"So between just these three, some $40 billion has been extracted from pension funds and other last-sucker-in-line investors."<p>This is incorrect, David takes the change in market cap and then equates that to losses in pension funds. But this does not represent the state of affairs because when companies go public they don't put <i>all</i> of their stock on the market, rather they put a small percentage of the company on the market (called 'the float') and it is those shares IPO investors get to buy. For Groupon this was an notably small percentage of the company (which caused short sellers to complain that there wasn't enough liquidity to short the company).<p>So lets be generous and say it was 10% of the companies involved then you are looking at a change in value that is 4 billion not 40 billion. Next pensions invest in hedge funds just as much as they do companies, and those hedge funds took a good chunk of that money because they are shorting these companies with questionable valuations. They could be having a great time with the IPO market.<p>So yes, there are investors who are holding GRPN, FB, or ZNGA who have lost money but it isn't a travesty, and it isn't 2000 again, and it isn't newsworthy. A pension fund might own a big position on Ford (NYSE:F) which they bought at the beginning of the year for north of $12 share and its now worth $9. Doesn't mean the 'music has stopped for Automakers'.<p>If you look at CalPERS [1] (one of the largest retirement funds at 236 B$) you will see they diversify their holdings pretty well.<p>[1] <a href="http://www.calpers.ca.gov/eip-docs/about/pubs/annual-investment-report-2011.pdf" rel="nofollow">http://www.calpers.ca.gov/eip-docs/about/pubs/annual-investm...</a>
I'm sure I'll burn karma, but let me say it again: there <i>are</i> companies out there generating real, long term value, but the HN news stream ignores most of them.<p>A perfect example is Guidewire, the company I worked for previously, which is up nearly double its IPO price and is rocking the earnings, which has been voted the best place to work in Silicon Valley for two straight years, and which has contributed a JVM language back to the community, but which is in an unsexy industry (insurance, enterprise software.)
I'd say Groupon and Zynga aren't in the same category is FB.<p>Zynga made it big on those "free" ringtones that would cost you $10 a month for the rest of your life. Groupon is a ponzi scheme.<p>Both Zynga and Groupon did quick IPOs because they had to get an exit before they fell apart. Many agents on Wall Street have aided and abetted this (underwriting banks, anyone who bought that stock for you or who encouraged you to buy it, etc.) It's stupid short-sighted thinking from the industry because it harms investor trust (in short supply today) and will hurt future IPOs.<p>Facebook is a real company that delightes customers. They only did an IPO because they couldn't keep up being a private company the way they were. (Blame regulation) The big weakness of Facebook is an ARPU that's south of $10 a year... It's believable they can get it up, but I' afraid being public means investors will force them to be tactical rather than strategic which could kill the goose that lays the golden eggs.<p>FB has some real problems, in particular a $10 /year ARPU
Plenty of people were warning about Groupon and Zynga being unsustainable businesses BEFORE they went IPO, and I have no sympathy for those that played that risky game. It's disingenuous to be outraged about those two stocks being below the IPO price when it was a common sentiment before they went IPO.<p>Facebook is actually a real business, making $1B/quarter in revenue. Maybe they should have went IPO at $8 and allowed all those high net-worth investors who could buy at the IPO price to double or triple their money. But why should they do that?<p>I'm beginning to think that the stock market is not a place for individual investors, with all the computer traders and momentum investors. But that's a different point entirely.
This is a typical anti-finance rant, with no substence. The only thing that would have made it worse would be a blantently political statement any of the parties.<p><i>So between just these three, some $40 billion has been extracted from pension funds and other last-sucker-in-line investors. While, in the process, soured many on the idea of the public markets and enriched investment bankers hawking the toxic stocks. Hey, at least someone got out while the going was good.</i><p>Net out what VCs got which also goes to pension funds before calculating the $40B. Don't mention investment bankers while not also mentioning founders who sold shares and took a far greater percentage of the IPO cash.
An article whose logic I'm not particularly enamored of, but whose underlying import probably matters, as magixman noted (<a href="http://news.ycombinator.com/item?id=4312648" rel="nofollow">http://news.ycombinator.com/item?id=4312648</a>)<p>IPO valuations, and post-IPO stock performance, have a lot to do with funding rounds for startups. This affects not just startups, but the overall employment and economic climate, especially in startup-heavy locations such as the SF Bay Area.<p>Given that much of the counter-cyclical economic activity in the Bay Area is a consequence of startup-related companies, I'd expect a fairly broad overall cooling, at best, from the Groupon / Zynga / Pandora / Facebook, et al, experiences.<p>David (no last name)'s financial logic is flawed. His concerns aren't.
> <i>some $40 billion has been extracted from pension funds and other last-sucker-in-line investors</i><p>Correct me if I'm wrong, but that would only be true if everyone in all the companies had sold all their shares.<p>I don't know what percentage of shares in Facebook, Zynga and Groupon became publicly availably post-IPO, but does Zuckerberg's continued stake in Facebook make him a "last-sucker-in-line" as well? I doubt it.
Did anyone here actually purchase shares of Facebook, Groupon or Zynga? I never read one positive thing saying that their share prices would go up, it was always the opposite. I just assumed people who took a bath on those stocks were less tech-savvy investors trying to be "hip" with fresh IPO stock.
Those "pension funds and other last-sucker-in-line investors" are to blame for not doing good diligence.<p>FB, Zinga, etc. cannot be accused of not leaving money on the table.<p>Updated: The OP did not accuse anyone, it's just my feeling toward those IPO. Big funds, with high management fees are to blame!
Not sure what the lesson is here, other than "shares sometimes drop in value".<p>I think most people understand that shares in tech startup IPOs are a fairly high risk business.
Those "last-sucker-in-line-investors" could have also invested in LinkedIn [1] and Zillow [2], both of which have done reasonably well after their IPO.<p>Easy to pick a company to use to reinforce a message (37 Signals would have made a better case against non tech company GM [3], which had hype <i>and</i> government assistance and is still on the way down)<p>[1] <a href="http://finance.yahoo.com/q/bc?s=LNKD+Basic+Chart&t=2y" rel="nofollow">http://finance.yahoo.com/q/bc?s=LNKD+Basic+Chart&t=2y</a><p>[2] <a href="http://finance.yahoo.com/q/bc?s=Z+Basic+Chart&t=2y" rel="nofollow">http://finance.yahoo.com/q/bc?s=Z+Basic+Chart&t=2y</a><p>[3] <a href="http://finance.yahoo.com/q/bc?s=GM+Basic+Chart&t=2y" rel="nofollow">http://finance.yahoo.com/q/bc?s=GM+Basic+Chart&t=2y</a><p>* edited for formatting
Selective bias in action. LinkedIn also debuted and is far from a flop and its too early to call demise of Facebook.<p>Sigh, SVN used to a blog about the small guy, the startup people and advice from the trenches. Its sad to see it deteriorate into banal arguments without any merit.
Each of these are different / unique cases. Perhaps only Facebook actually fits the 37 Signals narrative (that of a company overvalued because people were too optimistic about potential). Zynga and Groupon both had great revenues and from that perspective were deserving of their valuations. However Zynga is losing customers because they didn't innovate in their space and Groupon's financials were misleading in the first place.
If you have strong thoughts on this, consider contributing to this related question on Quora as well: <a href="http://www.quora.com/Venture-Capital/Why-do-people-care-about-valuations-of-other-companies" rel="nofollow">http://www.quora.com/Venture-Capital/Why-do-people-care-abou...</a>
I'm tired of "Stocks are gambling" nonsense like this. Some companies are valued on the fundamentals. In fact the best investment in the world right now is AAPL, which trades generally between 12-14 times its trailing EPS. This recent "miss" was a "bad earnings quarter" and even then it grew at %20 year over year. (The lowest in the past 4 quarters by far).... but if Apple was a company that only and always grew at %20 year over year, then "on the fundamentals" Apple should be trading at 20 times EPS.<p>This makes Apple a screaming deal. There are other good stocks out there, and if <i>you</i> decide to trade on the fundamentals, you can make great returns. Its not very difficult.<p>The thing is, part of the reasons it is so easy is that almost the whole world has convinced themselves that its impossible and instead doesn't invest or puts their money into index funds.