See that bubble?
It's bursting it is.
Facebook shares hit an all-time low in early trading today as the lock-out period ended for inside investors, freeing them to offload 270 million shares. The lock-out period, when inside investors are forbidden from trading their shares to give a recently public company a headstart, finished today, increasing the available …
But should FB vanish one day, I'm reasonably sure somebody else would spring up offering exactly the same thing (or even G+, which I think is maybe technically better, but just suffers as everybody else is still using FB).
Contrast this with Google vanishing from the face of the planet one day, and I'd be utterly stuffed.
I wish them no ill will but let's face it apart from the prospect of reaching 1 billion punters with shitty adverts what else did FB really have to offer anyone? FB have been testing a new ad model and there's already a big stink being kicked up about it which will knock the share price again.
FB stock may not be worthless but it's certainly not worth the paper it's printed on!
Firstly, a falling share price has little or no direct effect on a company as along as it is not preparing to raise equity or borrow. It is in no way a disaster even et 50 % of issue price Facebook is to big to be bought and the CEO still holds the majority of shares.
Secondly, $7 - $8 would be fair value in comparison with other US stocks at a 20:1 price-to-earnings ratio. So, much as I don't value the service, there is no need for anyone to worry. Apart, of course, for those who bought shares at over-inflated prices. More fool them.
I'm starting to think that even $7-$8 would be generous. As of the last filing there were 2.14 billion shares with 1.14 billion floated. Their book/share value is $6.22 for the most recent quarter which would indicate $7.50 or so being a fair price at the P/E you state. However, if the number of shares floated went from 1.14 billion to 1.41 billion with another 1.447 billion due to be floated by the end of the year it makes the total number of shares close to 2.86 billion shares and not 2.14 billion. That would put their current book/share value nearer the $4.65 mark and making a fair value closer to $5.50-$5.75 per share. Granted, this doesn't account for any increase in book value which may or may not occur and as a "tech company" price often runs 3x - 4x book/share until every now and then when the traders sober up and a bubble is declared and popped.
"However, the inside investors are usually big boys and girls, who hold their nerve a bit better than private investors. "
However, as inside investors they likely know things we don't about the likely future cashflows of the company and whether people inside are a bit worried hence may like to ditch their holdings whilst still above zero.
"If a mistake was made in that example, please say instead of downvoting."
That's not how it works. If you speak out against Apple, MS or FB the shills/fanbois appear and just downvote. Don't expect much in the way of correction or discourse. The shills hold a point of view based on faith, not on facts.
There may be Apple shills, there may be MS shills, there may be all manner of fanbois within and beyond both ends of the visual spectrum, but one thing I've never noticed on the Reg is a FB shill.
I thought that any given Reg reader's view of FB sat somewhere on a continuum between grudging toleration and downright hatred. I've never seen any FB advocacy, but life is full of surprises, I guess...
I'll bite. From a layman's perspective, there are two problems:
1) The inside investors have already paid for their stock; that's why they're called investors. You can't short-sell what you've already bought. However, even if you could . . .
2) Regulators probably tend to take a dim view of shorting (or trading of any sort in the stock) by an inside investor due to it being--wait for it--*insider* trading. The minimum penalty would probably be significant fines plus disgorgement of profit; the maximum probably involves Federal PMITA prison.
Even at today's share price, FB is still worth $50b. That's about what Goldman Sachs valued it at in January 2011. Anyone who got in before then could still be making a ton of money, even at $19/share.
What will be interesting is to see if these early investors sell or not. If they're selling, it's because they don't think FB has much more potential, and they want to take their profits and run.
It is important to have a walled garden where people can share their inspirational thoughts, pictures and mood swings. Otherwise we'd all risk being exposed to that content again, like when we used to get it by email...
In a perfect world they could build a completely parallel network, like they want to do in Iran, so that the individuals that are part of it have no way to interfere with this side of the Internet.
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