Should someone add a FB ticker to the HN home page? :-D
But seriously, is there something about Facebook that hit the news that is leading to this drop and is worth discussing? Or is this just to spur some discussion on stock price speculation? If the former, what's the news? If the latter, what's the point?
The reason why this cross is important is because it dropped more than 50%. Regulation T, which governs margin requirements in most accounts, says that you are allowed to borrow up to your cash balance to buy shares. So if you had 1900 dollars in your account (for simplicity of math), you could borrow 1900 more dollars to buy FB shares (3800 dollars = 100 shares). Now that FB dropped below 19 (and it looks like it'll close below 19), basically those investors lost ALL of their money (the value of the shares is now 1825, so your equity in the position is 1825[current value] - 1900[borrowed money] = -75) and we should expect another wave of selling pressure as those investors are forcibly closed out of their positions.
The importance is that institutions may decide not to participate in future IPOs (or may do so with weak uptake).
Comments
Should someone add a FB ticker to the HN home page? :-D
But seriously, is there something about Facebook that hit the news that is leading to this drop and is worth discussing? Or is this just to spur some discussion on stock price speculation? If the former, what's the news? If the latter, what's the point?
The reason why this cross is important is because it dropped more than 50%. Regulation T, which governs margin requirements in most accounts, says that you are allowed to borrow up to your cash balance to buy shares. So if you had 1900 dollars in your account (for simplicity of math), you could borrow 1900 more dollars to buy FB shares (3800 dollars = 100 shares). Now that FB dropped below 19 (and it looks like it'll close below 19), basically those investors lost ALL of their money (the value of the shares is now 1825, so your equity in the position is 1825[current value] - 1900[borrowed money] = -75) and we should expect another wave of selling pressure as those investors are forcibly closed out of their positions.
The importance is that institutions may decide not to participate in future IPOs (or may do so with weak uptake).
They were downgraded, that probably is partially leading to the drop: http://news.investors.com/technology/083112-624214-facebook-...