August 19, 2012

Bye Bye Bubble

Here’s some sobering news for those of you expecting the Facebook Effect to rescue the Real Bay Area’s housing values.

Zuckerberg Admits Facebook’s Plummeting Stock Is ‘Painful’ To Watch During A Company-Wide Meeting

120817-facebook-zuckerbergSeth Fiegerman, Business Insider  | Aug. 17, 2012, 6:43 AM

Facebook is finally acknowledging that its employees may be just a little bit concerned about the company’s plummeting stock.

According to The Wall Street Journal, Facebook CEO and cofounder Mark Zuckerberg admitted that the stock’s decline is “painful” to watch for some employees during a company-wide meeting earlier this month.

The meeting itself was reportedly part of a larger initiative to boost company morale. Zuckerberg had previously avoided talking about the stock with employees, preferring that everyone stay focused on their work, but in recent weeks, Facebook’s senior management started worrying that the stock’s poor performance might hurt employee performance.

Guess watching Facebook’s plummeting stock is just fine from the comfort of your own office.  But don’t count on cashing in those options to buy yourself an RBA mansion.  The employee lockup period is still in effect, but early investors are dumping shares now.

Now check out this article, from the same publication.

DEAR FACEBOOK EMPLOYEES: Here’s The Truth About Your Stock Price

120817-facebook-zuckerberg-2Henry Blodget, Business Insider  | Aug. 17, 2012, 11:59 AM

Facebook’s stock has dropped by half since the IPO three months ago.

And the stock price is now well below the level at which most employees have been granted stock in the past 18 months.

This means that most current and former Facebook employees are worth far less than they were a few months ago.

Facebook’s stock crash is also hurting morale at the company, and damaging perception of the company’s business and brand. The impact is big enough that Facebook CEO Mark Zuckerberg, who has been crystal clear about his desire to ignore the stock price, admitted at a company meeting that the stock crash has been “painful” for everyone.

Here’s the important consideration from this more in-depth piece:

With the Facebook employee lock-up releases coming in October and November, this isn’t just an issue of morale and “paper net worth.” Current and former Facebook employees have been counting on the stock to buy things (houses, for example). So it’s a matter of near-term financial planning.

So, are home values dropping in Facebook-friendly commute zones?  Let’s have a look.  First, here are Redfin’s stats for Palo Alto home sales.  The advantage of Palo Alto over Menlo Park is that there are very few questionable areas in the former.

120817-facebook-pa-redfin

120817-facebook-mp-altosYou could look at the listing prices one of two ways.  Either the 22% post-IPO listing per-square-foot increase was nothing but irrational exuberance, or Spring Bounce was unusually quick this year.  If we exclude the May and June numbers, we could look at the chart as showing a slow climb for 2012.  That’s if you ignore the 18% drop between mid-January and mid-February, though.

120817-facebook-mv-zillowAltos Research’s Market Action Index agrees with this graph, showing a peak right at IPO time and falling back almost (but not quite) to 30, which is a balance between a buyers and a sellers environment.  (31 indicates the ball is still in the sellers’ court.  Mostly.)  The MAI graph above is for Menlo Park, or ground zero for Facebook.

Unfortunately Zillow’s valuation tools are too laggy to show the post-IPO collapse, with the most recent valuation dated to June.  We’re looking at Mountain View this time, which is no doubt polluted by the conflicting Google Effect.

How would you recommend we best demonstrate whether Facebook stock’s disappointing results are affecting the RBA housing market?  What statistics would you recommend, and from where?  One thing we’re seeing is fewer homes going into Double-Secret-Probation Pending-Do-Not-Show status where the listing photos get yanked until the home closes.  And that’s good news for all fans of this site.  Not only does a picture equal a thousand words, it also equates to many more thousands of dollars.

We aren’t going to say in which direction those thousands are moving.

 

Comments (28) -- Posted by: madhaus @ 5:01 am

28 Responses to “Bye Bye Bubble”

  1. Sunny(vale) Kim Says:

    People who are claiming FB weakness is only on “next few weeks” probably haven’t seen this chart – especially number of shares on Nov 14.

  2. waiting_for_the_fall Says:

    Whoever bought FB at $28, as recommended by our resident stock adviser, will have a very long wait for the price to go that high again, if ever.

    My guess is, FB will drop below $10 by next year, maybe even below $5.

  3. Sunny(vale) Kim Says:

    “Facebook effect” is a myth so far. Most of the employee’s couldn’t sell their options and RSUs yet (expect those who quit FB). And by Nov when they will be able to sell, there won’t be much value of FB, unless they come up with a grand plan of monetizing mobile market. There was only one effect this summer – Interest Rate Effect.

  4. Sunny(vale) Kim Says:

    correction: expect those who quit FB = except those who quit FB.

  5. Sunny(vale) Kim Says:

    Whoever bought FB at $28, as recommended by our resident stock adviser,
    —-

    Ha ha! I liked the title RSA (resident stock adviser). RSA of RBA.

  6. waiting_for_the_fall Says:

    I want to know if he follows his own advise and how many shares of FB he’s buying on ‘weakness over the next few weeks’.

  7. Petsmart groomer Says:

    The Real™ Facebook employees sold their shares on the secondary market already.

    I hope OnLive employees did the same.

  8. Petsmart groomer Says:

    > I want to know if he follows his own advise

    Weakness was when Facebook reached $26. Real™ weakness in is the next few weeks as our resident stock adviser mentioned yesterday.

  9. waiting_for_the_fall Says:

    ‘Some people never seem to learn that the best time to buy something is when everybody else thinks the sky is falling.’

    I would like to know how people feel in November who follow RSA’s advice by ‘loading up’ on FB now.

  10. Petsmart groomer Says:

    > We’re looking at Mountain View this time, which is no doubt polluted by the conflicting Google Effect.

    Don’t forget the LinkedIn effect: IPO price was $45, lockup period ended on Nov 21 last year and it is now over $100.

  11. nomadic Says:

    Some people never seem to learn that the best time to buy something is when everybody else thinks the sky is falling.

    The key has always to know when there is underlying value. Sometimes a stock is cheap for a good reason. Buffett 101.

  12. Sunny(vale) Kim Says:

    Weakness was when Facebook reached $26. Real™ weakness in is the next few weeks as our resident stock adviser mentioned yesterday.
    —–

    I intentionally did not provide that link earlier to give him more room for making farther contradictory statements. Our RSA does not remember all the things he wrote in past. Hence all the contradictions.

    Anyway, let me preempt RSA’s next claim – he already sold those $28 FB for $33. There is no way RSA can make mistake and lose money. He has such a good crystal ball – even FB board member Reed Hastings does not have that.

  13. Crissa Says:

    But I was saying yesterday, looking at a Zillow chart I realized they had ret-coned this springs’ prices to about 20% lower than they had said there were. So the history says Zillow called the prices as being lower than Zillow actually called them…

  14. SEA Says:

    FB weakness started at $37.99.

  15. madhaus Says:

    Crissa, if what you’re saying is true, that’s actually pretty slimy of Zillow (unless they explained why they #retroactively reset their historical values). Can you find some proof, e.g. same page today vs using Internet Archive or a website entry showing the old data?

  16. nomadic Says:

    How is that different from retroactively reporting on your stock-picking success?

    ;-)

  17. Banker East Says:

    It’s kind of disappointing to come back here and find that nothing has really changed. I for one would like to hear from real perspectives on FB.

  18. SEA Says:

    Yup, nothing’s changed: The RBA keeps doubling every 10 years, or much sooner.

  19. nomadic Says:

    This appears to be a reasonable perspective on FB, in spite of it being from May:
    http://www.gurufocus.com/news/177535/a-rough-estimation-of-facebooks-intrinsic-value

    An estimate of book value of about $13.3B at the end of June versus a current market cap of more than $40B tells me investors should short the stock or have extreme faith in its ability to grow its way out of the hole they’re in. Do you believe in their strategy and ability to execute? (Well, do you punk? lol)

  20. Sunny(vale) Kim Says:

    Real™ weakness! And now Real™ perspective on FB! Real™ perspective was provided by someone who has a friend working for FB. According to him:

    …business is doing extremely well, and they will grow a lot in the next few years…

  21. SiO2 Says:

    13,15, when I bought my house a couple of years ago, the deal price was significantly lower than what Zillow said the value was.

    Now, the historic chart shows that Zillow was exactly correct, the predicted value was the same as the sale price. I think they revealed some sort of reset about a year ago, but I don’t know if they are continuously “adjusting” the historic values.

    Definitely calls into question how useful the Zestimates are, if they won’t even stand by their historic work. It’s still a useful site for actual sales value and for comps but the Zestimate is not that useful.

  22. CB Says:

    I wish Zillow reported a Zestimate for stocks.

  23. SEA Says:

    It’s only the most illiquid asset that Zillow guesses the value. The only less liquid asset is unregistered stocks.

  24. Crissa Says:

    Yeah, no, I don’t. I didn’t keep the emails from their mail service telling my home’s value dropped from its peak this spring… But the records for the whole town have been retconned to be alot lower.

  25. nomadic Says:

    Is this the Real Weakness RE was waiting for?

  26. herpderp Says:

    Peter Thiel unloaded 20 million shares Thursday the second the lock-out window closed. Nothing screams “tewtally aw-sum investment” like a member of the board cashing out as soon as humanly possible.

  27. Sunny(vale) Kim Says:

    Some people never seem to learn that the best time to buy something is when everybody elsePeter Thiel thinks the sky is falling.

  28. Crissa Says:

    Lock-out periods should lock out the execs longest.

    I swear, the risk is inverted in these deals from where it should be.


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