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Europeans Betting Millions That Facebook Will Plunge Another 30% By December

Tyler Durden's picture




 

While US banks have been busy refocusing their "creative financial products"-time over the past two months, instead defending against allegations of muppetism, or explaining how hedging is really betting it all on red, and then doubling down (just because the casino supposedly has the bank's back), Europe has been busy coming up with new and creative ways of betting on the demise of FaceBook. While official shorting of the most overhyped and overvalued company in history only became a reality for most investors today, Europe's banks have a head start courtesy of "innovated" structured products created by UBS, Commerzbank and Julius Baer. As Bloomberg explains, "the most actively traded structured products tied to Facebook since its IPO have been so-called put warrants, whose buyers profit if the shares drop below a pre-defined level, in some cases as low as $22, data compiled by Bloomberg show. UBS AG (UBSN), Commerzbank AG (CBK) and Julius Baer Group Ltd. (BAER) are among lenders that listed 1,504 warrants and certificates in Europe linked to shares of the social networking site that were offered at $38....“There has been strong demand on the put side, with the ratio between puts and calls at around 70/30” with “some people expressing deep downside views,” Heiko Geiger, the head of public distribution for Germany and Austria at Bank Vontobel AG in Frankfurt, said in an interview yesterday." 

The Facebook strange attractor: magic number 22. With a $ sign. From Bloomberg:

Bank Vontobel’s best-selling Facebook-linked product is a put warrant that will reward investors if the shares are below $22, the so-called strike price, in December, said Geiger. Put warrants give investors a cash payment depending on how far a stock falls below a set level.

 

Julius Baer sold the securities with the largest trading volumes, two put warrants with strikes of $35 and $30 on the Scoach exchange in Zurich. Investors traded 402,000 contracts yesterday valued at $335,780 of the former and 603,000 warrants for $322,620 of the latter, data compiled by Bloomberg show.

 

Zurich-based structured products distributor EFG Financial Products AG added Facebook shares to a basket of 10 social media companies that are tracked by a certificate that has traded on Scoach since last month, it said in an e-mailed statement.

Of course, should FB implode to the degree expected, while on one hand it will subtract meaningful points from GDP growth as retail ends up, once again, poorer, the one biggest winner will be securities law attorneys, who are sensing so much blood courtesy of FaceBook's brand new multi-billion cash hoard, that Zuckerberg will have no choice but to 'invest' almost exclusively in legal defense teams and settlement reserves, leaving him with no time, or money, to find (and fund) the next even lower IRR social-media bolt on acquisition.

 

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Thu, 05/24/2012 - 12:45 | 2459241 CharlieSDT
Thu, 05/24/2012 - 12:53 | 2459254 Ahmeexnal
Ahmeexnal's picture

Ahhh...those shorts shall be smoked like a salmon.

It only takes Ben Bukakke a finger stroke to flood the primary dealers with moolah to be spent on propping up FB come december.

Right after the election, FB will soar to over $100.  And a Big Mac+large fries will cost 50 buckaroos.

 

I see a divorce in Suckerdude's future....like...before yearend.

 

Thu, 05/24/2012 - 12:56 | 2459274 AlaricBalth
AlaricBalth's picture

Facebook has clearly plateaued and is in decline among users. Their bounce rate, which is the estimated percentage of visits that have a single page view, has increased dramatically from 12% in Jan. 2011 to 26.4% currently. FB's Time on Site stats have gone from 32 minutes per day (12/2011) each user to 24 minutes per day. People are spending less time on FB. Their ad click-thru rate is half the industry average at a paltry 0.051% of active users. Google Trends also shows a flattening in the curve of searches for Facebook. http://www.google.com/trends/?q=facebook

And from FB's S-1

 

We currently generate significant revenue as a result of our relationship with Zynga, and, if we are unable to successfully maintain this relationship, our financial results could be harmed.

 

In 2011, Zynga accounted for approximately 12% of our revenue, which amount was comprised of revenue derived from payments processing fees related to Zynga’s sales of virtual goods and from direct advertising purchased by Zynga. Additionally, Zynga’s apps generate a significant number of pages on which we display ads from other advertisers. If the use of Zynga games on our Platform declines, if Zynga launches games on or migrates games to competing platforms, or if we fail to maintain good relations with Zynga, we may lose Zynga as a significant Platform developer and our financial results may be adversely affected. (Zynga is the Pet Rock of this age and will be replaced by something else on another platform other than FB.)

 

We expect our rates of growth will decline in the future.

 

We believe that our rates of user and revenue growth will decline over time. For example, our annual revenue grew 154% from 2009 to 2010 and 88% from 2010 to 2011. Historically, our user growth has been a primary driver of growth in our revenue. Our user growth and revenue growth rates will inevitably slow as we achieve higher market penetration rates, as our revenue increases to higher levels, and as we experience increased competition. As our growth rates decline, investors’ perceptions of our business may be adversely affected and the market price of our Class A common stock could decline.

 

Thu, 05/24/2012 - 13:04 | 2459297 nope-1004
nope-1004's picture

Banksters are predators.  Short selling financials was banned a few years ago when it was clear all the big banks were going to zero.  Now they feel entitled to rape an IPO when it suits them.

Yes, FB was overpriced from the get go, because Mogan Stanley probably had a deal with these shorts so overhyped it knowing they would profit from the downside.

 

Thu, 05/24/2012 - 13:10 | 2459314 TrafficNotHere
TrafficNotHere's picture

Strangly, I now find myself now hoping FB goes up between now and Dec...

Thu, 05/24/2012 - 13:16 | 2459339 Ahmeexnal
Ahmeexnal's picture

start clicking those ads.

Thu, 05/24/2012 - 13:18 | 2459346 falak pema
falak pema's picture

Based on current performance and giving FB the benefit of a P/E comparable to Apple its value would be : 20 B not 70 b not 100 b. At 20 B the share price would be : 7.7! 

Thu, 05/24/2012 - 13:33 | 2459414 gold-is-not-dead
gold-is-not-dead's picture

Agree. I can't understand how people oversee the simpliest of the facts. If you don't have a clear image on how much a company is worth due to various input, you could roughly estimate, multiply anual gain by 7. In FB case, 3.5 billion * 7 = apx 25 billions. Are we going to see shares at $10 perhaps? :) Would go long then.

Thu, 05/24/2012 - 14:22 | 2459639 Winston Smith 2009
Winston Smith 2009's picture

"I can't understand how people oversee the simpliest of the facts."

The usual way - via the hype-induced greed of retail idiots.

Thu, 05/24/2012 - 13:27 | 2459383 eclectic syncretist
eclectic syncretist's picture

If the put/call ratio is really that extreme it creates a real risk of a squeeze somewhere down the line.  Shorting into an exhausted FB squeeze sounds like a plan to me.

Thu, 05/24/2012 - 14:33 | 2459670 Winston Smith 2009
Winston Smith 2009's picture

"Google Trends also shows a flattening in the curve of searches for Facebook. http://www.google.com/trends/?q=facebook"

Great points.  And look at the top ten geographical regions listed by Google Trends for Facebook which I assume are those where the growth in useage was greatest.  Not exactly what you'd call money makers.

Thu, 05/24/2012 - 15:39 | 2459949 Dr. Acula
Dr. Acula's picture

The curve seems to be dropping already for US: http://www.google.com/trends/?q=facebook&ctab=0&geo=us&date=all&sort=0

 

Thu, 05/24/2012 - 21:32 | 2461008 Buck Johnson
Buck Johnson's picture

You see what they don't understand is that when the next best thing comes as usual, FB won't gradually decline but it will one day fall of a cliff.  Just like what happened to Myspace.  This was the most horrible IPO done in history.

Thu, 05/24/2012 - 12:56 | 2459276 Colombian Gringo
Colombian Gringo's picture

FB was overpriced and overhyped, full stop.

Thu, 05/24/2012 - 14:39 | 2459698 Larry Dallas
Larry Dallas's picture

"I see a divorce in Suckerdude's future..."

Yes, he married a highly-eductated, now fairly self-righteous Asian woman. Its game over for him.

Asians can be nasty. Especially the women.

Thu, 05/24/2012 - 12:51 | 2459262 SheepDog-One
SheepDog-One's picture

Well Charles Biderman figures FB is worth about $1 trillion.....lot of great white sharks being jumped in Sausalito these days.

Introducing Biderman's Market Picks: Facebook Could be $1 Trillion Stock - YouTube

Thu, 05/24/2012 - 12:55 | 2459271 Ahmeexnal
Ahmeexnal's picture

If FB goes Scientology and starts to blackmail its users....it could well be worth more than 1 trillion.

Thu, 05/24/2012 - 13:38 | 2459429 TheGardener
TheGardener's picture

FB as in federal book keeping on citizens moves is a good buy once federal bounties on feral citizens reporting programs are made available in all states.

Thu, 05/24/2012 - 13:02 | 2459290 Bluntly Put
Bluntly Put's picture

$10 billion are you out of your mind? You could print up enough phonebooks to hand out to every single household in North America for that price (and no one would know you were using it), as long as it wasn't an exclusive government contract.

 

 

Thu, 05/24/2012 - 13:13 | 2459304 TheGardener
TheGardener's picture

Welcome to the dark broke banking syndicates of Europe.

Your face gets no savings book here.

Thu, 05/24/2012 - 14:25 | 2459648 Winston Smith 2009
Winston Smith 2009's picture

Love that analysis you linked to which was done prior to the IPO, the likes of which was nowhere to be seen in the Muppeteering mainstream financial media.

Fri, 05/25/2012 - 03:24 | 2459687 Albertarocks
Albertarocks's picture

10 years from now when we're looking back at the highs of 2012, we'll remember that the pinnacle came the day they issued the IPO of Faceplant, the biggest public fleecing via IPO shares in history.

Thu, 05/24/2012 - 17:39 | 2460352 stocktivity
stocktivity's picture

FB up $1 today so even these large European banks are now underwater with their shorts. Geez...the guys running the casino ponzi can't even win at their own game.

Thu, 05/24/2012 - 12:45 | 2459242 ShorTed
ShorTed's picture

FU FB

Thu, 05/24/2012 - 12:45 | 2459246 i_call_you_my_base
i_call_you_my_base's picture

Well, Zuckerberg did say he wanted to connect the world.

Thu, 05/24/2012 - 12:46 | 2459247 homer8043
homer8043's picture

Before I say this, FB is an absolute turd that is way overvalued. And eventually that will get recognized.

But it does seem an epic short squeeze is coming.

Thu, 05/24/2012 - 13:09 | 2459312 Joe The Plumber
Joe The Plumber's picture

It may grind a little lower for quite a while though

Wish I could have sold some 22 dollar puts

Thu, 05/24/2012 - 12:48 | 2459251 Elwood P Suggins
Elwood P Suggins's picture

 

 

So Facebook joined the race

 

But couldn't keep up with the pace

 

The NASDAQ did fumble

 

The stock price did tumble

 

And the bankers have shit on their face

Thu, 05/24/2012 - 12:49 | 2459258 tocointhephrase
tocointhephrase's picture

bom bom

Thu, 05/24/2012 - 13:04 | 2459295 mayhem_korner
mayhem_korner's picture

 

 

O Limerick King, where art thou?

Thu, 05/24/2012 - 12:48 | 2459253 brucef9321
brucef9321's picture

muppetism..!! LOL

 

Thu, 05/24/2012 - 12:49 | 2459255 SheepDog-One
SheepDog-One's picture

I wouldnt touch this turd in either direction myself, with talks of lawsuits everywhere and even 'IPO re-do over' on NYSE this is a complete FUBAR.

Thu, 05/24/2012 - 13:05 | 2459298 mayhem_korner
mayhem_korner's picture

 

 

You left out tax evasion.  :D

Thu, 05/24/2012 - 13:09 | 2459313 Matt
Matt's picture

What happens if you short the stock or have put options, and they call a mulligan on the IPO?

Thu, 05/24/2012 - 13:11 | 2459321 mayhem_korner
mayhem_korner's picture

 

 

maybe appeal to isda to declare a credit event

/sarc

Thu, 05/24/2012 - 12:50 | 2459257 Stoploss
Stoploss's picture

I think were going to see 30% in about 85 days.

Thu, 05/24/2012 - 12:49 | 2459259 tim73
tim73's picture

Hey Americans, WE ARE YOUR FRIENDS!

(hey Sheila, call my Frankfurt broker and say to him, short this dog called FB until your ass is sore, like last Saturday).

Thu, 05/24/2012 - 12:54 | 2459263 smb12321
smb12321's picture

IS this Europe's Plan C - prosperity through the downfall of others?  For the life of me I can't figure out all the anger at Apple, Facebook, JPM,  etc.   If you don't like then then for god's sake don't buy the product.  It's better than all the phony angst.

Thu, 05/24/2012 - 13:01 | 2459288 tim73
tim73's picture

I like America like it was in the 1960, going to the Moon just for the show off but now, it is just mostly salesman bullshit. Europe caught up with you guys and we are making better cars, planes, whatever. Time for shape it up on your side of the pond...

Thu, 05/24/2012 - 13:13 | 2459324 Joe The Plumber
Joe The Plumber's picture

Lol demography is economic destiny my european friend. Enjoy your success now.

Because I would not want to go where you are headed.

Thu, 05/24/2012 - 13:49 | 2459480 Yohimbo
Yohimbo's picture

europe goes down, it all goes down..........genius.

Including your little sick world of gloating

Thu, 05/24/2012 - 14:02 | 2459537 Joe The Plumber
Joe The Plumber's picture

Then you dont understand demography comment

I am not talking about the next ten years but the next hundred

Thu, 05/24/2012 - 13:16 | 2459330 guinea
guinea's picture

You mean Germany caught up.  

Europe without Germany = 5*Greece + 3*UAE

Thu, 05/24/2012 - 13:16 | 2459338 Ahmeexnal
Ahmeexnal's picture

Ahhhh...the 1960's sheeple...who believed a faux moon landing staged in the Atacama desert.

Thu, 05/24/2012 - 13:29 | 2459369 TheGardener
TheGardener's picture

Tim, you like us for all the wrong reasons.

And catching up was the other way round.

Tim off ! Or I missed your wicked sense of sarcasm. But your kind of Germans is said to be devoid of any sense of humor,
just like the FBI in the movies...

Fri, 05/25/2012 - 09:44 | 2461966 smb12321
smb12321's picture

I'm not exactly sure what you mean by "caught up".   It could mean Europe now uses all the products invented in America or Europe is now fairly well off.  But if the trainwreck we watch daily (and especially the demographic disaster in the making) is "catching up" then someone needs a new pair of glasses.

Have a nice day

 

Thu, 05/24/2012 - 12:58 | 2459282 zerotohero
zerotohero's picture

Why average joe would risk anything on Farcebook is beyond reason. Peeps have to wake up and see a sham for what it is.

Thu, 05/24/2012 - 13:02 | 2459292 spastic_colon
spastic_colon's picture

Ya well these products are unsecured notes, and the issuer is taking the other side of the trade, so who knows if your money ever really gets invested

Thu, 05/24/2012 - 13:03 | 2459294 Scalaris
Scalaris's picture

<-  European

Thu, 05/24/2012 - 13:11 | 2459306 falak pema
falak pema's picture

Here is the real ominous message of Corpocracy gone mad said by an inside man, Mark Cuban, part of that elite family :

The Facebook IPO Was A Killer, But Not For The Reasons You Think - Business Insider

Another intra-Oligarchy knife sharpening trend :

John Paulson Morgan Stanley Citibank Watch List - Business Insider

 

The ultimate sinister message comes from the innovators of silicon valley who think lightweight FB type ventures, passing fads, could corrupt the work ethic of innovative america; the unkindest cut of them all as it means mindset change! America is still the most innovative country in the world. But this financial cancer can even corrupt that! 

So yes the Eurozone will now bite back at the US financial behemoth, as the curency war will spill over into trade war as the recession deepens. We are in tipping times.

Thu, 05/24/2012 - 13:16 | 2459336 lenovot60
lenovot60's picture

Time to go long FB...contrarian view.  I wish they were selling some options about now.  IMHO

Thu, 05/24/2012 - 13:17 | 2459341 midgetrannyporn
midgetrannyporn's picture

Those puts seem cheap to me.

Thu, 05/24/2012 - 13:42 | 2459444 ThirdWorldDude
ThirdWorldDude's picture

You got it... it's a helluva bate for more muppets to get into the paper game.

Thu, 05/24/2012 - 13:31 | 2459400 ilovefreedom
ilovefreedom's picture

Ironically I am betting Europe will plunge AT LEAST 30% by December.

Fri, 05/25/2012 - 09:48 | 2461976 smb12321
smb12321's picture

No way.  Central planners are sheer genius is misguiding, prolonging and altering the situation.  I don't mean this in a conspiratorial way but because of their money creation and interest rate setting power.  This power translates to political power, propping up regimes or even replacing them.   So, Europe will slide DESPITE all the efforts of its planners.

Thu, 05/24/2012 - 13:35 | 2459419 boogerbently
boogerbently's picture

JUST 30% ????

That's WAY too optimistic. And WAY too OVER "fair market value", based around $5 per share.

TODAY....after the DROP it trades at a PE of 70.

(Although LNKD trades at a PE of 600, so there are DEFINITELY sheep out there!)

FB is a single digit stock, and will head there tomorrow, after options are initiated.

Big "preferred" money will profit on the way up AND on the way down.

Thu, 05/24/2012 - 13:43 | 2459450 orangegeek
orangegeek's picture

Europeans are betting a drop in FB of 30% by December?

 

By December, most markets should be in the tank.

 

SP500 Weekly says a lot:  http://bullandbearmash.com/index/sp-500/weekly/

Thu, 05/24/2012 - 13:44 | 2459455 Yohimbo
Yohimbo's picture

FUCK FACEBOOK AND FUCK ZUCKERBERG, the little bastard.

Thu, 05/24/2012 - 13:49 | 2459476 midgetrannyporn
midgetrannyporn's picture

Gingerboy has a face that could crack a mirror. Ironic.

Thu, 05/24/2012 - 14:09 | 2459565 BeetleBailey
BeetleBailey's picture

A little musical accompanyment to my post.

Pete Townshend - "Face The Face"

http://www.youtube.com/watch?v=zy6xDDl_DZc&feature=fvw

Facebook has to face their shareholders sometime in the not-so distant future.

LOTS of faces.

My guess?

Much RED faces - on both sides.

One side embarassed, the other, angry.

Thu, 05/24/2012 - 15:30 | 2459915 mr.5280
mr.5280's picture

Pending the short squeeze on a terrible buy...  Hype is barely green.

Thu, 05/24/2012 - 15:50 | 2459969 Dr. Acula
Dr. Acula's picture

Guys, this is the European organization that did the appraisal of Facebook:

http://www.efsmi.org/ 

 

Thu, 05/24/2012 - 16:12 | 2460029 cranky-old-geezer
cranky-old-geezer's picture

 

 

Betting is the key word there.

Financial markets are no longer investment markets where people buy stocks on company fundamentals like P/E ratio and dividend, with intent to hold long term.

Financial markets are gambling casinos now, and these FB put warrants are a classic example of it. 

But then all derivatives are gambling bets, and derivatives have grown exponentially while underlying is more or less stagnant.

How many different ways can you bet on mortgages?  MBS on mortgages?  CDS on MBS?  CDO on MBS?

You don't even have to have the underlying.   You can do a CDS on MBS you don't even have.  JPM can short silver they don't even have.

Look at silver.  You can buy silver futures and sell silver futures.  You can buy call options, sell call options, buy put options, and sell put options.  And you can go out and create a CDS or a CDO on any of that stuff. 

If A is the underlying, you can do a derivative bet B on A.  Then you can do a derivative bet C on B.  Then you can do a derivative bet D on C.  You can get 3 steps removed from the underlying, and you don't even have to have the underlying in some cases.

Rarely does anyone make much money on all these derivatives

...except brokers, they make way more money brokering all these derivatives than people make on them

...and big players in the market, who can watch COTs, move the market against them, wiping them out ...like JPM does on silver call expiration dates.

Yes, derivatives are rigged, big players see your hand and can move against you.

This is why big players worked hard to keep CDS off exchanges.  So other big players couldn't see their hand.

Thu, 05/24/2012 - 22:08 | 2461081 covert
covert's picture

first smart choice by the euro's ever made.

http://covert.ias3.com/expose/

 

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