SecondMarket Facebook Auction #43 Fails To Clear Any Shares

All this year TechCrunch and others were covering the weekly SecondMarket auctions for Facebook stock. 2.7 million shares, for example, cleared in aggregate the first five auction at prices ranging from $21.01 to $28.26 per share.

The auctions have continued, but there haven’t been the dramatic price increases or decreases needed to trigger the rabid coverage. But today, for the first time I believe, SecondMarket was unable to clear any shares at all in the auction.

The weighted average offer price for this week’s auction was $33.91, roughly in line with the clearing price for last week’s auction. But the weighted average bid price was just $28.15. Zero shares cleared the market, meaning no shares changed hands.

Why? The WSJ article this week pouring cold water on rising startup valuations, and suggesting that venture cash was drying up, was almost certainly the cause. Whether or not there was much truth to the article, things like that can and do freak buyers out and cause them to step back. No one wants to buy at the top of the market.

What really matters is whether or not things pick back up next week or the week after. And whether or not sellers will take lower prices in the $20s to cash out of Facebook.

23 thoughts on “SecondMarket Facebook Auction #43 Fails To Clear Any Shares

  1. If people learned to think long-term, they’d realize it’s a steal at this price. Facebook is getting bigger not smaller.

    • steveplace says:

      markets can stay irrational much, much longer than you think

    • Yo Fanny says:

      That have half as much “debt-free” cash on the books trading at less of a valuation than fB. When the $#@! hits the fan, cash will matter and eyeballs won’t.

      Silicon Valley’s economic cycle can be matched to office rents. When startups start paying $6-7 per SF, NNN in Palo Alto, that is usually the peak, and that is exactly where we are at today.

    • In my opinion. FB is a walled garden. They’re capped out in revenue .
      Only way to make more money is CUT THE FAT ! Time for layoffs .
      Or stay capped out.

  2. Anyone willing to make huge speculations probably has more than enough other “cheap” assets to play around with right now.

  3. Its now starting to feel like a top. That wall street journal article may have not been the most accurate but it sure got evryone thinking. I do think we are near a top but I actually think facebook is a good buy. They are only on the tip of the iceberg in terms of monetization and will probably grow exponentially.

  4. By the way michael. I love that a rich guy like you is breaking a story late on a Friday night. It shows this is a true passion.

  5. Isn’t this a bullish signal… insiders value their shares higher than outsiders?

  6. probably, Facebook has reached its top value for today’s configuration and number of users

    surely, it can’t be due to the (close-to-flop) Google+ clone

    now Facebook needs to implement some new services to increase its users and value

  7. echotoall says:

    From August to now, all markets were also pricing in a credit freeze/ end of the world scenario. . Curious to see the demand trends since August. This could be the culmination of the slowing of demand.

    I would be more inclined to ask why the price did not decline with the slowing of demand prior to this auction.

  8. Sam says:

    Facebook valuations have been a function of floppy analytics and emotional purchasing.

    Once social networks start basing their analytics off of “time based” engagement, recognizing there is a finite world they exist within, everyone’s valuations will start being more realistic. Think “Nielsen Share” numbers for television as a parallel (and, compare average time on Facebook to average time watching television #’s).

    The underlying reality is that with Google+ and other areas to spend connected time (particularly, mobile group chat engagement, etc.), Facebook is losing aggregate hours on site. Hours on site relate to ad exposures, which in turn relate to actual valuation.

    Additionally, Facebook’s biggest problem/threat/issue is that (while unreported), we can best-guess that it is starting to lose it’s “must have” status with Teens. Like Big Tobacco, Facebook’s lifeblood and future relies entirely on hooking each new generation of Teens as they come along. As Facebook has matured, including it’s demographic, it’s no longer perceived as a youth-based product. It’s growth among older audiences is it’s own unraveling.

    While Facebook may sign up more accounts, if that is accompanied by an aggregate loss of time on site, eventually someone will realize that it’s value is decreasing. Is it the top of the market? You betcha.

    • Eric W. says:

      I couldn’t have said it better myself. Although I tried, when I blogged a year ago about the social networking bubble that we were getting ready to enter. Your point about the youth market is especially compelling. When my daughter basically dumped FB for Tumblr, I saw that as a huge red flag.

      • But has she linked tumblr to facebook? Or her audience just has her blog in bookmarks? Facebook has such big gravitational force that almost every page has like/share buttons, and this is only start. Truth is lot of startups are just like pets.com, waiting for somebody to buy them, while facebook is just like microsoft in social.

  9. Lou Kerner says:

    The simple reality is that sellers move their pricing at a slower pace then buyers. Buyers are moving their price down for Facebook, just like they are for ALL other equities. Facebook doesn’t exist in a vacuum.

    Michael – If you’d ever like to talk in more detail about Facebook shares, feel free to reach out

  10. Michele says:

    a millionaire sporting an “Unpaid Blogger” shirt, how are we supposed in times like these to sympathize with you or just tolerate this? :)

    that was an epic communication fail in my opinion, strange for a man of your experience I think

  11. Rupert Murdoch wants in, like he wanted in with Myspace once. So he has his WSJ spread innuendos about the entire industry, depressing the market before he starts buying in. Maybe? Just speculating.

  12. Mitch says:

    Correct me if I am wrong in this. If FB has 70 to 80 billion dollar valuation how much growth can occur to yield returns on when a IPO does occur. You think it’s gonna get to over 140B so you can make double on the ~$30 share price on SecondMarket.

  13. Rdx2 says:

    To all the people who think facebook is at the tip of ice berg in terms of monetization and revenue, can you let us know how?

    Pretty much all my fb pages have ads, and i am guessing it is the same with most accounts in america and europe. If this super targeted ads did not get them super billions, you think selling music via spotify will get revenue at scale? They have certainly run out of people in developed world to add to their network and are now facing competition from Google+ for time spent. Zynga’s balance sheet shows that they are certainly not growing in terms of selling virtual stuff.

    I think “social” space is a super low margin business if you will where the ads have very poor performance, as say compared to search or a techblog or wsj… and there is tons of competition for time spent on site, so it is not a monopoly… and hence facebook is way overvalued.

    P.S : Love this anonymous commenting feature, which you screwed up in techcrunch because MG siegler felt insecure.

  14. Obviously says:

    I would love to see any non-innuendo information about FB’s ads effectiveness.

    I’m a fb user. I use the site an hour or two a week, and have for years. I think it’s a reasonably useful site, but hardly one of a kind or irreplaceable. I think recent months have really shown us that FB could easily be replaced with something more imaginative and user-focused. That said, it’s served its useful purpose to me, but I’ve *NEVER* clicked one of their ads, or even found them relevant or interesting. Their ad targeting manages to be weirdly creepy, and badly inaccurate / just crappy at the same time. It makes me think their advertiser network just sucks.

    They’re sitting on a treasure trove of personal user information (basically because most of their users are too lazy / shallow thinking to care about their privacy) which they are dying to sell out to the highest bidder. They keep trying different approaches to sell their users out, but it (mostly) just isn’t sticking. They’ve got a few more passes to make at the target, but eventually investors could just move on to more fertile ground. The other thing is, as users get tempted by other sites with better privacy controls / nicer features, or become much more privacy-conscious in the future, this facebook user data mine has the risk of becoming partly stale.

    I just don’t know how many more shots they have to capitalize on this. People don’t go to FB to search, or to buy music, or to recommend products, or to buy coupons, or anything. They go to FB to see which of their friends’ friends are good-looking. Period. The ads and all the other crap just get in the way.

  15. Andy Z says:

    Social networks are fads that cycle through about every three years. Facebook is a bit better and will probably be #1 for six years. It’s crazy to invest in a fad as a continuing investment.

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