It was supposed to be a dream debut for the most visited site on the Internet but Facebook's Nasdaq listing on Friday turned out to be anything but that. A combination of technical glitches on the trading platform, poor investor appetite and most important of all, that old stock market trait called greed ensured that the listing turned into a flop show. But even if the stock trades well below its offer price of $38 a share now, Facebook's early investors, who include some venture capitalists, angel investors and even a Russian oligarch, are now laughing all the way to the bank. By pricing the IPO fully, the investment banks may have ensured that early investors got the maximum bang for their buck. Yet, by leaving very little on the table for new investors, the investment bankers also ensured the stock will not trade over the offer price in the near term. In a throwback to the dark days of the dot-com boom last decade, Facebook, after sensing the hype around the IPO, raised the price band from $28-35 to $34-38 a share and also increased the number of shares on offer by a quarter. It is not surprising that 60 per cent of the proceeds of the offer of $16 billion will accrue to shareholders who invested in Facebook in its early days. Of course, as those who assumed great risk in investing in an unknown company, they deserve to reap the rewards now. But should this have been at the cost of incoming investors?
The first two days of trading suggest the market is uncomfortable with Facebook's mind-boggling $104 billion valuation. The company's price-earnings ratio of 107, based on its 2011 earnings, is way ahead of the 13x that the more profitable Apple commands. The first quarter revenues and earnings also show a slowdown compared to 2011 and with General Motors recently deciding to pull out of advertising on Facebook, the concerns are real. Questions are being raised over its revenue model, which mainly relies on advertising on the site, though Facebook Credits, which it sells for applications on the site, also contribute to revenues. With about half its users accessing the site through smartphones, Facebook has to develop advertising options for them. Typically, such users find advertisements annoying on the small screen. Facebook is also experimenting in New Zealand with paid posts (NZ$2 a post) with the assurance that the recipient will surely get to see them. With petabytes of information and pictures vested with it, there is no question of the opportunity available for Facebook to leverage. How well it does that will decide whether Facebook's stock appreciates rapidly like Google's or continues to languish below the offer price.
Keywords: Facebook IPO, Facebook Nasdaq listing
watch out for weibo.com
with more than 300 million registered users, weibo is already in top league micro blogging websites
Thats the case with each and every company. No one except god knows howz the actual future is going to be. We, mere mortals can only predict the "expected future" based on information at hand.
A company like facebook without any real product and a revenue model overtly reliable on fickle users is bound to have questions asked about its long term feasibility. Also, any stock thats overheated and hyped just on the basis of speculations is bound to come to eath. It seems the Investors the banks , the IPO creators, underwriters-all have forgotten the hard lessons learnt from 2007-2008 meltdown. Its time to go back to the days of hard nosed banking where the valuation of a company was more based on its ability to produce and not just sell. Hard-backed stocks might not soar sky high on day 1 but are liable to be more successful in the long run and rewarding to big or small, both the investors. Its time regulators started looking into IPO evaluations more carefully.
Facebook could have been a dazzling social networking site. But the evaluation of $104 is plainly insane. Unless its money model/business model is changed thoroughly very little hope one can do for its IPO. A company which primarily sustains on advertisements can't do better. Facebook is more of a hype, a craze or mania of people and indeed that translated into big bucks. But mania, more so the manias of this young generation is never constant. They are ever after new things. The day Facebook starts appearing as old concept, which already it is people will shun it for some new 'trendBook'. This Facebook episode only highlights Wall street investors never learn from the past, greed disillusion them from reality.
information and technology development in the current ara is very sparatic and can't be guess anything may happen in the fraction of second. so, innovation of new technology to surpass the present facebook is not exceptional. but,the failure of facebook in one stock market cant be taken as totality in the perception of shareholder of globes. they should try and list thier IPO even in bombay stock exchange since user of facebook are very high in india.
The success of Facebook as a social networking website and a listed
stock depends on how loyal its users are. At present they might be
popular but who knows something new will come and all users which
massively dump them and move onto the new thing! Many years ago during
the early days of internet Yahoo was the most popular search engine.
Then google came and all switched over to it and yahoo's popularity
and stock price went down! Today google by itself feels threatened by
facebook but who knows tommorrow something new will come and all will
leave google and facebook and rush to that!
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