The 421 mn shares of FB (ticker) that were sold to the public yesterday raised $16 bn in capital.The reason i didn’t join the blog bandwagon and write about it prematurely is because im more intersted in the day after the inital listing rather than quoting numbers from the SEC filing.I have this weird theory that the performance on the first day of trade will determine the future of the stock, as radical a view as it may seem,it has proven itself for recent tech IPOs Groupon and Zynga.
How does Facebook compare with other young companies that have poor revenue models backed by big investors?FB has proven to us that this is how far it can get,it doesnt show any exponential growth or future plans to tap into 900 million users it has registered.There is evidence to show that last years haul of $3.7 bn will not be beaten,infact this quarters earnings have already declined,compared to the same time last year.
A question id like to ask new investors, who were lucky to got hold of some stock,is-how lucky do you feel? reports suggest a lacklustre first day show with a surge of only 23 cents at close.What would be really unfortunate was if it falls below the ipo price over the next few weeks,just like the miserable performance of other internet debutants of 2011 that all met with the same fate.My biggest concern is,where does FB go from here, how bigger can it get? the numbers speak for themself,growth has already declined in the number of users,advertisers are backing out die to extremely low click through rates,and competition from other social networks is on the rise.
Something that alot of people didnt know was how inaccurate that 900 million- user figure is.One of Zynga’s popular games on FB is Yoville.I’ve been on this game since late 2008 and have met many users who create as many as 20 FB accounts to collect more coins and points in the game.Even if approximately 10 million active users play this game,and if 1/5 th of them make 10 extra accounts,thats 20million extra accounts.Then there are other players who make an extra account to add only friends from social games.Out of the 240 million users that play zynga games on FB,even if 1/10th made an extra account, thats another 48 million accounts.Not counting FAKE accounts that impersonate celebrities and underage (<13years) users that use Facebook.The 900 million number could be extremely inflated,and without primary markets like India,Russia and Brazil tapped to the max, getting more users will be almost impossible.Even China has shut the door on FB and runs its own mammoth social network called Qzone (QQ),so as far as further penetration is concerned,theres not much left of the civilized population,on Earth atleast,unless Zuckerberg plans to socially connect into other realms of the cosmos.
The only way to check the credibility of the stock, is to see how fast investors try to cash out and run.Even with the 90 day flipping threshold in place by the brokerage houses,this will be the test time.After this period, most of the primary investors could start offloading sections of their stakes and create a frenzy that could spirally slide the stock.
The only thing certain here is that the future of Facebook is uncertain.This was the big dream,the big plan.Some call the stock market a Ponzi scheme.This is the climax of the 8 year wait, to tap into the public market and bloat your investment,its the end dream of every corporation.Facebook has reached there, now what?