Facebook IPO Drinking Game

This is probably the coolest thing to come out this week.  Something that finally got back to the college roots of Facebook and I secretly believe is the product of the last Facebook Hackathon.  The Facebook IPO drinking game.  You might want to wait before the stock opens to get started.

Opening Bell on Facebook

If you do get into the Facebook action, I wish you luck in your financial endeavors.  If you got in on the IPO congratulations, you’re one of the few and should be set for a first day profit, if you sell.  For the not so lucky, the scheduled open is set for 11 a.m. eastern time.  I would plan on Facebook opening at that time, but don’t be surprised if it’s fashionably late.

Limit Orders, Please

If you plan on buying or selling Facebook in the open market today, here’s a few things you should know:

• The ticker symbol is FB.
• At the open, market orders won’t be accepted, use limit orders.
• Be patient and wait for your price.

Plan on a price spike easily over $40 at the open.  I’ve heard speculation into the $50s, $60s and even $100 by the time the market closes.

Last Call

• Facebook’s Business Model - Chris Dixon questions Facebook’s outdated, possibly unsuccessful business model and whether it can evolve to a more profitable one.

• So You Want to Invest in Facebook, Do You? Good Luck with That - Offers an insightful look at the different Facebook valuations floating around and for anyone buying on IPO day it eventually comes down to one thing, you’re betting on Mark Zuckerberg.

• The Facebook ($FB) IPO – the Enormous Upside Potential - As the title suggests, here’s the bullish side on the long-term potential of Facebook.  A must read for the long-term investors.

• GM to Facebook: I’ll Waste My $10 Million Elsewhere - Peter Cohan argues the bear case concluding it’s five times overvalued at the current IPO price.  Thanks to over exuberance he thinks it could top $100 by the market close.

• Facebook: The IPO of the Virtual Passport - I thought I’d end the Facebook link fest with the a great post about what the company has done to open up the world to its user base.

Cheers

Thanks to AAAMP Blog, Make Money Make Cents, One Cent At A Time, Personal Finance Whiz, One Smart Dollar, Well Heeled Blog, Portfolio Princess, 20s Finance, the Skilled Investor and Little Miss MoneyBags for sharing us with their readers.

Happy Hour: Facebook ($FB) IPO Reminders & Drinking Game is a post from: Novel Investor

©2012 Novel Investor. All Rights Reserved.

The IPO alone will give Facebook a valuation of $106 billion at the current IPO price.  The only reason I’d try to get in on the IPO is to flip the shares.  I’ll gladly take the quick profit, knowing there is too many people willing to pay too much for a company that doesn’t deserve the valuation.

The biggest concern with Facebook going forward is how will it turn all those friends and likes into big dollar signs.  So far it hasn’t found a way to do it.  If you think Zuckerberg, and the Facebook crew will succeed in doing so, go ahead and buy.  I’ll even wish you luck.  But I’m skeptical and have a few reasons to be concerned about buying on IPO day:

1.  There is too much of a novelty factor surrounding the IPO, just so people can say they own Facebook.

2.  It has 901 million active users and slowing.

3.  The company hasn’t been successful in monetizing mobile

4.  The Facebook hacker employees couldn’t come up with Instagram on their own.

5.  Normal lockout periods are 6 months, Facebook’s will only be 91 days.

6.  The lock out period hasn’t ended yet.

7.  It’ll be cheaper in 6 to 12 months.

8.  Zynga accounted for 15% of Facebook’s revenue so far this year.

9.  Zynga is building its own non-Facebook platform.

10.  Warren Buffett said so.

11.  At a $100 billion, Facebook will have a 100x P/E ratio.

12.  Social media fatigue.

13.  Irrational exuberance.

14.  Google.

15.  TV still has the best reach for advertisers.

16.  The chance the average investor will have an edge on IPO day is minimal.

17.  Zuckerberg has made it clear, he’s will to sacrifice short-term performance.

18.  59% of users don’t trust Facebook’s privacy policy.

19.  The IPO price was raised to $34 to $38, from $28 to $35.

20.  The stock will open trading higher than $38.

21.  The initial investors are selling 25% more shares because of the higher IPO price.

22.  Media pumping has pushed the IPO higher, not valuation.

23.  57% of users never click on ads or sponsored content.

24.  85% of Facebook’s revenue comes from advertising.

25.  Only 421.2 million shares will be available or about 15% of the company.

26.  Facebook will have half the value of Google but only 1/10th the ad revenue.

27.  GM will stop advertising on Facebook and isn’t alone in this thinking..

28.  First day trading is all about speculation and very risky.

29.  Facebook hasn’t invented a “hate” button yet.

30.  Insiders own shares at an average price of $1.11.

31.  Why would companies spend on advertising when they can get a fan page for free.

32.  The small float will only compound the buying frenzy.

33.  A great business does not equate to a great stock.

34.  Facebook’s growth is decelerating and profit margins might have peaked.

35.  Zuckerberg has also made it clear, the company’s social mission is much more important than the business.

36.  54% of users don’t feel safe using Facebook for e-commerce transactions.

37.  The chance that Facebook stock is the single best investment out of 1,000s of other stocks is borderline impossible.

38.  Apple.

39.  The smart money is already poised to sell after the shares go public.

40.  Jim Cramer said so.

41.  It doesn’t pay to chase IPOs.

42.  $106 billion market cap is overpriced.

43.  Do you really want to keep up with all those “friends”.

44.  The media frenzy has caused the biggest emotional marketing buzz around stock pricing since fear controlled pricing during the recent crash.

45.  Ad click-through rate is 8x lower than Google’s.

46.  Zuckerberg will control 55.3% of the voting rights.

47.  Facebook has no entry to China.

48.  When you go to Facebook, are you really looking to spend money or buy anything.

49.  It’s valued on eyeballs, not fundamentals.

50.  Several valuation models put a mean value of $57.3 billion on Facebook, well below the current IPO price range.

51.  It’s not 1999.

52.  Facebook doesn’t sell hoodies.

It’s already determined that Facebook is popular and successful from a user perspective.  I won’t deny it.  The platform offers a unique opportunity for people to interact and stay in touch.  But the platform is built for the users, not advertisers and the users aren’t spending money on Facebook.

This IPO stinks of buy first and ask questions later.  And there are a lot of unanswered questions, which has never ended well.  If you can get in on Facebook’s initial offering, you’re one of the lucky ones.  The question is whether the company is even worth that share price.

52 Reasons To Not Buy Facebook On IPO Day is a post from: Novel Investor

©2012 Novel Investor. All Rights Reserved.

Of course, for this trend to continue, shareholders need to take part, which seems to be the biggest obstacle.  Whether you have 100 shares or 100,000, it doesn’t matter.  It’s your money invested in these companies and a wasted opportunity by not voting.

As a shareholder, understanding your rights, the proxy voting process and knowing the SEC proxy rules is the best way to stay involved.  How you vote could have a direct impact on the company and your money going forward.

What is a Proxy Vote?

Every year there is an annual meeting and in between, any number of special meetings can pop up that need a shareholder’s vote.  These votes can be done in person.  But jumping on a plane every time a shareholder vote is needed can be excessive.

This is why the company provides the option of a proxy vote.  Which is just a vote cast by another person on your behalf.  Using a proxy vote makes it that much easier for shareholders to voice their concerns on any number of proposed issues that come up throughout the year.  It’s also one way to let management know just how well their doing (or not doing) without the extra travel costs.

Shareholder Voting Rights

The concept of shareholder voting rights is about accountability at the management level.  As a shareholder, you are an owner of the company.  For the most part, you’ll get one vote per share, though, there are exceptions where a specific class of shares get more or less votes per share.

Voting your shares gives you an opportunity to weigh in on a number of issues including:

• Electing the Board of Directors
• Approving of outside auditors
• Adopting company by-laws
• Approving or rejecting buyout/merger proposals
• Amending the company’s Articles of Incorporation
• “Say on Pay” vote on top management compensation practices
• Approving shareholder or management proposals

Shareholders even vote on proposed social and environmental issues that impact the company.  Most recently, the SEC added mandatory voting on executive compensation.  Some of the proposals are non-binding votes like the “say on pay”.  But these proxy votes give the board of directors a sense of the shareholder sentiment and more importantly how the company is viewed by the public.

Proxy Materials

When a shareholder vote is announced, a record date is set.  If you own shares on the record date, you’ll receive a notice from the company containing the proxy materials by mail or information on how to get access to them online.  The proxy materials will contain one or all the following:

• Proxy Statement - This has all the information that a shareholder needs to make a proxy vote on any issues being covered at an annual or special meeting.  It’s required by the SEC before any shareholder votes are taken.  The proxy statement will cover details about the meeting, shares owned, board structure, and any other information that will be voted on.
• Proxy Card - This is the ballot for registered owners and will cover any issues to be voted on at the company meetings.
• Vote Instruction Form - Or VIF, this is the ballot for beneficial owners to vote on any issues at the annual or special meeting.
• Annual Report – This has all the information about management, operations and financial statements.  Sometimes it’s just a marketing tool used to sway votes.  Companies are required by law to make the annual report available to shareholders.  If it’s not sent, you can find it at the company’s website.
• Proxy Notice – If you filed to receive the information online, you’ll get a proxy notice.  This will tell you where to find the proxy statement, proxy card, VIF and annual report online.

Ways To Submit a Proxy Vote

As we mentioned earlier, there are several ways to place your shareholder proxy votes.  The shareholder annual meeting is just one instance that owners can voice their concerns through a vote.  You can attend each shareholder meeting in person or you can submit a proxy vote in one of several ways:

• By Mail - Vote on each proposal on the proxy card/VIF and return it in the business envelope that came with the proxy statement.
• Online - Access the website provided on the proxy card/VIF, enter the control number on the proxy card,  vote on each proposal, and submit the results.
• By Phone - Dial the number provided on the proxy card/VIF, enter the control number, vote on each proposal.
• In Person - If you choose to vote in person, each company’s voting rules are different.  The proxy statement will cover, the how, when and where to vote at the meeting.  You can also send a proxy vote and attend the annual meeting.

Voting Options

When it comes to placing your vote, you’ll have several options on the proxy card or VIF.  You can vote for, against, abstain, or withhold, depending on each proposal.

When electing the board of directors, the voting options will be for or withhold.  You’ll be able to vote in favor of all directors or withhold on all directors.  There will also be an option to vote for each individual director.

Each proposal will give you the option for, against, or abstain.  The effect an abstain vote or for that matter a withhold vote, will depend on the corporate governance.  The proxy statement will explain how each voting option impacts the outcome.

You’ll be able to submit or change your vote by the cut-off or meeting date.  If you mailed in your proxy vote, another proxy card or VIF will be needed to make any changes.  To change an online or phoned in proxy vote, just follow the instructions again.

Research Before Your Vote

A bit of research will go a long way before you vote.  If everything is good at the company, management is doing their job, and the stock and company are performing well, then the time drain of research will be short.

But what if management has pulled the wool over shareholder’s eyes?  Maybe the company is being beat by competitors or the stock price hasn’t moved in a year.  There could be an activist investor looking to make a change for the worse.  A simple Google search or using a site like Moxy Vote could uncover other shareholder concerns.

Companies have looked more to shareholders about corporate, social, and environmental issues.  The shareholder’s voice is a necessary evil for today’s corporate management.  It’s a necessity to keep corporations honest, transparent, and open about the daily dealings of the company.  Sometimes it fails miserably, but most of the time, the shareholder’s voice leads management in a better direction.  If it doesn’t, do you really want to own the stock of a company that doesn’t listen to shareholders?

The Complete Shareholder Proxy Vote Guide is a post from: Novel Investor

©2012 Novel Investor. All Rights Reserved.

Zuckerberg

The Facebook IPO is about a week away.  It will be interesting to see how it all turns out.  I’ll be sitting on the sidelines, watching to see how much people will overpay for the stock.  If you’re planning to buy Facebook, take the time to read The Maturation of the Billionaire Boy-Man about Mark Zuckerberg.  Remember, he’ll have a 57% controlling interest in the company, stockholders are just along for the ride.

Butt Dialing 911

The biggest misuse of the 911 emergency number is from your butt.  At least it is in New York, where the city dealt with 3.9 million butt dials in 2010.  A study showed that butt calls, not to be confused with booty calls, amounted to 38% of all 911 calls.  That’s an average of about 10,700 per day.  The good news, 911 booty calls were down to 7%.

J.P. Morgan

The recent news out of J.P. Morgan is a blow to confidence and a fear catalyst the way the media has played it out so far.  The speculation hedging being used at JPM is beyond complicated.  But if it was a hedge, where is the offsetting gain.  It’s an argument for a return to Glass-Steagall.  The reality is, if the CEO doesn’t really know what’s happening under his watch, how do the regulators.  On another note, if your nickname is the London Whale, you’re having a very bad day.

Last Call

I jumped on the value investing bandwagon this week since there was such a large amount written thanks to the Berkshire annual meeting, Value Investing Congress, and Value Investor Conference in Omaha.

• The Complete Transcripts Of Berkshire 2012 Annual Meeting - This transcript offers what an annual meeting entails but more importantly how some guy named Warren Buffett views things from a value investing perspective.

• All Notes & Presentations From Value Investing Congress Omaha 2012 - If you have any interest in value investing, this has links to 14 presentations made at the Value Investing Congress.  It’s too much information to break down, you’ll just have to head over and dig through it all.

• World’s Simplest Stock Valuation Measure - Offers the quick and dirty valuation tool to find out if a stock is under, over or fairly valued.  It’s hardly perfect, but it’s a good start before the real research begins.

• Where is the “value” in value investing? - It’s a .pdf, so I warned you.  Aswath Damodaran is a NYU professor who challenges some value investing concepts in this Value Investor Conference presentation.

Cheers

Thanks to Control Your Cash, Balance Junkie, Money Talks, Young Adult Finances, 20′s Finances, Young and Thrifty, AAAMP Blog, Carnival of Retirement, One Cent At A Time, and Simple Finance Blog for sharing us with their readers.

Happy Hour: Zuckerberg, Butt Dialing, & JPM is a post from: Novel Investor

©2012 Novel Investor. All Rights Reserved.

So are we heading for a repeat of last year?  Or are the recent market headlines just another gut check for every investor out there?  More importantly, should it really matter?  What is different today that will affect your investment risk?  The answer should be nothing, if your portfolio is built around your investment horizon.

Focus On The Plan

When you invest, there’s a plan of attack.  It should be based on your goals over the next few months, years and decades.  Breaking those goals down, gives your investment time horizon.  Which is the total length of time you hold an asset before it needs to be sold.

Knowing this, you can manage risk easier by matching your investment horizon with your portfolio.  As you look across your timeline, the investments should go from low risk to higher risk the further you go out.

A basic investment horizon can be broken down by short, medium and long-term.  As the years go on, each time horizon will naturally shorten.  Here’s the basic investment guidelines for each time horizon.

• Short Term Investments - Less than 2 – 3 years.  You shouldn’t take on risk with these investments.  Stick with savings accounts, money market accounts, and CDs.
• Medium Term Investments - In the next 2 – 10 years.  You can take on risk, just not too much risk.  Stick to a basic conservative, diversified mix of stocks and bonds for this investment horizon.
• Long Term Investments - Longer than 10 years.  You can take on higher risk over the long-term.   Stocks can make up a bulk of these investments with a small portion in bonds.  Of course, this can be adjusted to fit your comfort level.

Understanding your investment time horizon will help you cut the short-term risks of the market.  If Europe sends the S&P 500 down 20%, your short-term investments are protected and the asset allocation of your mid to long-term investments can handle the changes.  When you put it altogether, it means less day-to-day worry.

Your Investment Horizon Will Change

Every year we get another year older and our investment horizon changes.  That’s why we do regular portfolio rebalancing.  Each rebalance will automatically adjust your portfolio to the risks of time.  As your timeline shortens those investments become less risky as your portfolio slowly moves from growth to preservation of wealth.

A Down Market Is Good

Here we go again!  Or are we?  Europe is once again making big headlines and it’s not good.  As usual.  A socialist leader in France, Spain has debt issues, still and Greece, somehow, is getting a bailout, or not, depending on who you ask.

Outside of a few new leaders in Europe, this is nothing new from six months ago when the S&P 500 started on a 20% trek upwards.  Problems in Europe aren’t going away tomorrow.  We found that out last year when the S&P 500 fell for a few months, until the fear and loathing in Europe subsided.  Will it happen again?  I don’t think so, but who knows, I’m not a psychic.  I’m not going to worry about it either.  I’m looking out 10 years and beyond.

If the market does repeat itself and heads down in the short-term, take advantage of it.  You take advantage of products when they go on sale.  Why shouldn’t you do it when it happens to stocks and bonds?  If the markets go on sale in the short-term, it’s just another buying opportunity.  Until then, it’s best to focus on your time horizon.

Remember Your Investment Horizon is a post from: Novel Investor

©2012 Novel Investor. All Rights Reserved.

The value investors journey to Mecca, the Berkshire Hathaway annual meeting, was this past weekend.  Anytime the event rolls around, the value investing blogs usually unleash a few hidden gems.

One of those gems was an interview Warren Buffett did back in March for the MBA program at the University of Western Ontario, through the Ben Graham Centre for Value Investing.  For an MBA student, it’s a rare opportunity to pick Buffett’s brain.  Thankfully, they took notes to share with the rest of us.

I’ve highlighted just a few of the interesting topics of discussion or you can jump to the bottom and follow the link to read the full transcript.

On Value Investing

What I seek is certainty about the pay-off, make sure there are two in the bush.
The way I deal with certainty is to find companies that have historically great
returns and earnings, leveraging on a competitive advantage.

On Pricing Power

See’s Candies was a business where we had pricing power. Our product was
often used as a special treat or gift for a moment. The first time I bought See’s
I gave it to my future wife and got a kiss. After that, they had me for life.
That’s because See’s is a product that provides happiness. On, Valentines
Day, do you really care if a box costs $4 or $5? You cannot go home to your
wife and tell her you got the cheap chocolates. Consumers also are not
conscious of pricing one year to the next. Candy used to sell for 1.95/pound
when I was young. Today it sells for $16.00/pound. See’s would always raise
their prices on December 26th. I bought this business when it had $4M in
sales. Today it is $83M. That’s pricing power.

On Finding Opportunity

On my honeymoon I travelled out west. When I visited the casino and saw all
these smart well-dressed people participating in a game with the odds against
them, it was then that I realized I won’t have a problem getting rich!

On Information Access

People have better information now, but they still act irrationally.

Overall Investing Strategy

Invest in equities slowly over time. And invest in yourself. Enhance your own
talents and weaknesses. Specifically oral and written communication skills.
And look to buy companies that will go on forever, like CocaCola. But the key
is to buy equities slowly over time, and don’t try to time the market. For the
more serious investor, buy equities strategically, opportunistically.

I always say buy what you know, and focus on your circle of competence. It
doesn’t matter how big the circle is, but you have to know the perimeter.

You can take Warren Buffett’s views as gospel, guidelines, opinions or useless drivel.  Regardless, it’s an interesting rundown on his value investing approach, views on the economy, education, occupy movement, life lessons and more.  Whatever your impression, take the time to read through the Ivey School of Business meeting with Warren Buffett (.PDF format).

Value Investing Lessons From Warren Buffett is a post from: Novel Investor

©2012 Novel Investor. All Rights Reserved.

Shipping Beer And Wine Via USPS

New legislation was recently passed in the Senate to help the financially strapped Post Office.  The legislation includes several things like a 5 day delivery week, restructuring health benefit payments,  provide retirement incentives to many employees, and most important, allow shipping of wine and beer by the postal service.  Imagine, a 103 year old law has prevented the Post Office’s profitability and we’re only finding out about this now.  If it we’re only true.

$50,000 To Happiness

Who says happiness can’t be measured in dollars.A recent survey had participants rank their level of happiness in several areas of their life.  Then asked about their annual income.  Apparently at $50,000 in income, happiness is achieved.  I don’t know about all this.  The biggest difference between those under and those over that mark, were satisfaction in housing, friends and just life in general.  The takeaway, money may provide happiness, but it definitely buys you friends.

Last Call

• Why Passive Investors Should Become Stock Pickers - There is nothing wrong with being a passive investor, but this post offers up a couple of reasons why using a part of your portfolio for stock picking could be a good idea.

• Harness The Power Of The Seasons - Understanding market seasonality is important for traders, but what about investors?  I think so.  Any extra information you can gain from understanding the markets can only add to your investing success.

• Is a Strategic Asset Allocation a Failed Model? - Offers an interesting take on the “set it and forget it” allocation strategy.  Should we be taking a more active role, by adjusting our allocation based on opportunity.

• To Win Big, It Helps to Be a Little “Nuts” - Different is not a bad thing, when it comes to a company’s business plan.  And well-known companies aren’t always the best performers.  This article offers up a few things to consider when researching stocks.

• Want to Invest in Commodities? Consider Producers Instead - Offers some interesting insights on commodity investments from a value investing point of view.

Cheers

Thanks to Young Cheap Living, KNS Financial, Frugal Toad, 101 Centavos, Card Wisdom, My PF Journey, Cult Of Money, Smart Military Money, and Money Cone for sharing us with their readers.

Happy Hour: Booze Will Save The Post Office & $50K To Happiness is a post from: Novel Investor

©2012 Novel Investor. All Rights Reserved.