Facebook: No Friend to Investors?
Well, after months of speculation and waiting, Facebook is a public company.
And for most small investors, the question will be where does it go from here?
Because now, Facebook joins the other 2,768 Nasdaq stocks that are graded on bottom-line performance. It's not about how many users the site has. It's about earnings and revenue growth.
On that score, you have to wonder just how well Facebook can perform. Top line growth -- revenue growth that is -- is already slowing. And one of the keys to the company's future success is how well it can use the personal information of its 900 million users -- and that puts it directly in conflict with our federal government. Investors have been attracted like a moth to a flame by the treasure trove of personal data that Facebook users share on the site, but the degree to which it can monetize that asset is far from certain.
Or as one commentator said today: “Facebook's sitting on a gold mine. Now it needs to find a way to mine it.”
What's more - the company's well-known CEO - the hoodied Mark Zuckerberg -- has never run a public company. He's a brilliant programmer and entrepreneur, but it's an open question how well he can manage a leviathan like Facebook whose size now rivals that of Pepsi, Amazon, Disney. Not long ago, he bought out Instagram for one billion dollars without even consulting his board of directors. Zuckerberg's lack of experience wouldn't be tolerated in any other industry.
One of the things about this deal that has bothered me is the degree to which insiders seem to be bailing. Nearly 60 percent of the stock offering comes from current shareholders who are cashing out -- bailing and moving on. Maybe they believe, like so many of us know that internet companies have a short half life.
Now despite all this, the enthusiasm for this stock is through the roof. Yesterday one of the employees of the building we work in here in New York came up to me and asked what I thought of the Facebook IPO. This person had never bought an individual stock. That's a sign there may be too much froth in the market for Facebook stock.
Ultimately, for me, it’s an open question whether Facebook is the next great stock investment. Being the next big thing -- well it's just not the same. The best advice I can muster - wait for six months, when insiders' options typically expire and selling pressure from insiders abates. If you still like it then, well, buy Facebook.