Tag Archive for Facebook IPO

Is Facebook (Nasdaq: FB) a Replay of the AOL/Time Warner Deal?

I hope you didn’t buy shares of Facebook (Nasdaq: FB). The valuation was always too aggressive.

And increasing both the price and amount of Facebook stock at the last moment ensured that both underwriters and retail investors ended up with far more shares than they bargained for.

In fact, the Facebook fiasco reminds me of another deal that marked the peak of the dot-com boom.

No, not the ineffable and rather sweet Pets.com- their IPO was far too small a deal to have genuine market significance.

Instead I’m talking about the AOL and Time Warner merger announced on January 10, 2000.

Like Facebook, the deal was sold as a big success. It was only later that it quickly became clear that AOL had sold itself at the absolute peak of the market.

From there on out it was all downhill as the storied merger practically top-ticked the market.

Before Facebook There Was AOL

AOL had built up a nice business from “dial-up” Internet access, but it was already obvious by January 2000 that the arrival of broadband Internet would make for a difficult transition.

As such, AOL’s market capitalization of around $200 billion was purely the result of the frothy market of 1999.

Nevertheless, that rich valuation enabled AOL to become the senior partner in an acquisition of the Time Warner media conglomerate, getting 55% of the merged company in a deal valued at $350 billion. It was the largest merger in U.S. history.

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Heavy Betting in the Middle of Mayhem

There’s going to be a lot of very heavy betting over the next few days, weeks, and months on what’s going up, what’s going down, and what’s going around:

  1. How far will Facebook IPO price go?
  2. How far DOWN from here will JPMorgan go, with the FBI and DOJ now sniffing around?
  3. How far AROUND the globe will the fallout be if Greece loses its game of chicken?

If you don’t have the stomach for what’s going to feel like an out-of-control rollercoaster ride, sideline yourself.

If, on the other hand, you like a lot of action, welcome to Mayhem – the preamble month to what will likely be the Summer of Some Discontent.

That is, unless you like rapid-fire trading.

Which, by the way, is not just fun, but can be very, very profitable. I’m in, and so are the subscribers to my Capital Wave Forecast. We’re gearing up for some heavy betting in the weeks and months ahead.

So, what’s front and center today? You know. The big three headlines: Facebook, JPMorgan Chase, and Greece. Are you sick of hearing about them? I’m not. I like trading the headlines.

Here’s my “heads-up” on the big three headlines.

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Five with Fitz: What I See When I Look Over the Horizon

When you’ve been working the markets as long as I have, you learn that the biggest dangers are always found in a place just over the horizon.

It’s why I spend my time hunting for stories, news items and opinions that in the old days were considered far “below the fold.”

Invariably, what I am looking for is the stuff that everybody else has missed.

Because I believe that’s where the real information is — especially when it comes to uncovering profitable opportunities others don’t yet see or understand.

It’s the story behind the story that interests me. To find it, you need to go beyond the headline news.

In that spirit, here’s my take on five things that I’m thinking about right now.

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