Do the math. At the end of trading on Friday, May 18th, Morgan Stanley (MS) had 162 million shares left, JPMorgan (JPM) had 82 million and Goldman Sachs (GS) had 63 million, that totals 307 million out of 421 million, which means they sold net after the buy-backs in the afternoon, a grand total of 111 million or 26%.
Or did I read the article in The Telegraph wrong? Apparently 570 shares were traded, so allowing for a bit of flipping, the underwriters sold about 300 million shares in the morning and bought back 200 million in the afternoon. Felix Salmon says Facebook is …"brand-new company, which no one knows how to value".
Well excuse me! Does that imply that the best and the most beautiful of the venerable mega-shadow-banks do not know how to do a valuation? How could that possibly be?
Come on guys, show some respect, after all they knew how to value all those mortgaged backed securities and synthetic collateralized debt obligations back in 2006 and 2007, are you trying to tell me they didn't learn anything?! Or perhaps they lost their touch? But there again, the way they used to do a valuation in the olden days was using mark to market, as in "Value is what you can sell something for to someone dumber than you". So where did all the dumb people go?
Oh but surely the market knows how to do a valuation? Efficient market hypothesis and all that … doesn't anyone know how to value Facebook? Surely there must be one person in the whole universe of 900 million Facebook friends who can do a valuation for all the lemmings to follow?
Well here are two considered valuations, a lot more carefully thought out than the innuendoes and half-facts that were in the SEC document, which is apparently what passes for an investment prospectus these days.
Warren Buffet said, "if you don't know how to do a valuation of something … don't buy it".