I have had enough of the whining and the law suits! Every other story in the online, printed and television news this past week condemned Zuckerberg or Morgan Stanley for the “failed” IPO for Facebook. How about buyer beware? All of those smart folks on Wall Street and their buddies who hold political office were all salivating at the prospects of making a killing on Facebook rather than looking under the hood, maybe the hoodie, of Facebook. All of the Wall Street and Washington insiders begged for insider stock positions, versus us poor slobs who have to buy stocks via the retail market, and could not wait to get their hands on more of the Facebook “wallpaper”. The “street” was delirious to see if the stock would go for $32, $34 or $38 per share. Then in order to meet the demand, more and more shares were “printed” and made available to the ravenous herd prior to the IPO. Sounds like a Currency move by Bernanke! Everything was wonderful, the IPO price was set at $38, and everyone who was “in” were having pre-IPO parties and celebrating Zuckerberg as a genius and a financial wizard. Then, the IPO hit and the stock spiraled down.
The stock is now down below $32/share and everyone is hiring lawyers to sue someone, anyone, who may have been involved. I would suggest, before you plunk down a healthy retainer, take $5 dollars of that retainer and go buy a mirror! Then, Google, P. T. Barnum. about two links down you will see “There’s a sucker born every minute – Wikipedia, the free encyclopedia”, then pick up your mirror and look into it!
How about a little up front due diligence. I am not rocket scientists but after taking a quick look at advertiser hit ratios, the make up of the Facebook user base, the current web interface of Facebook and the prominence of advertiser space (or not), this was a short from the get-go at a $38 IPO price. Facebook, like Google, Bing, and Yahoo will live or die by its advertising revenue. It does not charge for online user participation so advertising is its major source of revenue. Just look at a quick look at 3 indicators that would have taken the Wall Street boys and girls less than 5 minutes to discover about Facebook.
- Facebook’s revenue was down 6.5% in Q-1 of 2012 versus Q-4 2011
- Facebook’s profits were down 32% in Q-1 versus Q-4 2011 (should make Obama Happy since he hates profit)
- Facebook’s Click through rate was half of the internet average in 2011. (.1% average vs Facebook at .051%) The lower the click-through rate the less hits on advertisers.
Then, days before the IPO hit, Government Motors pulled their advertising from Facebook citing poor ad/cost performance as the reason. Gee, was this a hint of things to come. Apparently none of the analyst use Google, Bing, Yahoo or Facebook. The first three of these sites are SEARCH engines. What do you use a SEARCH engine for geniuses? To SEARCH for stuff. While not all of the searches necessarily are to locate a product or service, all searches can generate ad suggestions. Go to Facebook. See an ad anywhere? There is a column of sponsored links down the inner right hand panel but not many. Now do a Google, Bing or Yahoo search. Look at your P.T. Barnum search in Google, There are books galore on the right side to buy. You think these are just books that Google likes? No, they are advertisers!
If this wasn’t enough, even Zuckerberg, that new Age Steve Jobs wannabe told you in his letter accompanying the prospectus that:
- “Simply put: we don’t build services to make money; we make money to build better services.” (my comment: Build and they will come? Really?)
- “These days I think more and more people want to use services from companies that believe in something beyond simply maximizing profits.” (My comment: maybe Obama would agree, stockholders shouldn’t)
- “People connect with Facebook to connect with people. We believe that we are at the forefront of enabling faster, easier and richer communication between people around the world.” (My Comment: OK, but how about connecting with Advertisers?)
Do I feel sorry for those who lost money on Facebook. Let me think….NO!
Do I think Facebook, its underwriters, or Zuckerberg or his employees should be sued? NO.
Should Facebook/Zuckerberg be investigated by the SEC? Heck No. The SEC approved the IPO beforehand. Maybe they were searching Porn Sites with Google rather than checking out the prospectus! Wonder how those advertisers were?
Everyone should grow up, take their lumps, and next time do your due diligence! Zuckerberg may well get the last laugh on this one as he banks his billions…