Simmering Hope

Hope is the expectation that something outside of ourselves, something or someone external, is going to come to our rescue and we will live happily ever after. – Dr. Robert Anthony

Archive for May, 2012

May 23, 2012

Facebook- An investor nightmare

First it was the dot.com in 2000, then the sub-prime in 2008, now is Facebook.

I am not stock market savvy; however, I would not have invested a dime in Facebook. What are the fundamentals of this company? Does it produce anything? And by producing I don’t mean selling our private info to the highest bidder. The truth is that FB makes money via advertising. How many people click on the ads? I assume not too many.

One day before the IPO, which was on Friday May 18, 2012, General Motors decided not to pay for advertising on FB anymore. Coincidence or inside info about what is to come?

Three days into the stock market, FB shares lost already 18% of their initial evaluation.
According to some financial analysts, the real value sits at around $9.50, far, far away from the initial $38.

Now investors are complaining about being kept in the dark regarding the forecast, which looks less than promising. Combined with the info that Zuckerberg along with his directors sold a huge part (or all?) of their shares, the future looks messy. He did the right thing- for himself- by floating the company at the right moment. He traded his electronic/cyber wealth for cold hard cash, laughing all the way to the bank.

But how can anybody complain about being kept in the dark? Seriously?
Anyone with an IQ over 2 digits could have seen that this was going to be a massive disaster.
Facebook have said their Revenues were $4bn and Profits $1Bn. Their share price of $38 for the IPO gave the valuations of $100Bn and a Price/Earnings ratio of 100 (the market average is approx 12) – an unattainable figure.
This assumes a revenue growth of 80% per year for the next 8 years.

With their stupid Timeline, I can see people leaving FB the second another social network, more user friendly, it’s coming around.

Courtesy of Daily Mail, following is a breakdown of how many FB shares were sold, by whom, and how much they saved by selling before the shares sunk from $38 to $31:

Mark Zuckerberg
Shares sold: 30.2 million
Value: $1.13 billion
Saved: $174 million

Accel Partners, venture capital investor
Year invested in Facebook: 2005 for $12.7 million
Shares sold: 49 million
Value: $1.86 billion
Saved: $341 million

Peter Thiel, PayPal co-founder
Year invested in Facebook: 2004 for $500,000
Shares sold: 16.8 million
Value: $640 million
Saved: $119 million

DST Global Ltd, investment firm based in London and founded by Russian oligarch
Year invested in Facebook: 2009 and late 2010 for $200 million
Shares sold: 45.7 million
Value: $1.74 billion
Saved: $323 million

Goldman Sachs, investment bank
Year invested in Facebook: 2011 for $450 million
Shares sold: 28.7 million
Value: $1.09 billion
Saved: $200 million

Elevation Partners, private equity firm with Bono as spokesman
Shares sold: 4.6 million
Value: $176 million
Saved: $3.3 million

Greylock Partners, venture capital investor
Year invested in Facebook: 2006 for $27.5 million
Shares sold: 7.6 million
Value: $289 million
Saved: 53.4 million

Conclusion: it’s good to be rich! At least until you get sued or investigated by Security Commission.


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