Back in March, I wrote about the announcement by Facebook of it’s IPO. After a very long drumroll, the big event finally took place on Friday, May 18th. After a delayed opening, for reasons no one can quite explain, shares began to trade in a range of $38 to $42. After all of the hype, the feverish anticipation and the endless commentary, the social media site closed the trading day with a gain of 23 cents. By the close of business on Monday, shares had dropped to $34.05, an 11% difference, and in after hours trading, it had continued to decline, sitting at $33.78 while I’m writing this post. Even good news from Greece didn’t help. As the Nasdaq saw its’ largest single day increase since December 2011, Facebook just continued to sink.
Between my first post about Facebook and now, I’ve followed the company, trying to find out just why there was so much hoopla over this particular public offering. What I found was underwhelming, to say the least. It wasn’t so much the articles I read at Bloomberg or the Wall Street Journal or at CNBC. The most interesting and enlightening stories came from the comments people left at these sites. Many of them have or once had Facebook accounts, and their opinions about the site and the company were not the stuff of which corporate dreams are made.
There is a strong belief that Mark Zuckerberg, one of Facebook’s founders, is not really interested in becoming the type of CEO who will protect and look out for the interests of shareholders. He is cavalier, full of hubris and likes being a billionaire. Answering to the demands of shareholders doesn’t appear to be a priority. Some have called him disrespectful, immature and, even somewhat naive. He has either arrived late, or not at all for investor and analyst events – events which were meant to promote the very business these folks were supposed to be interested in purchasing for themselves or clients. When Zuckerberg could find his way to one of these meetings, he did so dressed in his trademark hoodie, and gave off the cuff speeches which sounded more like the ramblings of a college frat boy than the CEO of a major company. I’ll give him a pass for ringing the opening bell at NASDAQ on Friday from Facebook’s headquarters in Menlo Park because he did get married in California the next day.
The other thing I learned reading the comments was that a large number of them couldn’t understand how Facebook could grow its’ profits enough to satisfy investors. Facebook users have said that they avoid clicking on the advertisements because they don’t want to be hounded by any more ads than they’re already getting. They’ve also stated that if the company plans on charging them to use the site, they will simply close their accounts. In all honesty, I really don’t blame them. I’d do the same thing. It really isn’t worth the price of admission. Selling information about users is all that’s left, something I had covered in my earlier piece.
I’ve probably read more than a couple of hundred of these comments in the past couple of months. They haven’t looked any better or more promising since Friday. If you know something I don’t, or have the secret as to why so many people wanted to board this particular train, I’d be happy to hear your opinions and comments, because I’m frankly at a loss. I only know slightly more about finances than I do about my computer, and I think we all saw how well that’s working for me.
I’m sure I know less about it than you do. I think however, that by the time many of these dot com companies hit the public market, they’ve already peaked in value. That is, the big money has already been made. For the casual investor, it’s little more than a bank account sort of thing that has a fee for withdrawal and maintenance (brokerage fees), at best.
When I worked contract at a car company, I was told that the goal of the employee was not to build a better car. It was to ‘maximize shareholder value’. Meaning, as it was explained to me, to get the stock price up. That mentality always bothered me and it still does. How do you maximize shareholder value if you’re building something the customer isn’t going to buy? The person who told me this was on the bean counter end of it so I understood where he was coming from but, I still didn’t really understand the mentality of that statement. Still don’t. To me, that thinking is backwards. It says to me, screw the customer, once he’s driving off the lot with the car, who cares what he thinks of it? Japanese car companies kicked the living shit out of the US auto industry in the 1980s due in part to that mentality. They built a better product that not only lasted but was reliable and they did it cheaper. The American car market lost a Lot of once loyal customers during that time, many have never returned. When I brought that up, there were a lot of shaking heads in the room. At the time they had decided to kill their number one selling car. It made no sense to me.
A car is something people can put their hands on. Something like a facebook, is nothing more than a bunch of electrons firing around cyberspace in the form of a huge database. There is nothing tangible about it. Their biggest market, right now, from what you are saying, is advertising. Those annoying ads that appear a the top and along side of the screen when people are using the site. I for one, find that completely annoying and never click on them. Like many others, if they choose to start charging me for the privilege of having an account, I’ll be the first one out of the door.
It appears, again from what you say, that this CEO has made his money and doesn’t really care where the company goes from here. I cannot imagine investing in something like that and all the hoopla around the IPO is more advertising than sound advice. I’m probably wrong but I’ve always thought that investing in something you can’t put your hands on was a bad idea.
Yes, I’m babbling and that’s my uneducated opinion. Very little based in fact and not meant to advise anyone. I told someone the other day – Give me your money to invest and you will be broke inside of a month.
Sounds logical to me, but what do I know.
FB flopped because it was ridiculously overpriced. Only the stakeholders who invested early (who were never certain of getting their money out, therefore risked the most) made money. Not even the big investors like our pensions and 401Ks made anything.
FB is nothing more than a later version of AOL. Remember them?
A few weeks before the IPO, FB acquired Instagram in a $1 billion stock and cash deal when the picture sharing network was valued at $500 million. Analysts believe that they made their move when they did to eliminate competition from Twitter and Google. I think FB is keenly aware that, as a stand alone company, it very well could be another AOL – sort of seen it, done it, been there. The company also realizes the need to be a larger force in the mobile world, or it will fall by the wayside. There is word that FB is setting its’ acquisition sights on Pinterest and Tumblr. From my rather limited expeience and knowledge, these purchases, and whatever else they have in mind in the future, look a lot like a Pinky and the Brain effort towards world wide web domination.
The IPO may have not been all that it was cracked up to be, but I’m not quite ready to call the company a complete flop – yet. They’ve got a lot of time, and a lot of cash, so the sky’s the limit if they play their cards right.
This is along the same lines with what mth said – we may not see the tangible properties, at least not right now, but if enough folks enjoy the other apps and sites, they might be willing to pay for them. Not my cup of tea, but…I don’t think I fall within the target demographic, anyway.
I’m sure FB and their related acquisitions would be delighted to have a member of the peerage in their target audience.
LOL! I’m afraid my tiny Empire is of little interest to them! 😀
“Investors were still shaking their heads over the botched opening trading of Facebook when Reuters reported late Monday that the consumer Internet analyst at lead underwriter Morgan Stanley cut his revenue forecasts for Facebook in the days before the offering, information that may not have reached many investors before the stock was listed.
JPMorgan Chase and Goldman Sachs, which were also underwriters on the deal, each revised their estimates during Facebook’s IPO road show as well, according to sources familiar with the situation.
Reuters reported that Morgan Stanley selectively disclosed the change in Facebook estimates, which drew the attention of the main regulator of U.S. brokerages.” ~article
I saw a similar report from CNN Money. Goldman Sachs and Morgan Stanley – what a surprise.
“Facebook Inc Chief Executive Mark Zuckerberg, and several banks led by Morgan Stanley were sued by shareholders, who claimed the defendants hid the social networking leader’s weakened growth forecasts ahead of its $16 billion initial public offering.
The defendants were accused of concealing from investors during the IPO marketing process “a severe and pronounced reduction” in Facebook revenue growth forecasts, resulting from increased use of its app or website through mobile devices.” ~article
I don’t think I can remember a more problem laden IPO than this one. I may also be a bit short on experience with these things, but isn’t what these banks have done considered selective leaking of insider information?
“And anyway, this isn’t the first time Saverin has shown savvy with complicated international financial regulations. In a widely published IM conversation from his college days, Mark Zuckerberg described Saverin like this: “My friend who wants to sponsor [Facebook] is head of the investment society. Apparently insider trading isn’t illegal in Brazil so he’s rich lol.”’ ~article
here we go again