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Facebook’s market meltdown is far from over
Reuters ^ | 08/08/2012 | Rob Cox

Posted on 08/08/2012 4:41:28 AM PDT by SeekAndFind

It would be all too easy to wager that Facebook’s market meltdown could be coming to an end. After all, the social network led by Mark Zuckerberg in just a couple of months incinerated as much as $50 billion of shareholders’ wealth. To put that in context, even after a recent rebound, Facebook since its Nasdaq debut in May has lost value nearly equal to the current market capitalizations of Yahoo, AOL, Zynga, Yelp, Pandora, OpenTable, Groupon, LinkedIn and Angie’s List combined, plus that of the bulk of the publicly traded newspaper industry.

As shocking as this utter failure may come to the nearly 1 billion faithful Facebook users around the world, it’s no surprise at all to anyone who read the initial public offering prospectus. Worse still, all the red flags that were flying when the company debuted – overpriced shares, shoddy corporate governance, huge challenges to the core business and a damaged brand – remain at full mast today. In this respect, Facebook looks like a proverbial example of what’s known on Wall Street as a falling knife – that is, one that can cost investors their fingers if they try to catch.

Start with the valuation. To justify a stock price close to the lower end of the projected range in the IPO, say $28 a share, Facebook’s future growth needed to mirror that of Google’s seven years earlier, according to an analysis by Reuters Breakingviews and Anant Sundaram, a professor at Dartmouth’s Tuck School of Business. Under that scenario, Facebook would have had to increase revenue over the next couple of years by some 80 percent annually, while maintaining high profit margins all the while.

That’s not happening.

(Excerpt) Read more at blogs.reuters.com ...


TOPICS: Business/Economy; Society
KEYWORDS: facebook; stockmarket

1 posted on 08/08/2012 4:41:31 AM PDT by SeekAndFind
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To: SeekAndFind

is this surprising given a college kid with no business experience is running it - the kid got played by wall st


2 posted on 08/08/2012 4:48:41 AM PDT by Revelation 911 (How many 100's of 1000's of our servicemen died so we would never bow to a king?" -freeper pnh102)
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To: SeekAndFind
The difference between Facebook and companies like Google, Microsoft and Apple is that seasoned business people were put in charge early on, pushing the "kid entrepreneurs" to the background. This gave the kids a chance to mature before re-assuming executive roles at the companies they founded.

I'm not really seeing that with the Facebook.

3 posted on 08/08/2012 4:55:32 AM PDT by SamAdams76
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To: SeekAndFind

Top brand to trash.

He does support gay marriage though. Maybe they’ll bail him out.


4 posted on 08/08/2012 5:00:58 AM PDT by TigerClaws
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To: SeekAndFind

What is happening now is Facebook is swimming with the sharks. The sharks are trying to leverage a old fasion takeover. The sharks see big dollars but what they don’t understand is they will commericalize it more and turn off many people in the process. The little boy who is running it thinks he is smarter than the sharks. I see it with smoke rising and nothing worth much left in the end.


5 posted on 08/08/2012 5:01:26 AM PDT by bmwcyle (Corollary - Electing the same person over and over and expecting a different outcome is insanity)
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To: bmwcyle

Myspace


6 posted on 08/08/2012 5:04:46 AM PDT by KSCITYBOY
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To: Revelation 911
IMHO the focus on Facebook’s leadership and business model are all wrong.

What did Facebook produce? What physical product was produced by Facebook? What product produced by Facebook in January of this year is still in use today?

Facebook is/was nothing but a very fancy chat room where people can exchange emotions.

How long would this web site, Free Republic, last if it was listed on the stock market?

Doesn't anyone remember the big flurry and instant millionaires from the “Dot.Com” bubble?

7 posted on 08/08/2012 5:17:51 AM PDT by Nip (TANSTAAFL and BOHICA)
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To: Revelation 911

In addition to all the stated business concerns, Timeline has been a disaster for FB. No one likes it and it has reduced usage and interaction.


8 posted on 08/08/2012 5:32:17 AM PDT by Josa
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To: SeekAndFind

There’s a Zucker born every minute...


9 posted on 08/08/2012 5:32:33 AM PDT by outofsalt ("If History teaches us anything it's that history rarely teaches us anything")
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To: SeekAndFind

Facebook like all fads eventually fades. The novelty of posting family pictures is over — drowned by BS and propaganda from every enity that has a “facebook” page.

I believe that there is a finite amount of advertizing revenue available to the media of all typoes.

Also only about 1 percent of folks with a facebook page use it once a week or less.


10 posted on 08/08/2012 5:47:11 AM PDT by texican01
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To: bmwcyle

The ‘little boy’ can hire all the help he needs. This ‘little boy’ seems to have done pretty well so far.


11 posted on 08/08/2012 5:54:06 AM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: driftdiver

Yes he did but going public opens the company to stock buying and takeover. The boy is out of his league there.


12 posted on 08/08/2012 6:01:20 AM PDT by bmwcyle (Corollary - Electing the same person over and over and expecting a different outcome is insanity)
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To: SeekAndFind

I feel sorry for the small investors who got taken by this.


13 posted on 08/08/2012 6:09:41 AM PDT by bkepley
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To: Nip

Like the Duke brothers in Trading Places-SELL! SELL! SELL!


14 posted on 08/08/2012 6:24:26 AM PDT by Dr. Ursus
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To: bmwcyle

yeah he should go out and hire a Harvard grad, oh wait he is one

You keep denigrating him. He’s done a lot of things correctly and has built a great business.

I strongly disagree with his politics but thats not what your argument against him.


15 posted on 08/08/2012 6:49:33 AM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: driftdiver
I did not say he was not smart but really smart people many times don't see the big picture well. That is why so many PHD’s are said not to be able to tie their own shoes or have to be cleaned up after they piss themselves. The boy is a fantastic at writing code. Hostel takeover is not his realm. You need to get over your idol worship.
16 posted on 08/08/2012 6:55:31 AM PDT by bmwcyle (Corollary - Electing the same person over and over and expecting a different outcome is insanity)
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To: bmwcyle

idol worship, ha

No idol worship, just a dislike for people making ignorant comments. You act like he’s all on his own.


17 posted on 08/08/2012 6:58:26 AM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: SeekAndFind

When it goes into the low single digits it may be a buy.


18 posted on 08/08/2012 8:03:54 AM PDT by 2001convSVT (Going Galt as fast as I can.)
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To: bmwcyle
Hostel takeover is not his realm.

Well, his name isn't Patel, is it now.

19 posted on 08/08/2012 9:49:30 AM PDT by Moltke ("I am Dr. Sonderborg," he said, "and I don't want any nonsense.")
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To: bkepley

Why do you feel sorry for them? If they couldn’t look at the fundamentals of this company and see it was a dog...then they have no business being in the market.

Rule #1 Don’t invest in businesses you don’t understand.

Rule #2 The laws of business apply to all businesses, even the shiny internet based ones.


20 posted on 08/08/2012 4:04:56 PM PDT by willyd
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To: texican01
about 1 percent of folks with a facebook page use it once a week or less.

So 99% use it more than once a week.

Is that good or bad?

21 posted on 08/08/2012 4:16:10 PM PDT by nascarnation
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To: driftdiver
yeah he should go out and hire a Harvard grad, oh wait he is one

I thought Zuck bailed after his soph year?

22 posted on 08/08/2012 4:17:43 PM PDT by nascarnation
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To: SeekAndFind

just wait until all those time restricted stocks hit the market in november.

when the price crashes THAT will be the time to consider buying.


23 posted on 08/08/2012 4:19:19 PM PDT by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: longtermmemmory

Don’t they have something like 5 times the current # of market shares coming available to sell?


24 posted on 08/08/2012 4:25:26 PM PDT by nascarnation
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