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 ...
So 99% use it more than once a week.
Is that good or bad?
I thought Zuck bailed after his soph year?
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.
Don’t they have something like 5 times the current # of market shares coming available to sell?
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