Facebook conference call with Rob Enderle here
May 17th update
A word to retail investors, get out in time.
Retail after market demand will be like an incoming tsunami & then it will recede fairly quickly to much lower levels.
At the recently increased size 57% of the IPO proceeds will go to selling shareholders, almost $9 billion. That’s huge, never happened before & never will happen again. Those selling shareholders are stampeding towards the exit.
At the increased size & increased price range mid-point point ($15 billion) FB is the biggest pump & dump ever. Shortly down the road retail investors in the aftermarket won’t know what hit them.
Four comments about Facebook. Full FB analyst report here
(1) Facebook's growth
The growth rate is declining because Facebook is essentially a legacy application designed for desktop real estate. It's a fish out of water in the mobile platform in terms of generating ad revenue.
'Sponsored links' have been around forever & they are no silver bullet for Facebook. Mobile users are too focused on their own activities (like walking & talking at the same time, etc) to bother clicking through mobile-sponsored links.
In short, FB is backing itself into a corner regarding revenue from mobile, but they don't really have a choice.
(2) Zuckerberg's leadership
His friction with Wall Street has been especially noticeable during the road show. He's showing his rebellious side, which is good if he's in a rock group, not so good as CEO of a major major company.
As a result the Wall Street crowd isn't going to give him much future leeway.
Also, I always thought he would set the price at $100bb regardless of any advice he received, because FB has been touting the $100 bb valuation for a year, regardless of quarterly non-performance.
And sure enough, that's the birthday present he gave himself today by setting the price range midpoint of $36. It's amazing what you can do for yourself if you control 59% of a company after the IPO.
The 'birthday present' is in the same category as dressing like a back-room coder when presenting to powerful Wall Street investors & analysts, which is another way of saying 'stick it in your ear' to Wall Street, not very smart.
Well, that's another black eye he gave himself as far as a fairly large group of Wall Street professionals are concerned, seems to me. Over time they are not going to cut him any slack, especially when he needs it.
Regarding MZuckerberg as a product development genius...I don't think so. If he is such a product genius then why in the world did he wait for five or six weeks after filing the S-1 on February 1 to start testing his mobile app?
That one screw-up is all you need to know about Facebook's vision for the future...which is they don't have a defensible up-to-date vision for the future.
(3) Will you recommend buying FB?
Only if you can flip it right away. I think Facebook has loaded up the retail channel (Schwab, Etrade, Fidelity, etc) with stock. Most of those retail houses have 15 to 30 day holds, so FB & the investment bankers are trying to limit to float to ensure a near-term pop...
...so the institutions can get out asap in spite of what some of them are saying. However, FB has been taking a lot of negative hits since it filed, and that may have filtered into the retail side. So hopefully there is some education out there that will help limit the retail losses from the uninitiated buyers in the first week or so.
And there's no reason to think Facebook stock performance will be any different than all the other social media stocks, most of which never saw their first day (first hour's) pop again.
(4) Top themes to note about the FB IPO
Legacy desktop application that doesn't work for advertisers on the mobile platform
Artificially low float initially, but IPOdesktop expects 2 billion shares to be available six months out. It makes sense for everyone who owns the stock now to sell 100% of their holdings this year, because of tax law uncertainty and because in six months it will be obvious that FB's 'trust me' mantra of today won't have worked.
I think FB missed their December quarter estimates, missed their March quarter estimates and will miss their June quarter estimates -- once Wall Street has internalized that fact the price/earnings multiple will undergo a severe contraction.
Zuckerberg's friction with Wall Street will come back to haunt him. He just doesn't know what he doesn't know.
And a favorite saying of a friend of mine is 'If you don't get in touch with reality it WILL get in touch with you.'
Hello Mark Zuckerberg.