Reading about Facebook as a business the last few months has been
interesting. In the last week in particular, it seems about 99% of the
public comments on the New York Times and Washington Post sites have
been negative on buying the stock. Rarely is there such a consensus in
the comments sections, and on what I thought was a somewhat arcane
subject (how to price an IPO). Many commenters even call it "Fadbook."
The latter was new to me.
That so many seemed to anticipate the decline of the stock from the
get-go is impressive. I think Skip W. used to comment here about how
widely anticipated events in stocks rarely came to fore. I agree with
this. But at the moment, this has been turned on its head. I wonder if
many put their money where their mouths are and have shorted the
Facebook's price/earnings ratio of about 80 sure sticks out to me. I
guess the packages of the IPO are banking on earnings rising rapidly.
I see the forward P/E is about 49. Still no good, AFAIC.
I think those buying Facebook stock are under the psychological
delusion that Zuckerberg is a repeat of Jobs and Gates. One might say
that sensations like Jobs and Gates rarely repeat. Mr. Zuckerberg does
seem to show some smarts by marrying a doctor. Else I do not see him
on the same entrepreneurial level as either Steve Jobs or Bill Gates.
I understand Facebook's revenue from present comes from selling
advertising space. This is just as newspaper, billboards, radio, and
television have done for many years. I do not like the product. (I
also do not own any newspaper, radio or TV products, unless they are
part of a conglomerate like GE.) So I do not plan to buy any Facebook
stock. Still, the history here intrigues.
I read more about IPOs as a result of all the chatter here. I feel Ben
Graham would say they are really not something for the masses, even of
the "Intelligent Investor" type. Generally he advises purchasing
older, established companies.
Does anything stick out to others here regarding Facebook and its
promise (or non-promise) as a business?
- posted 8 years ago