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Sid Squirrel

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  • Henry Blodget sets a target range of $16-$24 for Facebook (FB -11%), based on a valuation of 20x-30x a 2013 EPS estimate of $0.80. Blodget's retort to those bullish due to Facebook's growth potential: Facebook has already been working on monetization for years; Mark Zuckerberg cares more about Facebook's "social mission" than its business; and the company's next billion users, weighted towards emerging markets, will be much less valuable than its first billion. (previous)  [View news story]
    The million $ question : when will the syndicate finally have no FB on their collective books? Answer : when about 300m shares have traded on the sell side, so around 600m in total starting in the morning of May 21. So far we have traded 168m, so we are 1/4 of the way there maybe. My view remains you should not touch this thing with a 10 meter pole until this issue has gone away which will probably be in about 10 days. At some point we are going to hear how much they have lost between them on this sorry mess. I think it is going to be a big number. Good job you can't short the stock yet or it could get really tricky. Although do note that from today there will be options trading. Lord only knows what the implied vol will be after the start it has had but nonetheless I reckon the Puts will see more volume than the Calls....worth watching
    May 22, 2012. 09:18 AM | 1 Like Like |Link to Comment
  • Morgan Stanley's $2.4 Billion Facebook Short [View article]
    it will likely be more, faustius, i would guess about 50% more but they will do what salesforce.con does and claim that the share options and so on somehow do not count and we should look at EEBS (earnings before bad stuff)
    May 22, 2012. 09:02 AM | Likes Like |Link to Comment
  • Morgan Stanley's $2.4 Billion Facebook Short [View article]
    I keep on mentioning this but it seems nobody has noticed...with reference to MS making money or not on a FB short created via the greenshoe mechanism, they may or may not have. But it pales in comparison with the money they may/may not make on the other $11bln that they and the other underwriters between them bought in the market on Friday. Thus far at best 25% of this has been unwound if you assume 60% of the orders yesterday were sells. Therefore there is still an overhang of around $7-$8bln of stock sitting somewhere at MS/JP/GS/BARCAP/BAML. All the talk about the greenshoe is interesting but from a practical perspective what will decide the direction of the stock is how this messy situation is unwound. My guess is that it will take about a week or 10 days before we have a "true" market in the stock and by then I expect the stock to be trading between $25 and $30 which is why I am short. Round about then people will be able to short the stock with institutional size money as it becomes available to borrow (as opposed to small individuals doing spread betting). The other reason I am short is that I think FB's pole position will erode within 3-5 years tops as people realise that posting your life on a public forum is actually quite irresponsible and a great way to get burgled/stalked/kidnapped but let's not get into that for now....
    May 22, 2012. 03:13 AM | 2 Likes Like |Link to Comment
  • Facebook Has A Growth Problem [View article]
    Pass the Parcel
    Forget the theory and the long term ideas about whether FB is or is not an interesting investment. The simple reality right now is that the underwriters are sitting on 86 per cent of the stock which was sold to the market. Simply put, the underwriters sold it to institutions who in turn have said no thanks and sold it back to the underwriters who are now sitting on the biggest IPO hot potato you ever saw. There must be prayer mats out on Wall Street over the weekend. If (as seems rather likely) the next trades are down and below $38 this will turn into an almighty mess with $30 and probably $25 in prospect. Then we can worry and talk about the fundamentals etc etc. For now the only way is down.
    May 21, 2012. 05:25 AM | Likes Like |Link to Comment
  • Would The Fed Take Facebook Shares As Collateral? [View article]
    With reference to your comment in paragraph 11 that " the exact total amount bought by the underwriters is not known but could represent billions of dollars", we do know actually!!
    On Friday there was an S-1 filing made with the SEC in which the following positions were disclosed as at the close of business:

    MS 162m shares ($6.16bln), JPM ($3.2bln), GS ($2.4bln), BAML ($1.04bln), BARCAP (1.04bln). I actually thought all these numbers were typos but they are not. In aggregate the underwriters are sitting on a remarkable $13.86bln of the $16bln or so that were sold so ironically despite all the hoopla the IPO has kind of not really happened yet. What has happened is that Wall Street has offered shares to institutions who have basically offered them back to Wall Street and we are pretty much back at Square 1 in the sense that the underwriters now have to figure out who to sell the stock to and more importantly at what price given that the first price was clearly too rich. It is a truly extraordinary situation and one that I fear will end in tears and recriminations as the stock commences its inevitable slide. Should it trade down 20% (entirely possible in my view, after all that would only take it to the lower end of the initial price range) then we are looking at $2.7bln of losses for the banks involved in aggregate which is roughly 15x the fees that were generated in the first place from doing the deal. Messy. I am short but by main concern is that I am not short enough...
    May 21, 2012. 05:25 AM | Likes Like |Link to Comment
  • 4 Reasons To Stay Clear Of Facebook: Part 1 [View article]
    Nice article. The point about the underwriters not having any more $$$ to support it is key. They already own 86% of the free float. I suppose they could buy 100% and pray Mark bails them out in due course by some magic trick but more likely they will have to start SELLING. Question : who to ????
    PS Diary of Mark Z :
    Friday : sold company of debatable value to Wall Street for $100bln+ (wahey!)
    Saturday : got married (wahey!). What a week that chap has had! I expect this week will not be quite so exciting one way and another
    May 21, 2012. 05:25 AM | Likes Like |Link to Comment