Facebook Stock

Facebook Stock is Worth $7.50 a Share at Best

Duh on you if you bought the Facebook IPO.


Double duh if you're thinking of buying Facebook stock now that it's fallen to $32 a share and lost $17.16 billion off its initial $104 billion valuation.

The company is only worth about $7.50 a share. And, no. That's not a typo. There is no missing zero or a placeholder.

That's reality. What is ludicrous is that Morgan Stanley and Facebook executives thought the company merited a $104 billion valuation at 100 times earnings.

As my good friend Barry Ritholtz pointed out recently, both Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG) debuted at about 15 times earnings. Today they trade at 13.6 and 18.2 times earnings and 3.75 and 4.9 times sales respectively.

As I type, Facebook's market cap is $86.84 billion and its price to sales is ridiculously high at 21.01. I think that's way out of line.

So what should the numbers be?

Try this on for size. If we use Google's price to sales ratio of 4.9 (and I am being generous here for discussion purposes), that equals a total market cap of $20.24 billion or 76.68% lower than where it's trading today.

With 2.74 billion shares outstanding, that's equal to only $7.39-$7.50 per share.

No doubt I'll get the evil eye from the Facebook faithful and Morgan Stanley for saying this, but think about it.

Revenue is already slowing and the company does not and cannot possibly dominate the mobile markets that are becoming the preferred channel for millions of people.

Worse, startups are already cannibalizing Facebook's user base as concerns over privacy and who likes who mount.

Companies like General Motors (NYSE: GM) are deciding not to renew their advertising. This is going to hit Facebook to the tune of $10 million a year for the loss of GM alone.

More will undoubtedly head out the door for the same reason, since Facebook friends don't necessarily translate into revenue.

Corporate buyers are beginning to figure out that advertising on Facebook is simply not cost effective versus other media alternatives - gasp - including good old fashioned television and radio advertising, billboards and tradeshows.

Facebook Stock: At the Mercy of the Merely Curious

Many people think this isn't a big deal. They couldn't be more wrong.

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Is Facebook (Nasdaq: FB) a Replay of the AOL/Time Warner Deal?

I hope you didn't buy shares of Facebook (Nasdaq: FB). The valuation was always too aggressive.

And increasing both the price and amount of Facebook stock at the last moment ensured that both underwriters and retail investors ended up with far more shares than they bargained for.

In fact, the Facebook fiasco reminds me of another deal that marked the peak of the dot-com boom.

No, not the ineffable and rather sweet Pets.com- their IPO was far too small a deal to have genuine market significance.

Instead I'm talking about the AOL and Time Warner merger announced on January 10, 2000.

Like Facebook, the deal was sold as a big success. It was only later that it quickly became clear that AOL had sold itself at the absolute peak of the market.

From there on out it was all downhill as the storied merger practically top-ticked the market.

Before Facebook There Was AOL

AOL had built up a nice business from "dial-up" Internet access, but it was already obvious by January 2000 that the arrival of broadband Internet would make for a difficult transition.

As such, AOL's market capitalization of around $200 billion was purely the result of the frothy market of 1999.

Nevertheless, that rich valuation enabled AOL to become the senior partner in an acquisition of the Time Warner media conglomerate, getting 55% of the merged company in a deal valued at $350 billion. It was the largest merger in U.S. history.

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Facebook Stock Price Drama Heats up with Lawsuit (Nasdaq: FB)

Investors are not taking lightly the lackluster performance of the Facebook stock price (Nasdaq: FB).

On Tuesday the finger pointing blame game began, followed today (Wednesday) by lawsuits.

Investors who claim they were misled in the purchase of the social network firm's stock filed a lawsuit against underwriters Morgan Stanley (NYSE: MS), Goldman Sachs (NYSE:GS), JPMorgan (NYSE: JPM) and the other underwriters, some 33 in total.

According to a complaint filed Wednesday in Manhattan federal court, the investors, who are members of a proposed class action lawsuit, claim they have lost more than $2.5 billion since Facebook's debut last week.

Morgan Stanley has been accused of mismanaging the offering by either signing off on a price that was too high, or agreeing to sell too many shares.

Facebook went public May 18 amid much hype and fanfare at $38 a share, the high end of the increased price range.

Several investors are frustrated that they got more shares than they were expecting in the IPO. They in turn dumped those shares when Facebook began trading Friday, pressuring the stock's price down and taxing the Nasdaq's overburdened platform. This resulted in a myriad of problems including late execution reports, communication problems, and delayed quotes.

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Facebook Stock Price: Time to Play the Blame Game

It's the third trading day for Facebook stock, and the finger pointing over what went wrong has begun. Facebook (Nasdaq: FB), its underwriters, and the Nasdaq are all red-faced after the lackluster debut of the largest-ever tech offering. The hyped-up Facebook IPO was finally priced at $38 last Thursday, raising $16 billion. Shares opened Friday […]

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The Time to Buy Facebook Stock

Facebook stock got off to a rocky start Friday, with Nasdaq messing up order confirms and Morgan Stanley propping up the share price. Now on day two, the stock price has slumped more than 10% already in morning trading. Money Morning Capital Waves Strategist Shah Gilani joined Fox Business' "Varney & Co." program to discuss […]

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Why Facebook Stock is doing a Faceplant

Forget all the hype.

And you can even forget that I told you Facebook was a hyped-up offering, and that I would sell my shares if I was an insider, and that I definitely wouldn't buy the IPO on its first trading day.

Did you listen to me?

If you didn't, and you own Facebook stock (Nasdaq: FB), here's what you have to worry about.

The Facebook Stock Concerns



First, did you get your confirmation? Probably by now you did.

But the problems that NASDAQ OMX Group had sending out electronic trade confirmations in the heat of trading on Friday were staggering. (They eventually went "manual" on the opening day of the biggest tech offer ever on the biggest tech exchange in the world... how ironic... manual.)

There's nothing out there, nothing anywhere about who or how many people did or didn't get confirmations or when they got them. There's nothing out there because the exchange is panicking, and if thousands of confirms, or tens of millions of shares, are up in the air... well imagine what could happen.

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There's More to the IPO Market Than Facebook (Nasdaq: FB)

Admit it, you love the Facebook IPO (Nasdaq: FB).

Besides its $100 billion-plus stock valuation, the social media company has over 900 million active users worldwide.

Plus, at $16 billion, Facebook will go down as the second largest U.S. IPO ever, trailing only Visa's $17.9 billion deal in 2010.

But let's not forget, this isn't the first IPO that's gotten a ton of attention, and it won't be the last.

In fact, the hype surrounding Facebook stock is overshadowing the entire IPO market, clouding the big picture, and perhaps, some worthwhile investments.

So let's take a look at what else has been going on in the IPO market and what's coming up that deserves your attention.

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Facebook Stock Price Gets Small Bump in Lackluster Debut

In what was one of the most highly anticipated initial public offerings in history, Facebook (Nasdaq: FB) finally made its debut among much fanfare and frenzy Friday.

But the Facebook stock price failed to soar as high as the hype. While not exactly a dud, the intro was definitely subdued.

Shares opened around 11:30 a.m. in New York at $42.05, up about 11% from Facebook's IPO price. Momentum quickly ebbed, and shares dropped as low at the $38 IPO price in the first half hour of trading.

By 3 p.m. shares were hovering just above $38. But with an hour of trading still to go, investors shouldn't get complacent.

"The day isn't over," cautioned Money Morning Chief Investment Strategist Keith Fitz-Gerald. But regarding Facebook's debut, "initial trading has not been impressive."

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Facebook Stock Ready to Roll – But Where Will it Go?

The Facebook IPO price was set and the stock is ready to start trading - but will it live up to its hype or sharply sell-off?

The social media giant priced at $38 a share, the company announced after market close yesterday (Thursday).

That makes Facebook the largest tech IPO in history, valued at $16 billion.

It's the third largest U.S. IPO ever, behind first place Visa at $19.7 billion and then General Motors, which raised $18.1 billion.

While the stock has created unrivaled investor frenzy, there is a wide range of predictions for how Facebook will do in its first trading day - and who the real winners will be.

"The ones who make out on IPOs are the early investors, venture capitalists, founders, and underwriters," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "The public almost always goes along for the ride...whether or not they get taken for a ride remains to be seen." The Facebook stock price will be determined when it starts trading today at 11 a.m.

Where the cutoff is for considering the IPO a success varies - with many thinking anything below 50% would be a disappointment.

"I think anything over 50 percent will be considered a successful offering - anything under that would be underwhelming, Jim Krapfel, an analyst at Morningstar, told Reuters. "A lot of retail investors are not concerned about valuation. That's what is going to drive the first day pop."

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Investing in IPOs: Why You Should Think Twice About Facebook (Nasdaq: FB)

Ever since the Dutch East India Company became the first to issue stocks and bonds to the public in 1602, investors have seen initial public offerings (IPOs) as the road to riches.

The current hype surrounding the Facebook IPO is just one example.

But investors tempted by Facebook (Nasdaq: FB) may want to think back to the dotcom craze of the late 1990 s. You'll remember it spawned a feeding frenzy among investors chasing after internet IPOs on an almost daily basis.

It wasn't long before investors on Main Street took the bait after watching hordes of new college graduates in Silicon Valley become instant millionaires.

But as companies with unproven business models executed massive IPOs with sky-high prices, every day investors who succumbed to the siren call got clobbered.

Pets.com for instance, raised $82.5 million in an IPO in February 2000 before imploding nine months later. And EToys.com stock went from a high of $84 per share in 1999 to a low of just 9 cents per share in February 2001.

In both cases, small investors were left holding the bag. The point is IPOs have always been high-risk, high-reward.

So, what is an IPO anyway? How do people get rich-and go broke-- so fast? And, more importantly, should you invest in an IPO like Facebook for instance?

Here's what you need to know...



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The Facebook IPO Facts: The Good, The Bad and The Ugly

Face it, you want it. It seems that everyone wants a piece of the Facebook IPO.

But, can you handle the truth? Will the hyped sensationalism be a boon or a boondoggle?

I'm not going to tell you what to do, whether you should buy Facebook sooner rather than later. That's up to you.

However, I will tell you that I won't be buying it right away, but, I will be buying it if...

First though, here's the good the bad and the ugly truth about the company, the IPO and owning "FB."

The Good News About the Facebook IPO

The good news is overwhelming if you're Mark Zuckerberg, any of the company's founders, executives, or venture capital backers, many of whom own Facebook stock (Nasdaq: FB) at a dollar a share.

So far, the target range the stock is expected to be priced at--which was originally $28-$35/share-- has been raised to between $34-$38.

And it could very well go higher before tonight's pricing deadline. The amount of shares to be floated is being raised too.

That's all good news for the insiders, the underwriters and the company itself.

FB is causing its own IPO hype, partly because it will be the largest IPO in U.S. history, in terms of the value it will put on the company, which will likely approach $100 billion. However, Visa in 2008 and GM in 2010 will have raised more money on their IPO debuts. (I know, calling GM's IPO a debut is strange to me too.)

Facebook will raise at least $13 billion (at the lowest end of the price and share offering range) and bank some $9 billion in cash on its balance sheet. That's good news.

But better than that, the company will now have a huge hoard of stock as currency to use to buy up companies and technology to advance its master of the social media universe status.

The other good news is that...

Five with Fitz: What I See When I Look Over the Horizon

When you've been working the markets as long as I have, you learn that the biggest dangers are always found in a place just over the horizon.

It's why I spend my time hunting for stories, news items and opinions that in the old days were considered far "below the fold."

Invariably, what I am looking for is the stuff that everybody else has missed.

Because I believe that's where the real information is -- especially when it comes to uncovering profitable opportunities others don't yet see or understand.

It's the story behind the story that interests me. To find it, you need to go beyond the headline news.

In that spirit, here's my take on five things that I'm thinking about right now.

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Facebook's IPO Price Too High? Not For The Woz

The Facebook IPO just got big-name support from the tech world.

Apple Inc. (Nasdaq: AAPL) co-founder Steve "The Woz" Wozniak said in an interview with Bloomberg Television that he would invest in Facebook, regardless of the price.

Wozniak, who built the first Apple computer with Steve Jobs and co-founded the company with him in 1976, also commented in the May 12 interview that he thought Facebook founder Mark Zuckerberg combines the talents of the late Jobs and of Wozniak himself.

"I was thankful to have a partnership with Steve Jobs and I see Mark Zuckerberg closer to the combination of us," said Wozniak. "When he speaks he speaks with a lot of idealism for the users and a lot of good ideas for the product overall."

The favorable Facebook fodder came just as Facebook upped its projected IPO price from $28 - $35 per share to $34 - $38 per share. That gives the social networking company a valuation exceeding $100 billion.

Facebook stock (Nasdaq: FB) is slated to start trading Friday.

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Facebook Takes a Step Closer to Its Own Search Engine

And Facebook's reach grows bigger...

Microsoft (Nasdaq: MSFT) announced this week it is revamping its Bing search engine to include content from Facebook and other social media platforms.

The move introduces a new sidebar to Bing, which aims to connect users with friends and other aficionados who can provide help, assistance and advice related to the performed search.

The Redmond, WA-based Microsoft said the foray is based on the fact that "90% of people consult with a friend or expert before making a decision."

The venture will hopefully give Bing some bang. Data reveals that Bing has about 15% of the U.S. search market, while Internet search behemoth Google (Nasdaq: GOOG) commands a 66% portion. Microsoft is hoping many will likethe new element and it will entice people to favor Bing when Web searching.

The new service will appear to the right of all search results, and will highlight a feature dubbed Friends Who Might Know.

Microsoft wrote on its blog, "Bing suggests friends on Facebook who might know about the topic-based on what they "like," their Facebook profile information, or photos they have shared so you can easily ask them about relevant experiences and opinions. For example, if you're searching for diving spots in Costa Rica...you may discover that one of your friends knows a great spot, based on photos from their last trip."

Bing will also flag other topic "specialists," identified from their posts on Google's social network Google+, Twitter, Foursquare, LinkedIn and Quora.

The feature will roll out shortly in the United States, according to Microsoft. The company did not comment about other locations.

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Facebook App Store Will Boost Popularity, Profit

Is there anything Facebook can't or won't do to keep its massive user base happy?

The social network giant just announced plans for a new Facebook App Store where Facebook friends can purchase games and other applications on its heavily trafficked site.

The new Facebook App Store, which will be formally known as the Facebook App Center, will feature applications for web browsers, and be available via the Apple Inc. (Nasdaq: AAPL) iPhone, Android smartphones, PCs and tablets.

The move will provide a platform for software developers to sell their products on the social site.

With over 900 million users worldwide, the new Facebook App Center opens up an alluring venue for developers and entices the social networking Web site's scores of members to keep coming back for new, current and popular applications.

Facebook's App Store is being launched in the midst of the company's highly anticipated, much-hyped initial public offering, expected on or around May 18.

And the Facebook App Store in not merely in the works, it is set to roll out in the next few weeks.



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