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FortWayne
2012 May 20, 1:59pm
They have to hold the price up for the next few days, after that they either take losses or as they hope gains.
As you noticed, the only way to hold the price up is to create artificial demand...
If they could only figure out a way to sell all their stock back to themselves at the artificial price, and end up having someone else own them. I bet the banks can figure out a way to do that, somehow.
CBOEtrader
2012 May 20, 3:58pm
Just pass the shitty stock on to mutual fund customers.
Is this what happens?
Seriously, what am I missing here?
MS has a market cap of $24 billion, but they bought $10 billion worth of FB stock in friday's IPO. MS had an average daily VAR of 133 million during the last quarter. Since this trade's VAR should be 162 million shares times an absolute minimum daily expected st dev using the vix as a baseline vol input this one trade adds a minimum estimate of $90 million to the VAR. Any risk manager would set it much higher. Whether through their own VAR or losses, they will be forced to sell, which could snowball...potentially into a system wide banking collapse.
Relax people . The banks can't blow out , blow up or meltdown .
The government steps in along with the Fed . The bill goes to the taxpayer . Win win !
lostand confused
2012 May 20, 5:25pm
Maybe the FED will buy Facebook stock as part of its junk asset program??
I was reading on Dr. Housing Bubble I think, that the FED has pumped well over 10 trillion into the banks, but the total outstanding mortgages is only 9 trillion and change. If they had bought all the mortgages and shredded them instead-well I guess when you have Jamie Damon as member of the New York Fed-can't expect anything different.
To be fair, most of that $16 billions are belongs to these 3 banks' mutual funds.
"Cannot short Facebook yet? Short the bank who owns it !"
CBOEtrader
2012 May 21, 12:24am
To be fair, most of that $16 billions are belongs to these 3 banks' mutual funds.
"Cannot short Facebook yet? Short the bank who owns it !"
The mutual funds own the shares day one? pump and dump
"To be fair, most of that $16 billions are belongs to these 3 banks' mutual funds."
Please state your source for that. Everything I've read states that it is unknown what percentage of shares bought were for customers, but every commenter I've read, including on Forbes, strongly suspects that the ratio is weighted mostly to shares bought to keep the price from deservedly tanking to where it belongs.
Tenpoundbass
2012 May 21, 1:46am
Facebook will be the biggest financial blunder in the history of finance. There are two certainties, you were born to die one day, and all websites(technology companies) will fade in obscurity one day, as they have a shelf life.
Tech companies that have hardware and products behind them such as Apple or even HP, at least have physical property behind it. When Facebook circles the drain and goes down the brown tube of despair. It will be worth nothing more than a room full of servers. Craigslist would make a more successful IPO than Facebook. I predict in 5 years FB will be less relevant than MySpace is now.
The constant meddling and using it to pry on peoples private lives and use it against people and for agendas to sink people, will be the single biggest driver of its down fall.
I think for now, it's America's favorite real time reality show, "Who will disclose TMI today? and How can we use it against them?" But like all hot shows, the series comes to an end.
Anyone loses money on FB will be a bigger fool than those who bought Real estate in 2007-8.
CBOE trader said: MS has a market cap of $24 billion, but they bought $10 billion worth of FB stock in friday's IPO.
I'm assuming this is a typo. Should read MS has a market cap of $240 billion.
Facebook stock is a good hedge against financial armegeddon. Someone told me "yes but you cannot eat facebook",,,to which I laughed and thought. "Wow, this jackass never soaked a stock certificate in a bowl of soy milk, and enjoyed it for breakfast". Sucker!
Tenpoundbass
2012 May 21, 7:16am
,to which I laughed and thought. "Wow, this jackass never soaked a stock certificate in a bowl of soy milk, and enjoyed it for breakfast". Sucker!
That's great!
Tech companies that have hardware and products behind them such as Apple or even HP, at least have physical property behind it.
Apple and HP dont matter.. the real physical property are semis, storage, and software.. you create what ever you want from that and put a label on it, be it HP, Apple, Dell, IBM or what ever. Dont know if Apple HP or Dell will be around in 20 years... but Semis and Storage will be around for the next 100 plus years in one form or another. Intel, Cypress, Seagate, Appled Matl do matter and will matter for many years to come.
So stop looking at the pretty box and label and start understanding the guts of real technology... and yes, we do need to make this stuff on our shores.
CL
2012 May 21, 10:37am
Facebook stock is a good hedge against financial armegeddon. Someone told me "yes but you cannot eat facebook",,,to which I laughed and thought. "Wow, this jackass never soaked a stock certificate in a bowl of soy milk, and enjoyed it for breakfast". Sucker!
He probably gets them new-fangled digital stocks.
marcus
2012 May 21, 4:04pm
First, 86% of all shares IPO'd ended up in the hands of the underwriting banks. Wow!
I wonder how much of that was lent to other banks or themselves for the purpose of shorting FB. Wouldn't it be somewhat more complicated or maybe even impossible to know how "long" FB the banks really are ?
Couldn't the limited upside on the day of the IPO (i guess it spiked up a couple times), in fact be due to the actual holders of the stock shorting it? IT would make sense that rather than dump it, they would hold it and short it, since they represent the interests of people who still own 80% of the stock that hasn't even been put on the market yet.
Dan8267
2012 May 22, 12:22am
Unlikely, but is possible.
I would say very unlikely and here's why.
Holding onto Facebook stock, or any stock for that matter, has zero costs. I'm not talking about the loss of opportunity or not selling at the right time. I'm talking real costs.
Holding onto houses, in contrast, has considerable costs: maintenance, taxes, HOA fees, utilities. And if you try to ignore these costs, bad things happen. If you don't keep the heat on in the winter up north, pipes freeze and bursts. If you don't keep the A/C on in Florida year round, mildew and rot sets in. And then you have to keep the pool clean, etc.
Despite all these costs, banks have held onto houses for a very long time in order to not flood the market. Holding onto Facebook stock for a long time has zero costs, and eventually, they will probably sell it for more than they bought it for. It may take a long time, but there's little pain in waiting.
CBOEtrader
2012 May 22, 3:00pm
CBOEtrader says
Unlikely, but is possible.
I would say very unlikely and here's why.
There are carrying costs to stocks, but that isn't why I was wrong.
Just pass the shitty stock on to mutual fund customers.
This is what happened.
I am pretty clueless about IPO's, and didnt know the lead underwriting company could trade it's own IPO'ing stock for its clients first day. I have since read articles claiming MS was short-- point here, is no one outside the company really knows their position vs their customers' positions.
EBGuy says
CBOE trader said: MS has a market cap of $24 billion, but they bought $10 billion worth of FB stock in friday's IPO.
I'm assuming this is a typo. Should read MS has a market cap of $240 billion.
Uh, no. You are thinking of MSFT, not MS.
http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/9277128/Banks-move-in-after-shaky-start-to-Facebook-IPO.html
A few very interesting stats have come out from friday's FB session.
First, 86% of all shares IPO'd ended up in the hands of the underwriting banks. Wow!
And shit, gentlemen, it gets better...
These banks now own around $22 billion in FB stock!! Holy shit, can you say selling pressure? I expect $38 to become a strong resistance level very soon.
Here's the infuriating part...
That $22 billion is enough to crash these banks, with Morgan Stanley alone holding onto a $10 billion notional bet. They've bet all our ranches on FB, (or all our bank deposits anyways). Are they willing to double down to protect the $38 price? There are no options to cover FB wingrisk, as in most stocks. There is no correlated product to FB which could be used as a hedge...with the now unfortunate exception of the bank stocks themselves.
Here's the real question: if these banks start to sell their $22 billion in stock, and FB drops, could this create a feedback loop which sparks the potential to crash the US banking system? Unlikely, but is possible.
Is this the right time to take a speculation on little puts in bank stocks? At what point would the US government step in to buy FB to save the banking system? Imagine our US government with all that private information...
As the Sports Guy often says, "I think I just puked in my mouth."