If I offered you FB stock at $10,000, what would you say? "Too much", I hope.
If I offered you FB stock at $0.05, what would you say? Probably, "Hell, yeah, that's a bargain".
So there's a rational price that the market agrees upon, within certain boundaries. The market seems to agree that the IPO overpriced the real market value of the shares. It's a real time machine that tells us what people think the shares are worth.
Comments
Hmmm... Isn't facebook still growing? aren't they making money? aren't they expanding?
Yes. But the question is "how much?"
If I offered you FB stock at $10,000, what would you say? "Too much", I hope.
If I offered you FB stock at $0.05, what would you say? Probably, "Hell, yeah, that's a bargain".
So there's a rational price that the market agrees upon, within certain boundaries. The market seems to agree that the IPO overpriced the real market value of the shares. It's a real time machine that tells us what people think the shares are worth.