pulled it for the IPO. Assume it’s worth somewhere between $45 and $50 now…The stock should be trading around $50 or more per share. Go out on the street and offer $20 bills out of your bank’s ATM for $15 and then see how shocked you are at the results.
Posted by: tipster at May 15, 2012 10:24 PM
So Tipster, what has changed over the last three months that changed your opinion from pointing out how FB’s valuation was sinking to under $40, to now thining that $40 is a discount? I mean you go from mocking options at $39.99 to comparing a $38 value to selling $20 for $15.
“That’s why the IPO is oversubscribed. Must be all the little amateurs with the $18.5 Billion to invest.”
Institutional investors have to have FB in their portfolios, too much downside if it pops and you were the manager that missed out. It’s no big deal if it tanks as long as everyone else is in as well.
My gosh, you can all get in on FB in a few days and get rich! There is a reason Goldman Sachs calls the hordes who go for stuff like this “muppets” and it is not because the masses have great investing savvy!
Here’s a tip that will make you a lot of money. Do nothing with FB for about three months, then short it. You think all the insiders just added to the IPO day sales volume because they think a P/E ratio of 100 is a deal and FB will skyrocket from here? That’s right, the added shares aren’t being issued by the company but being dumped by big insiders. Go get ’em muppets!
R, this story’s for you. From CNN, Seniors clamoring to invest in Facebook IPO. I’m not even going to quote from it, the headline just says everything you need to know.
That article is a meaningless anecdotal fluff piece about three or four people in Florida. And anyway, the average retail investor isn’t even going to get a chance at the FB IPO, and that’s been widely reported. So that’s a miss to Brahma, and a miss to anon. So weak.
Let’s not get confused here.. I’m not investing in FB, I think it’s overvalued. But based on the fact that they just upped the number of shares 25% and are oversubscribed, I’m in the minority.
And Brahma that article is kind of a joke.. Three old guys are interested in buying it.. and they turn it into “seniors clamoring”.
Da Money Quote….
Buffett and Munger won’t buy Facebook
“We never buy into an offering” Buffett told CNN at Berkshire Hathaway’s annual meeting in Omaha earlier this month. “The idea that something coming out…that’s being offered with significant commissions, all kinds of publicity, the seller electing the time to sell, is going to be the best single investment that I can make in the world among thousands of choices is mathematically impossible.”
He never buys into any offer, so that’s not relevant. What’s going on with the wilder than usual negative spin today? None of these links, wuotes and whatnot support what these guys are posting. LolX50
I disagree with Buffett on his quote (I must be crazy).
I think there are IPOs (not all) where you can make more money quicker than in other places.. I rarely hold an IPO for very long though. Last year I made >40% in six weeks. Awfully hard to do that elsewhere.
I do not think FB is one of those.
Buffett being a value investor, he’ll try and catch good companies with a future when they are in a (probably) temporary downturn.
Discipline is tough to master. There’s a lot of temptation out there.
Even a lead balloon can stay aloft for a while if you toss it hard and high enough. And the pitcher has been winding up for quite a while.
The hype seems bizarre on this one, especially the Instagram acquisition.
I don’t doubt that there will be a lot of winners in the short term. Long term seems more puzzling.
That article might have been “weak” or “fluff”, but I’m pretty confident that the IPO is going to attract significant traffic from retail, unsophisticated investors, whether they are seniors or muppets or ‘little amateurs’. I don’t have a way to project that or prove it in advance for practical purposes.
A friend told me over IM that E*trade just threw up a page where anybody with an account can make conditional offers if they agree to buy a certain minimum number of shares, so I don’t agree that the “average retail investor isn’t even going to get a chance at the IPO.”
All of that is not to say that there won’t be interest from institutional investors, there probably will be. At a minimum because FB will be added to the Russel 2000 or similar shortly after the IPO and that will bring in all kinds of passive funds that have to buy every stock in the index.
Yeah? Well Google it then Brahma. There are plenty of articles about precisely how regular retail types won’t get a crack at the FB IPO. The fact that you aren’t following the news cycle very closely doesn’t exactly aid your “pretty confident” pure conjecture.
Would someone (TMoD?) please run the recent postings of anon1 through the linguistogrammatik soft serve yogurt machine and check for a probability match percentage with [anon.ed]?
My flujdar has been beeping and warbling for a while now….
Of course anon1 is our boy Kenny.
Yay! And out come the real haters, who never say anything about anything other than directly to, or about, an individual! Quick, Bizarro fanboys, start impersonating “anon1.” Get that moniker banned too!
I will try and pick up a few hundred shares of Facebook at the IPO price. Wish me luck!
It is a shoot the moon kind of stock, probably overvalued, but FB has all kinds of personal info that advertisers have been trying to get their hands on unsuccessfully for decades. They have a chance to do something really amazing there.
“…FB has all kinds of personal info that advertisers have been trying to get their hands on unsuccessfully for decades. They have a chance to do something really amazing there.”
Substitute “creepy” for “amazing” for the impression one gets after thinking through the ramifications of this covert dossier creation.
As a culture we have not yet grasped the implications of installing this surveillance into our lives. For example from a brief reading of the FB EULA I see nothing that would prohibit FB from using the fine grained data gathered to infer a person’s specific psychological weaknesses and then exploiting those weaknesses via advertising. Its all legal.
But it could backfire.
“Of course anon1 is our boy Kenny.”
yes, the linguogrammatik text analyzer and soft serve yogurt machine hasn’t collected enough data but did report that anon1 seems like fluj/realtormon/anon.ed but with a tinge of prescription barbiturate mixed in. (Uh, wasn’t I just railing against covert dossier creation recently ? 🙂
anon1 is right to complain about the personal attacks and impersonation. That is darn annoying.
“I see nothing that would prohibit FB from using the fine grained data gathered to infer a person’s specific psychological weaknesses and then exploiting those weaknesses via advertising. Its all legal.”
You just described FB’s entire business model!
“But it could backfire.”
And it will because the business model is so sleazy at its core. A competing “FB” would be easy to create and one will come along that says “we don’t sell your private information” and it will take a big share of FB’s users. That’s the main reason FB is so over-priced-hyped. The barrier to entry is close to zero and it will never, ever grow its revenues/profits to the point where the current valuation makes any sense at all. Take a gamble on a short-term pop if you want. But you’ll make a LOT of money shorting it. I’m going to. Just need to figure out the timing. Of course, that’s the hard part!
FB = Pig getting fed for slaughter – it will begin being fed tomorrow in ernest for slaughter post Nov 2012 Election
While the barrier to entry is low (FB proved how easy it was to displace Friendster, which displaced MySpace) the barrier to profitability is high particularly if you are not going to sell the users private information in order to target ads. If it were so easy to displace FB just by entering the market, Google+ wouldn’t be a ghost town.
None of the above is a defense of a high stock price for FB. Just saying I find it unlikely that a competing social network could easily displace them AND be highly profitable while also swearing off selling the users personal info for targeted ads.
Bad news: HP is going to layoff 25,000+ employees.
Good news: there will be lots of HP employees’ homes for sale for the 3500 FB employees to buy.
How many of those layoffs are going to be in the Bay Area?
My understanding is that the Zynga lockups expire on Monday. Let’s see how the Zynga employees have done if that’s the case.
From 2007 to 2009, as a much smaller company, Zynga gave out options to what appears to be a couple of dozen employees. The options had a strike price of as high as $3.81 during the latter part of 2009, and essentially zero before then as the company was too small to be worth very much. The stock is trading at $6.64 as I write this, so the late 2009 employees, assuming 100,000 options, which is pretty high, make $300,000 and taxes are low, so they’ll clear just below $250K. They probably took a $100,000 hit to their salaries over that time period (that’s why tech companies issue options, they can pay lower salaries as a result), so they net about $150K.
The earliest couple of employees will clear about $500,000, and took a longer hit to their salaries, so they net about $350K after taxes. Obviously the founders and earliest few employees probably got much more.
But here’s where it gets interesting. In 2010, they switched to RSUs. RSUs give you the right to get cash, in the amount of RSUs you have times the share price at whatever time you ask the company for the cash. The company pays you that much. Typically, RSUs vest over a period. That means the company grants you so many RSUs up front, but you are only entitled to a fraction of those for each year you work for the company, *but* only after the IPO or a sale of the company. The fraction are considered vested after the IPO or sale, but you don’t have to take the pay for them until you want. You can only take the pay of the shares vested, and if you leave, you get nothing. Until the IPO or sale, your vested shares are zero.
SO RSUs are basically forced savings, plus a stock option. If you get 3000 RSUs each year when the share price is $6, they will cut your pay by $18,000, PLUS an amount due to the fact that you essentially have an option at $6. If the share price goes up to $10, you get the $4 extra dollars. If the share price stays at $6, you get your $18,000 back, so all it is is forced savings. Because they come with an implied option, RSUs have a value above the share price at the time and they’ll cut your pay accordingly. NVJ has repeatedly stated that RSUs are different from options because they are guaranteed to not be worthless, and that’s true, but they do deduct from your salary accordingly. When, as here, the value of the underlying shares has not gone up or has gone down, all you get is some or all of your own money back.
The big problem with RSUs, and one that is going to kick these employees in the teeth, is that they are taxed as of the vesting date, even if you didn’t take the money. And a lot of the RSUs vested on the IPO date at the IPO, for $10 per share.
So someone who got 3000 RSUs each year starting in 2010 took a salary hit of around $30,000. At the IPO, they were taxed at the $10 per share price, so they pay $5 in taxes. You can see how bad this is for them!
The RSUs are worth $1.64 over the taxes they’ll pay, so they net about $5000 for each year of service. But they took a salary hit of $30,000 each year, though that would have been taxable too (with a $15,000 net), so they are about $10,000 in the hole per year. The 2011 employees probably lost about the same: their RSU valuation was higher, so they got fewer RSUs, and paradoxically, that was better than getting more RSUs because of the taxes, but they lost the forced savings!
So, a couple of dozen people netted $150K, and about two or three dozen people made out even better – around $350K total. A half dozen more probably did better than that and the founders and early investors of course did phenomenally well. The later investors have lost a bundle.
The rest of the employees, hundreds and hundreds of people — all lost money! They got jobs with below average pay. Of course, the share price could still go up, but lots of shares are about to flood the market, so that seems doubtful in the near term.
“what appears to be”
“assuming 100,000 options”
“they probably took”
“hit of around”
“probably did better”
So essentially, this is a very long winded wild-assed guess. Thanks for your insight, Tippy!
-The overwhelming majority of the Zynga employees have lost money working there.
-Only a handful made anything.
-For all but the earliest employees, what was made was relatively small compared to the hype.
This is all certain. I did put some reasonable numbers on things and stated my assumptions where I made them to provide some concrete data points.
Of course the realtors are going to be unhappy with an actual analysis as compared to unsubstantiated hype. That was pretty much expected.
Tippy, are you calling your manifesto above “an actual analysis”? If so, you might want to rethink what an “actual analysis” consists of.
Yes, a thorough analysis is somewhat lengthy when you have different groups of employees and you are carefully analyzing each one. You should try it sometime.
Apparently the editor doesn’t like my comments.
I’ll try again. GIGO. Familiar to you Tippy? It means Garbage In Garbage Out. In relation to this post, it means, when you make a bunch of guesses and assumptions, then do a “thorough analysis” based on those guesses and assumptions, the result is guesses and assumptions. GIGO. It’s pretty simple.
If you want to do a real analysis, start with some facts.
I did start with facts. The S-1 has them and the current price of the stock is known.
Obviously there are many different employees and each one has a different situation. So I provided some calculations for some example employees in typical, though very favorable, situations. That’s not garbage in, that’s a few example situations calculated to completion.
The reality here is that you just don’t like the end result. It looks very, very bad for you so you are doing the best you can to try to attack it by stating the assumptions done for the purpose of example are “garbage” because they may or may not match any one employee’s situation.
Whether any employee matches the examples shown doesn’t change the end result. There are very few (and possibly none) millionaire rank and file employees. The overwhelming majority, hundreds and hundreds of employees, have lost money. The facts that I put forward back up that analysis. The assumptions made were for purposes of examples. My examples were very favorable and they still turned up not a very earth shattering conclusion in the best cases.
It’s a conclusion you don’t like and it doesn’t support your cause. We get it.
You lose. Too bad for you. Sorry if you don’t like it. Get used to it.
More garbage. What’s my cause? Why does it look so bad for me? What the hell are you talking about?
As for your supposed facts, here’s what you have:
“The options had a strike price of as high as $3.81 during the latter part of 2009, and essentially zero before then”
“The stock is trading at $6.64 as I write this”
You then go off on a bunch of guesses and assumptions as I highlighted this morning.
And what is your factual basis for asserting my example data is garbage?
I think we’ve both made our respective points clear. People can read my analysis and your factless retorts complaining about facts and make up their own minds
And the winner is TIPSTER yea
No winners in this thread. Can’t we just let the Editor keep this cleaned up and leave it alone.
What a surprise that the realtors are outraged that someone would suggest that the zynga IPO will not result in any any new demand for SF housing! I wonder if the outrage stems from the fact that they told everybody who would listen JUST WAIT, APRES ZNYGA, LE DELUGE!
So now the realtors are in the phase of saying that unless one can conclusively prove the precise small number of employees getting anything material, then “see, maybe there are still thousands of new millioaires out there – your numbers do not irrefutably disprove that!”
Next phase – you’ll see the realtors here denying that they EVER suggested that zynga would be anything but a big bust with no impact at all on SF housing.
Zynga off 64%.
Yelp, off 44%.
Facebook off 33%.
Even apple off 12%.
HP, laying off tens of thousands.
Europe, our biggest trading partner, collapsing.
Founders of companies unable to get financing desperately selling their homes in a hurry at fire sale prices.
Boom times here. Boooom Times.
What a sad life some people lead. It’s one thing to make a comment here or there but what possible utility does someone get from endlessly delivering the same message using the same tactics. I suggest some people need to stop and think about their life just a little. Perhaps this empty activity makes your life a little more full. But it is an illusion and a sad, sad story really. All of you.
Tipster, your so called analysis is merely you saying things for effect on here. It’s very easy to Google what the post 2009 FB average engineer or sales director hires got for RSUs (10 to 15K), and factor in the pre-2010 stock split (5 to 1), factor in a few years of possible performance based smaller allotments over the past few years (or not), and to multiply by 19 dollars or something conservative, and to factor in the tax hit of .45 on the dollar or what have you. The windfall is around 10 times your “hey look at me I’m a never-will hater on Socketsite” 75K bogus number. You aren’t fooling anybody, ever, on here. The question again and again is why do you get to spazz out so much more than others with your wild disinformation.
I see that fluj is still stuck in that stage of arguing that things must be great because nobody has proved with irrefutable evidence that they are not!
In another few months, he’ll be saying “nobody ever said these tech firms were anything but a short term bubble or that they would affect the SF real estate market much.”
I see that fluj does know how to google “facebook RSU tax engineer” LOL!
Anon, the things you think you’re saying toward posts I make are never about anything other than you acting hostile. I’ve asked you before to please stop. Thanks.
Valid point. Surprised the editor allows it.
“Tipster, your so called analysis is merely you saying things for effect on here.”
Ahh, but I’m the one that is just being “hostile.”
I understand, however, why you and R would be angry that your tech-housing-bubble-reinflation dreams never came to pass! LOL!
One, what else would you call his need to repeat disproven opinion on here, if not for effect? Noe Valley Jim alone has disproven Tipster seriously about a dozen times. So yes, for effect, clearly. Anyway, secondly why do you continue to act as if you and Tipster are one and the same? I was not talking to you, nor do I care to any more. You’re only rude and nothing more these days. At least Tipster –initially– has arguments. Not you. You’re pure hostility. Get a life.
The realtors like to gush about how many RSUs were granted, but if you look at Zynga, that same thing scares the stockholders and they run for the exits at the lockup.
The Zynga RSUs are almost all worth nothing more than the cut in pay it took to get them, and most are worth much less.
It looked pretty good for Zynga, even a few months before the lockup, the stock shot up, all of the RSUs were gains to the employees and the realtors were smacking their lips, but in the end, what looks good to the realtors ends up looking bad to the investors and the net is most of the employees with RSUs lose money.
Will the same thing happen to the facebook RSUs? Who knows, but it’s looking even worse than Zynga for them right now.
The stock market goes up and then it goes down for a while. Who can tell me what Zynga shares will be trading at in six months? Can you even say whether they will be up or down?
The new wealth created by these companies will tend to drive incomes and home prices up. It is not a zero sum game, new industries are being created. It is still pretty early so hard to say how much they will be worth. But I expect New Media to be bigger than Hollywood within 10 years and most of it will be centered here in the Bay Area.
“realtors like to gush about how many RSUs were granted”
R, try anon1 above at 11:49 to start.
So it’s gushing when it’s taking the numbers anybody can find on any number of business publications? And tacking on a stock price well off what today’s was? I think not. That’s not how one uses the word “gushing” in a sentence properly. Nor is it valid to continue to posit “what’s good for the goose is good for the gander,” and jump around willy-nilly between Zynga, Facebook, Groupon, Apple (lol, at your inclusion of Apple today!) Etc etc. But one meaning of gushing is to go on and on about something. Well, nobody tops you there Tipster. So add hypocrite to your litany of character flaws. Again, RSU = effective strike price of zero. And dispense with equivalating “salary cuts it took to get RSUs” across boards youKve never once substantiated.
I don’t think he was gushing, looks like he was stating published facts.
The continued banter and persistence of certain posters seems to give one the idea that maybe they are using this method to influence public perception of the stock market. Maybe certain people should disclose whether or not they have any financial interests in the publicly traded stocks they are posting about “anonymously”? Why else would someone continue to post this type of information so vigorously?
Yeah right “pumpanddump.” More likely one of the misinformationcrew pulled a quick little cynical name change like they usually do when they lose arguments, in order to obscure everything further. Because your point doesn’t even segue. Nobody has said these stocks are even doing that well in any of these posts. In fact, several built in further losses.
“More likely one of the misinformationcrew pulled a quick little cynical name change like they usually do when they lose arguments,”
That’s some fine projection there, Lou.
Posted by: justme at March 28, 2012 10:38 PM
Nobody ever told you that references to recontextualized quotes, placed in still another context are apropos of zilch, misinfo member #2 a k a #3 ? (A k a probably a few more?) So, um, lame comeback. But yeah it was pretty transparent that it was you, and why you went there. Thanks for confirming.
Anon1, the things you think you’re saying toward posts I make are never about anything other than you acting hostile. I’ve asked you before to please stop. Thanks.
Yet that stays? Aping language, and switching handles while doing so? Why ed? Why do you let these guys clown your site up, jumping from handle to handle several times a day?
(Because they realtor bash, right?)
[Editor’s Note: As best we can tell, the only person who has been posting under multiple handles on this thread is you. And at last count, you were up to three.
As we wrote above, “with respect to the IPO market and its ups and downs, let’s consider this a safe place to discuss and debate its impact on the San Francisco real estate market as we try to keep our other discussions on topic and track.”
You’re welcome to join the debate, otherwise just ignore it and move along.]
What a load of utter crap, ed. Those were redundant typos from different boxes in your archaic little system, and you know it. Meanwhile they’re picking up each others’ thought trains. You’re corrupt.
[Editor’s Note: We’ll take your word for it, but you’ll have to take ours that no one else above was tripped up by our archaic little system nor was posting under multiple monikers as was incorrectly assumed and rather dramatically asserted.]
If the NASDAQ fell by 60%-90% in three months, the housing market would dry up tomorrow.
It doesn’t much matter at this point whether a paper millionaire has this much money or that, the fact is they all have 40-90% less than they thought they had 3 months ago. I think if my net worth was cut by 40-60% in a short period, I certainly wouldn’t feel flush and so I wouldn’t go out and spend profligately on a home purchase no matter what my net worth was.
Now add that to retail sales collapsing in France and Italy (retail sales in Italy are falling faster than they fell in the last recession!), where Europe is our biggest trading partner, jobless claims up, payrolls missing even the modest estimates, Chicago PMI indicating a recession, and I just find it hard to believe these people are going to rush out and buy at the start of what looks to be a severe recession.
I get the whole pent up demand thing, I’m sure there will be some of it, but most of these employees are single twenty somethings. What’s the pent up demand of single twenty somethings who just lost half or more of their net worth?
A lot of Zynga employees have been nearly wiped out. The accrued RSUs vested at the IPO. If they didn’t sell on that date, the taxes will run about $5 and the shares are worth about $6. They had been worth $14. This means they went from netting $9 per RSU to netting $1 per RSU. If my net worth dropped by 90%, I just don’t think I’d feel all that flush right now and rush out and pay any price for a home. Call me nuts.
I tried to recruit a 2011 Zynga hire. He turned the opportunity down because he thinks his stock could pay off.
Would $30K/Year More make him Switch?
Yes, because apparently (according to Tipster) all companies without options/RSUs pay at $30k more a year for the same skillset.
“Yes, because apparently (according to Tipster) all companies without options/RSUs pay at $30k more a year for the same skillset.”
Apple gives You 1k stock Worth $600K over 4 Years
How Much less $$$ would You take in Cash a Year?
How does that Work Out if Apple Collapses?
Oh I’m not arguing AT.. Clearly Tipster is right. Companies that offer options/RSUs pay $30k less a year. It’s a well known fact to all of us who follow Socketsite. I mean, nobody has any data to back that up, but who cares about data when you “know” it to be true?
“Would $30K/Year More make him Switch?”
We never got to the salary discussion but he is aware of what his position would pay since he left our org to join Zynga. He knows that I’d fight for a higher salary than his previous though he’s also aware that our HR dept. will resist. So limit != sky.
He’s a smart person who knows how to evaluate the prospects of both alternatives (Zynga vs. established company). If Zynga is smart they are reloading or re-pricing stock benefits for their best employees. I didn’t ask him if that is what is occurring.
The point remains, that the guy values them at something. So limit!=sky, but value > 0.
RSUs are basically a deferred compensation element coupled with an option. If the stock is trading for $6, when they offer you 1000 RSUs, if the stock is trading for $16 when you sell, you’ll get ten more dollars. There is some risk to the deferred compensation, but there is also the potential for a reward to the option component. The earlier you are, the less risk and the greater reward, but I suspect that people value them at least as great as the current value of the stock times the number of RSUs.
Obviously different people have different tolerances for risk, and everyone will value them differently. Some people will value them higher, some lower. I never said that everyone values all RSUs at exactly $30K.
But what MOD is proving is that they value them at something. And to tell you the truth, if I were facebook, and I handed out RSUs at 6, and the next year the RSUs were worth $16, I wouldn’t give that guy any raises. Not only is he getting an automatic one from the RSUs, but he also forfeits the RSUs from the year before if he leaves. As a result, if salaries went up by $26,000, I wouldn’t give him a raise at all, because if he leaves, he forfeits $16K worth of RSUs from last year, and the RSUs he gets for this year go up by $10K. So yes, I’d hit him a second time for the value of those RSUs he got in the first year. $16K worth of RSUs this year and he’d still not leave if his salary was $26K under market, for the reasons MOD alludes to.
So obviously, people with RSUs are taking a hit to their salary.
“took a salary hit of around $30,000”
Posted by: tipster at May 25, 2012 10:32 AM
“I never said that everyone values all RSUs at exactly $30K.”
Posted by: tipster at May 31, 2012 1:14 PM
Yes, that was the example I used in that case. Sorry if that concept is too complex for you. I put forth a sample person, assigned values to everything, and stated them for all to see. If you wanted, you could alter those assumptions and draw your own conclusions.
It doesn’t change the fact that these people are all a whole lot poorer than they were 3 months ago.
As I mentioned on a different thread, Zynga RSUs are worth 90% less than they were three months ago (the taxes are $5 and they went from $14 – netting $9, to $6, netting $1, a drop of 90%). Whether you went from $1M to $100K, or from $500K to $50K, people who take a 90% hit to their net worth don’t usually spend profligately on assets whose prices fluctuate, especially when so many signs are that the economy is turning down.
Oh, so the $30k figure was for that specific example you made up?
What would be your thoughts on the general salary hit that folks take who get options/RSUs? Percentage or dollar amount is fine.
“Oh I’m not arguing AT.. Clearly Tipster is right.”
OK Dont argue At Tipster
Just Answer My Question
Less Salery Plus $150k/year Apple Stock
How much less Salary do *You* take???
RfR.. You’re asking a stupid question.
Of course you take less salary for an established extremely valuable existing stock (your AAPL example).
What we are discussing here is whether (or how much) people take less salary for options/RSUs on an unproven pre-IPO startup.
I saw one example offer from a fb-er who said they told him he’d get $150,000 in RSUs, to vest over so many years.
Based on how they are presenting that, I think it would be difficult for some engineer right out of school who is not schooled in how they work to value that at anything less than the total dollar amount divided by the number of years over which they vest.
I think in 2009, someone probably would expect that they could quite likely increase in value. So they may have very well valued them above that, and if so they would have been right, but probably not below it.
I also think that they could be used as golden handcuffs, both using the example I posted above, where they go up in value but are forfeited if you leave, or in MOD’s case, where they went down in value but someone thinks they could go back up.
And MOD, I suspect rather than reloading, you first tell the engineers that “We have a plan in place to get your RSUs back up to being worth $9 like they were.” You reload when the engineers realize there is no way that’s going to happen.
“Of course you take less salary for an established extremely valuable existing stock (your AAPL example).”
FB/Zynga wernt dot con 1 pre IPO
they had Established Second Markets where Guys Could and Did sell there Extremely Valuable Stock
RfR, are you actually arguing that receiving RSUs from Zynga in 2007 is directly comparable to receiving AAPL stock today?
If you believe that then no wonder you think people take $30,000 less in salary.
But here in the real world, things are different.
We were talking about facebook in 2009. Big, big difference, dude, not Zynga in year 1.
“RfR, are you actually arguing that receiving RSUs from Zynga in 2007 is directly comparable to receiving AAPL stock today?”
But When they were At $10 on Secend Market They were comparable to 10$ worth of AAPL
Specially to Guys who Took the Job There
Guys like jonny who Think there a Pig arent the ones Taking the Jobs There
Tipster, your $30,000 salary hit quote was about Zynga.
RfR: Could you please run spellcheck, your posts are painful to try and read.
And no, $10 of RSUs on the secondary market are not and never were worth $10 of a highly valuable very successful publicly traded company.
much of this is just nonsense.
bottom line is that all of this “social media” stuff is simply a bubble.
the bubble popped and FB is a symptom of that pop
get over it…if you want to “make money” on social media, then “short” don’t go long
^^Because that is what everyone is talking about, going long on social media.
I would like to “make money”, do you have any actual advise besides shorting social media. Becuase you said the entire USA economy is a pig that is going to get slaughtered. Short everything is that the plan?
yes, the USA economy is a pig too. did you know that in less than 4 years the US has packed on another $5 trillion in Debt or about a 50% increase since 2008??
look at the markets today, look at the market performance during May … consider the action a precursor of things to come
you want to go long stocks, then go long intl dividend payers like wmt or msft or ko to name a few. but the direction of the stock market is Down and the direction of “social media” pigs is Down
I appreciate you actually saying something in that post. I like ko as well.
You are only looking at public debt johnny, what has happened overall is that total economic debt has gone down and more importantly, debt/GDP has gone down.
Some of the debt has been transferred from private to public balance sheets via various mechanisms. Most of the risk has been transferred from quasi-private TBTF institutions like BofA to quasi-public institutions like The Fed.
bubble waiting to pop!
see this link too
another bubble waiting to pop and kill the avg person
only a 10% decline and not fundamentally driven
Zynga@$5.60: $5 in taxes owed.
10,000 RSUs worth $600.
Humdinger for housing.
That’s not the way that that works and either you know that and are being that way for effect, or didn’t pay attention to the ample instruction others offered. Either way you are a complete bore nowadays.
Ken, let’s hear you explain how it works. I’m curious.
Once again that is not my name, you creepily negative childish, stalker-lite troll. But 10000 RSUs @ 5.60 would be something like 33K minus the brokerage fee. No great sum, but not 60 cents each either.
Got it. So in your world, the tax basis is calculated on the selling price?
Good luck with that! LOL! (you prefer “Kenny?”)
Always with the little laughs and things. As if you made salient points in any of these threads, and didn’t let unsubstantiated numbers dangle. And no, that’s not it either. But Anon1 would be fine thanks, creepy loser. (What’s the obsession with bringing down the 4th wall anyway, as you’re not an actor or a participant?) Anyway, with this you’ve reached the quota of words you’ll get out of me for a while. You can finish the other trolls’ thoughts and be rude to whomever wthout my input, I am quite sure of that. I’ve said something. I didn’t merely mock something. Try to argue with substance, once. I’ll sit back and read how it goes. Maybe I’ll deign to speak to you. Maybe not. Probably not, as I bring the worst out of you it seems.
Sorry anon1, but you’re wrong.
Search “RSU taxed vested”
Zynga RSUs accrued prior to the IPO, vested at the IPO.
The shares were paid to the employee when they were worth $10, so they will be taxed at that value. Not only are income taxes due at the marginal tax rate, but 1.45% medicare tax will be assessed.
60 cents a share, that’s all they were worth yesterday. 10000x.60=$600
And there haven’t been material “brokerage fees” since 1999 when you were a web designer. You just move the shares to a discount brokerage and sell them for $10-20.
^^^10,000 x .6 has never been 600, not in 1999, not in the first tech bubble not ever. How can we be expected to accept your high-fallutin’ economic wizardry and salary comparisons when you can’t do simple math?
You are not taxed at ‘vesting’ you are taxed when they can be traded.. i.e. when the lockup expires. So if an employee had 10,000 they’d be taxed on the value last Monday. And could have sold last Monday.
“the employee is taxed at vesting, when the restrictions lapse, unless the plan allows for the employee to defer receipt of the cash or shares.”
Hey, at least he is consistent and no matter how many times he multiples $0.60 x 10000 he comes up with $600.
@Sparky: Oh crap, you’re right. Did the math wrong in my head. $6000. It doesn’t really change anything.
@The accrued shares vested as of the IPO date. The “restrictions” described in the article are the restrictions regarding the RSUs being convertible to cash or stock. Until the restrictions lapse, if you quit, the RSUs are forfeited, and thus, you can’t be taxed on something that hasn’t been irrevocably transferred to you.
But once those restrictions lapse, you get restricted stock and that is a taxable event. Now the restricted stock can’t be sold for 6 months, but that doesn’t mean the stock wasn’t transferred to you and thus is income. If you quit in that period, you still won the stock. They don’t take it back. Thus, that restriction doesn’t affect the taxes.
So Sparky wins. $6000. Maybe they’ll buy in Pac Heights with their new found riches?
“Either way you are a complete bore nowadays.”
“I’ve said something. I didn’t merely mock something.”
R, you are confusing “vesting” with “end of lockup period.” Two different events. Taxes are based on the first, and the RSUs are vested at IPO. Think of it this way – if (like dot-com 1.0) znga stock tripled between IPO and lockup instead of halving, the employees’ tax bite would not also have tripled because it was “worth” 3X more after the lockup (the gain would have been taxable as capital gains but not as ordinary income). But it cuts the other way here. Big time.
Anon: You may be right. But Fidelity says different in the link I showed. I’m going to go with them.
“when the restrictions lapse” means when the lockup is over.
The zynga RSU agreement is online.
Vest is at IPO. Sorry.
I just reviewed the grant agreement linked by Tipster, and it looks like he’s right. Zynga RSUs vest at the IPO, and so it’s Tipster FTW.
Something analogous happened back in the tech crash of 2001-03 with respect to options. Many naive tech options grantees exercised their options, and then elected to try to hold their shares for a year in order to gain favorable long term capital gains tax treatment, only to watch the shares collapse, leaving them worth much less than the tax that was due in respect of their initial exercise. As I recall, there were some specific tax regs promulgated to lessen the sting, but it remained that the anticipated windfall effectively evaporated.
Just like with ZNGA.
why the fascination w/ZNGA “RSUs”??
boil it down. why does anyone care??
ZNGA is a pig and is in process of being slaughtered.
whether you own RSUs or open market share, you will not see much wealth creation, if any.
if you want to create wealth via ZNGA, fascinate yourself w/shorting it
It’s up 5.75% today, when should I short that pig?
What’s amazing is how much the press loves to hype the “Zynga millionaires” just before the IPO, but never follows up.
For example, look at “the 1000 facebook millionaires”. If you track that back, a wealth management firm that had a few facebook employees as clients figured out the typical amounts of stock people were getting and identified the number at 850. The press changed that to “about 1000”. However, the 850 was 600 at the IPO and then 250 later as shares vested. So the number was really 600, but was reported as 1000.
But that was assuming the IPO price. I’m sure they could tell you exactly how many there are at todays price, but obviously that’s a much lower number and not worthy of the headlines like 1000 was.
It also was before taxes, and as you can see, taxes can take a huge bite, and sometimes the whole shebang.
Zynga probably had a couple of dozen people who really netted anything more than the price of a really nice car, in contrast to the hundreds of millionaires originally reported. By the time the lockup expires, facebook will probably have about two hundred people in similar situations, after taxes. The press will never say anything about it. 1000 will be the number that stuck.
Even if fb held its IPO price, the taxes alone would have reduced the number of millionaires to a much lower number, but that doesn’t sell newspapers, or dreams. Sorry to disappoint you. And for every fb employee who will net even $200K, there are 1000 employees at other startups taking reduced salaries who will net nothing.
It’s basically like the gold rush. The papers had reports of miners making bank here and there, but of course, what that really does is attract more miners, which helps sell pick axes, shovels, jeans and all sorts of other advertisers of the newspapers, and that helps the newspapers. The saloons did well. The vast majority of the gold rush people who chased the gold rush did not make anything. The people selling pick axes make all the money. They never make headlines, nor do they want to. They want to attract miners, not pick axe shop keepers.
So go ahead and follow the headlines of this guy or that finding a gold nugget. The reality is quite different. The benefit of the fb IPO is not the fb-ers buying houses, it’s the ability of the Realtors to terrify the non-fb-ers that they need to buy now, and pay any price to do so, “before several hundred Zynga millionaires and a thousand facebook millionaires all immediately spend every dime on a house”, which is of course, not going to happen because after taxes, at the current prices, there aren’t nearly that many.
You’re confusing vest and when taxes are due. Yes, RSUs vest at IPO, but they are still under sell restrictions, so according to Fidelity, you don’t pay taxes.
You”ve not earned the right to summarize + realtor bash when it comes to these matters, Tipster. Here you are AGAIN pretending like FB and ZNGA are the same. Once more, numbers were used at a valuation of 19 dollars, well under your IPO number prattle, and the payout dwarfed your fake 75K nonsense. Give the “I’m going to repeat myself 11000 times” m.o. A deserved rest..
“You’re confusing vest and when taxes are due. ”
From NJVs link few Days Ago
“Here’s the kicker: The IRS taxes RSUs as ordinary income on their full market value when they vest. The logic is, “Hey, the company’s giving you valuable stock. That’s part of your regular compensation and you should pay taxes on it when you get the shares, not when you sell them.”
“”With stock options, there’s a lot of planning you can do around taxes — exercise some, hold some, spread out the timing,” says Ray Thornson, a San Francisco-based managing director of tax firm WTAS. “With RSUs, there’s absolutely nothing that you can do about it.”
DataGuy had IRS qute Too
The only issue that matters is when does the asset no longer have a risk of forfeiture. A lockup is irrelevant.
At the time the RSUs vest, they transfer and its income. An ambiguous phrase in a fidelity link is kind of a weak argument to hang your hat on.
This is a much more detailed treatment (see the Q&A #3 on the second to the last page of this link):
I realize you guys want to hold on to this view for dear life, so I’m done discussing it with you, but anyone who reads the link above will realize that it is the risk of forfeiture that determines the date of transfer, and thus the value of what got transferred. The risk ended at the IPO. Thus, it gets valued at the IPO and you pay taxes on that value. Those RSUs really turned out to be nearly worthless.
So it’s debatable then. Your etrade link doesn’t speak to any restrictions, while fidelity does.
And Tipster, just because you have obvious long held views that “you want to hold on to” doesn’t mean everyone else does.
Well, I guess that’s not true, I have a longheld view that I will not let go of: That we should try and be accurate and factual in our statements, not just make shit up.
short it NOW! only 1 minute left!!
Sparky, thankfully you didn’t take johnny’s advice, ZNGA up more today.
yeah, up huge! LOL
Maybe you don’t understanding how ‘shorting’ a stock works johnny, but if it’s up at all, you lose money. And it’s costing you money to borrow it, so you’re losing more.
And ZNGA is currently up like a quarter since your proclamation to short it.
And now it’s down! ka-ching!
There is no margin call with such tiny swings.
Still up ~20 cents since johnny said to short it.
Who said anything about margin calls?
Not that you expect immediate results, but in one day, johnny was right. Down 10 cents a share.
No, ZNGA still up since johnny issued his short call.
Eddys the Zynga Monster
Jonnys the Zynga Pig
We All Get That
How About Victory Danses every Five Bucks
Not Every 10 Cents
Zynga: new low. Employees get 55 cents per share after taxes for RSUs vesting at the IPO.
New low for zynga. Under $5. Wonder how long before we see the deluge of zynga employees’ homes come on to the market as they need to raise cash to pay their taxes? Unless they followed johnny’s advice to short.
ZNGA – a total pig – enjoy the pork! lol
Hope sparky took johnny’s advice, $1 per share drop in six days, 16% move. Where is R?
Right here. I’d cover that short now, I think it’s being artificially pressured down due to recent press.
“How About Victory Danses every Five Bucks”
Didnt have to Wait Long
“Zynga was supposed to be public by now, but didn’t want to sell the company with the currently available valuations. It’s only going to get worse.
That is, until there is a “Loudcloud” event, where the IPO goes straight downhill from minute one and it’s all over.”
Zynga is a real company with real revenues and huge profits. Impressive growth. So I think the IPO will be successful and may buck the trend of Tipsters “pick the highest peak on day 1 and mock losses” game.
Posted by: eddy at November 9, 2011 5:51 PM
zynga will not be a monster ipo.
i’m afraid your thinking is wishful or maybe magical
sorry, but lux real estate prices aint going up. there is no demand, except for about 200 yards east to west on broadway.
Posted by: johnny at November 10, 2011 8:25 AM
Dot Bomb 2 Blowing up Way Faster VS Dot Bomb 1
“Right here. I’d cover that short now, I think it’s being artificially pressured down due to recent press.”
IPO went Great
Zynga HQ just on a Busy Street
” It’s been a month since Facebook’s IPO fell flat and in that time, the market for initial public offerings has collapsed.
No company has gone public since May 18, compared with 19 in the same period a year ago. Fourteen offerings have been withdrawn or delayed, according to Dealogic.”
“”There were a lot of venture capitalists and entrepreneurs that really have been waiting for Facebook to go public,” says Sam Hamadeh, the CEO of PrivCo, a research firm that follows privately held companies. “Everybody’s been told just wait `til May 18, Facebook is going to pop, everybody will get very excited about it … and then you have the opportunity to go public this summer with that halo effect.””
Gotta Put this in for Truthiness
“Of the fourteen IPOs that have been postponed since May 18, it’s unclear if any of those cancellations relate directly to Facebook’s experience. One was Tria Beauty, which makes laser hair removal devices and planned to raise $64 million. Another, Corsair Components, makes computer gaming parts. Both cited poor market conditions.”
Hooray, Zynga, currently at $4.95, means the RSU holders who haven’t yet sold, lost 5 cents for every RSU that vested at the IPO, after taxes. They also took a salary hit to get these “valuable” rights that ended up costing them more in taxes then they can get.
ZNGA getting slaughtered.
only so long before music stops and manipulating financials becomes exposed.
Manipulating financials? From what I’ve read, what’s at issue this week is traffic and usage decline as well as an analyst downgrade.
From the Los Angeles Times’ Company Town blog today, Zynga shares slide to all-time low:
The closing price today was $5.02, or just over half the IPO price of $10 when the company debuted on the Nasdaq in December.
Old Web 2.0
Guy Sells Shares of Socail Network to buy House
New Web 2.0
Guy Sells House to buy entire Social Network
“The Wall Street Journal is reporting that Digg cost Betaworks just $500,000 according to three unnamed sources, adding that such a price is “a pittance for a company that raised $45 million from prominent investors including LinkedIn founder Reid Hoffman and Marc Andreessen.”
johnny, you’re rich! znga getting hammered after terrible financials. Down 40% after hours to about $3.
But I’m sure, just SURE, that we’ll soon see the hordes of znga employees buying up SF houses ’cause the realtors told us so.
Down 40% After Hours Gotta Give Jonny Guy Mad Props Ed
LIVE: ZYNGA CUTS FORECAST, STOCK FALLS 40%
Just Vote Pinkus Out
Item 5.01 — Changes in Control of Registrant
On or about July 24, 2012, Mark Pincus, the Chairman, Chief Executive Officer and Chief Product Officer of Zynga Inc. (the “Company”), became the beneficial owner of approximately 50.15% of the total voting power of the Company’s outstanding capital stock as of July 24, 2012. Mr. Pincus’ voting power increased to over 50% of the total voting power of the Company as a result of sales and/or transfers by other stockholders of the Company of Class B Common Stock,
A company whose main business concept is the sale of virtual assets for actual cash is bound to have both customers and small investors go for the door one day.
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