Saturday, May 19, 2012

"Houston, we have a problem" Facebook Fizzles! Fails to Liftoff

Some things just make me chuckle... Like I've said a hundred times:

Groupon's business built on SPAM mail is a terrible business model.

Facebook doesn't have a profit model.

Facebook's IPO was a failure: Yahoo reports in Facebook Fizzles

All that hype for a 23-cent gain! Facebook's (FB) first day as a publicly traded company started with a bang and ended in a wimper. FB shares opened on the Nasdaq at 11:30am et, after a 30-minute delay, at $42 each; 11% higher from the IPO price of $38. Within 10 minutes, that gain was cut in half and stock hovered around $40 for most of its shortened trading day, before officially closing at $38.23.
Facebook's Opening Day
While difficult to cut through the hype surrounding this stock, some cautionary signs emerged in just the last two weeks leading up to the IPO. We've discussed them at length here on Breakout. Slowingrevenue growth, General Motors (GMpulling ad spending, and monetizing mobile usage are strong, but not alarming, reasons to question when to buy, how much to buy, and whether this is the right investment for you.
Earlier today Breakout covered the Facebook open live from our New York studio and the Nasdaq market site. In the attached video tech analyst David Garrity of GVA Research highlights some of the biggest issues to keep in mind if you're thinking about buying Facebook after the IPO honeymoon.

I called Groupon correctly and let me make a guess on Facebook. Facebook will be in the mid $20 range by December.

I have no position of Facebook... Wish I could short the hell out of this company. 


Anonymous said...

Well, you made me look up what a profit model was. :) Makes me think if Facebook popularity translates into profit?

Anonymous said...

Like many people I have a love-hate relationship with Facebook, as a user and as a "member of the community". However, I think you are being overly negative (perhaps implicitly) about Facebook's business model, competitive advantage, staying power, management team, and growth prospects, especially in comparison to Groupon. Anyone can start a Groupon clone and the company itself is an embarrassment in many ways.

The real issue is that Facebook is massively overvalued, at least using reasonable projections.

But I wouldn't just write it off as another MySpace, friendster, etc. It's an easy thing to do, and a probable outcome, but not still unclear at this point. Having said all of that, I won't be buying any FB shares any time soon, if ever.