Press Esc to close

Welcome to Money Morning - Only the News You Can Profit From.

Close

Cash in on This "Invisible" $33 Billion Business

U.S. defense contractors don’t make a habit of sending “thank you” letters to America’s enemies.

But if they did, the corporate leaders at The Boeing Co. (NYSE: BA) might want to look up Vladimir Putin‘s address – before running to the Hallmark store.

Full Story

  • Nasdaq: FB

  • Why the End of the Facebook Lockup Period is a Big Deal (Nasdaq: FB) On Thursday morning, the first lockup period of some 1.91 billion shares of Facebook (Nasdaq: FB) ends, releasing even more of the battered stock into a market with few interested buyers.

    The end of the lockup period (used to reduce trading volatility immediately after an IPO) will kick off with up to 271 million shares flooding the market on the sell-side. More shares will become available over the next few months, compared with less than 500 million currently authorized for trading.

    Investors who got in early and paid a mere pittance for the stock may race to cash in despite Facebook's steady decline since its legendary May 18 initial public offering at $38 a share. Since the fabled IPO, which morphed into a trading fiasco, shares have lost some 40% of their value.

    The flood of shares ready to be unlocked is off-putting for some potential buyers.

    "It's one of the No. 1 issues on investor's minds right now," Herman Leung of Susquehanna International Group told Bloomberg News. "Even the investors that I talk to who want to buy the stock and like the company are not sure if they can stomach the lockups."

    To continue reading, please click here... Read More...
  • Sorry…Facebook (Nasdaq: FB) is Still Only Worth $7.50 a Share The technorati took me to task. So did Wall Street.

    They were agitated by an article I wrote in May explaining why the world's most hotly anticipated IPO, Facebook (Nasdaq:FB), was worth a mere $7.50 a share at best.

    "Out of touch," one of the critics said. A "luddite" charged another.

    "Doesn't grasp the significance of so many users," one Wall Street insider opined--who happened not coincidentally to work for one of Facebook's investment bankers.

    Since then the social media darling has fallen another 31% to nearly $22 a share. Ten weeks later, Team Hoodie hasn't done much to merit an upgrade either.

    Sorry guys...Facebook is still only worth $7.50 a share - likely less.

    Here's why.

    The Cold, Hard Facts for Facebook

    At the time I reasoned that Facebook's valuation simply didn't merit the 100 times earnings IPO price of $38 a share based on comparable figures from Google (Nasdaq: GOOG) and Apple (Nasdaq: AAPL).

    But there were a host of other factors as well.

    I cited falling revenues, a lack of control over the mobile market channel, increasing distrust from customers who were voting with their feet and the concurrent departure of major advertisers like GM which will cost Facebook an estimated $10 million a year in revenue alone.

    I also posited the assumption that Facebook would be unable to maintain the 100% plus growth that many investors believed was baked into the proverbial cake.

    Google couldn't. Apple couldn't. And both of them are real businesses.

    That's the key...real businesses.

    Fact is, Facebook still hasn't figured out what it wants to be when it grows up.

    Despite the fact that CEO Mark Zuckerberg does have some excellent advisors, the company isn't going to be able to hide the fact that its "business" is nothing more than a colossal time-wasting collection of personal interest items for much longer.

    Other problems abound, too. All of them point to a lower share price.

    [ppopup id="70925"]To continue reading please, click here...[/ppopup]

    Read More...
  • Another 1.7 Billion Reasons to Avoid Facebook Stock As if there weren't enough factors to make Facebook (Nasdaq: FB) stock unattractive, there's a flood of free shares about to hit the market that could make it even harder to raise the share price.

    In two weeks comes the first expiration of "lock-up" agreements, meaning certain investors barred from selling their shares will then be able to do so. Typically employees and big investors are required to hold shares for a certain time period after an IPO. This is done to reduce selling pressure and the chance of a mass exodus as soon as the stock starts trading.

    But now some of those investors' shares will be freed up, and they want to cash in.

    Editors Note: Why Facebook’s “Big No-No” Could Lead To Its Big Collapse [ppopup id="70925"]Click here[/ppopup].
    Nearly 1.7 billion shares of Facebook stock will enter the market over the next few months, starting in mid-August. That is more than four times the number of shares now floating on exchanges.

    "It's like a train coming around the corner toward shareholders, so they better get out of the way, Francis Gaskins, president of research firm IPOdesktop.com, told the Los Angeles Times.

    The first batch of 268 million shares will be freed up in mid-August, followed by 192 million more shares in mid-October, and a whopping 1.2 billion shares will be let loose in mid-November.

    Granted, a slew of those shares will not be sold, but the fresh torrent of shares to be set free far outnumbers the 421.2 million shares Facebook sold in its fabled IPO.

    To continue reading, please click here... Read More...
  • You Might be Invested in Facebook Stock and Not Even Know it Investors who boast that they were smart enough to avoid the hype of investing in Facebook (Nasdaq: FB) stock might want to check their mutual funds' holdings before relishing in their bravado.

    According to data compiled by investment research firm Morningstar for The Wall Street Journal, some 160 U.S.-based mutual and exchange-traded funds bought shares of Facebook in May. And since only some fund companies choose to reveal their holdings on a monthly basis, the ones that chose to invest in Facebook will be disclosed over the next two months as fund companies file quarterly reports.

    "Even if John Q. Public didn't buy [Facebook] directly, he may own one of the hundreds of mutual funds that did," Geoff Bobroff, a mutual fund consultant in East Greenwich, RI, told The Journal.

    What is notable in many cases about the purchases, including those by lead underwriter Morgan Stanley (NYSE: MS), is that some of the funds that purchased shares wouldn't normally invest in a high-growth technology company like Facebook. And some wouldn't invest such a high percentage, like Morgan Stanley that had at least seven funds with over 5% of portfolio holdings in Facebook stock.

    "That's a huge gamble," Michael Kalscheur, a financial planner with Castle Wealth Advisors LLC, told The Journal. "Are you really going to put an IPO as a top-five holding in a fund?"

    To continue reading, please click here...
    Read More...
  • iTunes Revamp Will Fortify Apple (Nasdaq: AAPL) Ecosystem A major revamp of its catch-all iTunes software will strengthen the already formidable Apple Inc. (Nasdaq: AAPL) ecosystem.

    "People with direct knowledge of the matter" confirmed to Bloomberg News last week that Apple's biggest overhaul to iTunes since 2009 will appear before the end of the year.

    According to the Bloomberg report, changes include the addition of music sharing features, better integration with Apple's iCloud remote storage service, and easier ways to discover new apps, music, and movies.

    The upgrade is long overdue.

    Launched as a mere music jukebox in 2001, iTunes has gradually added chores like media content management, an online store and syncing. As a result, it's evolved into a Frankenstein that fails to uphold Apple's legendary ease-of-use ideal.

    "At some point, you've got to sit down and say, 'How do we create a really good, easy experience for consumers that doesn't involve them wading through endless tabs and subsections of the site," Carl Howe, research director at theYankee Group, told MacNewsWorld.

    Although the iTunes Store generates a relatively small portion of Apple's overall revenue -$1.9 billion out a total of $39.2 billion in the March quarter - the software is a main ingredient of the glue that holds the Apple ecosystem together.

    An iTunes revamp will tidy up the cluttered ecosystem that helps drive sales of iPhones, iPads and Macs - AAPL's real revenue generators.

    With that in mind, it's also easy to see the iTunes overhaul as a defensive move.

    It's surely no coincidence that the Bloomberg story appeared mere minutes after Google Inc. (Nasdaq: GOOG) announced an upgrade to the Android ecosystem. The Google Play store added movies, TV shows and magazine subscriptions - just like the iTunes Store.

    What to Expect from an iTunes Revamp

    While the details remain veiled in secrecy, the recent leaks offer several clues about what Apple has in mind for iTunes.

    To continue reading, please click here... Read More...
  • Analysts Weigh in on Facebook Stock as Quiet Period Ends Investors who want more analyst opinion on the Facebook stock price now have a lot more reading to do.

    Today (Wednesday) marked the end of a 40-day quiet period for dozens of analysts who work for the 33 underwriters of the Facebook (Nasdaq: FB) initial public offering. That means these analysts now have released their first opinions and outlooks for shares of the social networking behemoth.

    In an effort not to artificially inflate the stock price of a "hot" IPO, major Wall Street firms are prohibited for the first 40 days following a stock's debut from issuing analyst reports on stocks they underwrite. Smaller banks that are part of such an offering usually follow suit.

    The universal opinion prior to Wednesday's Facebook releases was that the majority of analysts would "like" FB shares, and predict a 20% rally or more could be expected over the next 12-month period.

    That was mainly the case among its lead underwriters, although some were bearish, bringing the average price target down. Price targets for analysts who provided them Wednesday ranged from $25 to $45, with the average $37.71.

    But investors should consider the source before acting on the first analyst opinion they see. Some may be more interested in getting attention than guiding investors in the right direction.


    To continue reading, please click here...
    Read More...
  • How to Spot Winners as Facebook (Nasdaq: FB) and Friends Fight Patent Wars For big players like Facebook Inc. (Nasdaq: FB) and Apple Inc. (Nasdaq: AAPL), last summer marked a dramatic turn toward patent warfare in the world of technology.

    Microsoft Corp. (Nasdaq: MSFT) and Apple in July 2011 spent over $4.5 billion at an auction on a portfolio of 6,000 patents.

    Then in August, Google Inc. (Nasdaq: GOOG) purchased Motorola Mobility for $12.5 billion, gaining over 17,000 patents.

    Facebook and Yahoo! Inc. (Nasdaq: YHOO) currently headline the battlefield. This spring, Facebook spent a whopping $550 billion on patents. Then Yahoo sued Facebook for patent infringement.

    You should expect more lawsuits as many of the tech giants have a similar wartime strategy: The best defense is a good offense.

    The plan is to snatch up as many patents as possible, then defend their plunder. The strategy effectively chokes out the competition, preventing the other guy from developing or implementing new technology because doing so infringes on patents.

    But aggressive patent warfare leads to a big casualty: innovation. Technology investment buzzwords like creativity, growth, research and development take a sideline while companies lock each other up with litigation.

    In fact, companies heavily participating in patent warfare doom themselves to fail. That's why investors should steer clear of the patent trolls.

    Becoming a Monster: Patent Trolls

    Patent trolls buy patents specifically to extort money from innovators. They are akin to a modern day mafia, according to the The Washington Post.

    Patent trolls take advantage of the fact that litigation in any arena is typically a war of resources.

    They sit atop their pile of patents, waiting to have a tenable enough argument that a company has been infringed upon. Then they sue.

    The result? A patent troll suit can easily annihilate tech startups that simply don't have the resources to outlast a larger company in litigation.

    Any tech company putting major effort into aggressive patent litigation should raise a red flag to investors. It is evidence of mixed-up priorities that scream failure.

    For example, let's take a look at Yahoo.

    To continue reading, please click here... Read More...
  • Why Facebook Stock Could Get a Boost from New Ad Strategy Facebook (Nasdaq: FB) continues hunting for a major development that'll lure investors back to its stock.

    In order to do that, it has to show it can appease both users and advertisers. The world's largest social network, which has amassed some 900 million users worldwide, earned $3.15 billion from advertising in 2011.

    But the Menlo Park, CA-based company has to attract more advertisers to its site since they've become disenchanted with Facebook's lagging mobile ad strategy.

    Worries that Facebook's ad revenue growth is not moving in tandem with its explosive membership have weighed on the stock. Since going public on May 18 at $38 a share, Facebook stock has slumped 26%.

    Recently, the company debuted mobile ads and other services to buoy sales, but investors remain skeptical that the efforts will successfully boost revenue.

    "Facebook's been having challenges coming up with effective advertising. The company is hoping to use that inventory on the right side of the page to deliver advertising that is more targeted," Debra Aho Williamson, an analyst at eMarketer Inc., told Bloomberg News.

    That's why the company is introducing Facebook Exchange.

    To continue reading, please click here... Read More...
  • The 2012 IPO Calendar: How to Spot the Winners You might find yourself eyeing the 2012 IPO calendar with a bit more scrutiny after the Facebook (Nasdaq: FB) fiasco.

    Although Facebook has been nabbing the most attention for disappointing its investors, it's hardly the first IPO to do so. It's all part of the fickle IPO process.

    In fact, about 40% of the IPOs to hit the market over the past 12 months have seen their share prices fall below their IPO prices.

    Facebook isn't the only factor to blame -- U.S. unemployment is up, the Eurozone debt crisis is sapping bullish spirit, and the upcoming U.S. presidential elections in November are adding to market uncertainty.

    But avoiding IPOs altogether could also be a huge mistake.

    Just ask those who bought the Google (Nasdsaq: GOOG) initial public offering. The Google IPO priced at $85, started trading at $100, and now trades around $560.

    So how can you put yourself in the 60% group and earn a profit in the process?

    With the right research and guidance, you can spot winners just like Google.

    Do Your IPO Research

    Investing in IPOs is like buying and selling any asset: due diligence is required.

    An IPO, like a credit-default swap or subprime mortgage, is the ideal financial instrument for a limited set of circumstances. It is up to the individual or the institution to determine if the IPO they are considering is suitable for a long-term investment or a short-term flip.

    If it qualifies as just a short-term flips, that is enough to tell you not to buy.

    Whatever the investment objective, however, information is readily available for the necessary and needed due diligence.

    For example, on March 17, 2011 Michael J. De La Merced wrote an article in The New York Times about the IPO of FriendFinder Networks (NYSE: FFN).

    In his Timespiece,"FriendFinder Braves Choppy Market with IPO, Again," De La Merced did an excellent job of detailing his concerns with the stock, ranging from the disposition of the proceeds of the IPO to the accounting at the company to the number of times it had attempted to go public before and had to withdraw the offering.

    FriendFinder Network IPO priced at $10 a share last year; it's now selling for around $1.15.

    Other times an IPO can be hurt by factors having nothing to do with the financials of the company or the overall economic situation.

    Take the Carlyle Group (Nasdaq: CG), a Washington, DC-based private equity group, which went public in May. Until Election Day in November, private equity groups will be vilified by the Obama Administration, unions and others due to Republican presidential candidate Mitt Romney's work with Bain Capital.

    There is no way that can aid the share price of Carlyle Group. Now trading around $21 a share, Carlye Group has slipped from its IPO high of $22.45.

    To continue reading please click here... Read More...
  • Facebook Stock Price Hits Low – Can this New Strategy Help? After hitting a new low of $25.75 on Tuesday, Facebook (Nasdaq: FB) stock slid further Wednesday morning despite a nice rally for U.S. equities.

    With the Dow up nearly 90 points right after the opening bell, Facebook shares edged down to $25.68 in early morning trading, reaching another new low. Shares now sit more than 30% below the IPO price of $38.

    Weighing on Facebook Wednesday was news that the Nasdaq Omx Group (NDAQ) will tell brokers exactly how it will recompense investors for the myriad trading problems during the Facebook IPO frenzy. Problems at Nasdaq contributed to order issues that prompted several class action law suits.

    But what drew more attention from investors was a comment by Ironfire Capital founder Eric Jackson. The analyst appeared on CNBC's "Squawk on the Street" program Monday and said that Facebook will lose its dominance as a social network in less than 10 years.

    Jackson highlighted Facebook's inability to make leeway in the thriving and prominent mobile arena, as well as the stock's steady tumble since the company's epic IPO.

    The comments have triggered suspicions that Facebook will suffer the same fate as MySpace, once the dominant force in the social networking circle, and Yahoo (Nasdaq: YHOO), once a leader in Internet search.

    "In five to eight years they are going to disappear in the way that Yahoo has disappeared," Jackson said. "Yahoo is still making money, it's still profitable, still has 13,000 employees working for it, but it's 10% of the value that it was at the height of 2000. For all intents and purposes, it's disappeared."

    Now Facebook has a new strategy to increase its reach - and its profits - but it's one that will likely raise some eyebrows.

    To continue reading, please click here...
    Read More...
  • Facebook Stock Options: Bears Come out to Play It's been an interesting ride so far since the Facebook stock options left the starting gate Tuesday.

    Expected to hit the 400,000 contract mark on their first trading day, the options closed with a total volume of 369,478 contracts, according to The Options Clearing Corp (OCC). Only Apple Inc.'s (Nasdaq: AAPL) options had more trading volume than Facebook on Tuesday.

    Unfortunately, the underlying Facebook (Nasdaq: FB) stock price wasn't as charming as it dropped under $29 a share for the first time Thursday. That's more than 23% below its IPO price of $38 on May 18.

    The options market has highlighted investors' lack of faith in the Facebook stock price.

    Put options, usually recognized as a bearish bet, give a holder the right to sell shares at a specific price by a certain date. Call options, on the other hand, are usually considered a bullish bet and give the holder the right to buy shares at a specific price.

    In its first three days of trading, put volume has continued to outdo call volume. It appears that everyone is down on this stock.

    Until Facebook stock stops falling, most investors remain too wary to buy.

    "Short-term we are still cautious but there should be reasons for optimism later this year and next," Pivotal Research analyst Brian Wiesner told Reuters.

    To continue reading, please click here... Read More...
  • Facebook Stock Price: Is Mark Zuckerberg Losing Sleep Over This? Everyone's eyes are on the falling Facebook stock price, but CEO and founder Mark Zuckerberg remains silent on the issue.

    Facebook (Nasdaq: FB) stock is down about 17% from its $38 IPO price. But Zuckerberg has not commented publicly or issued a company statement, according to The Wall Street Journal.

    Silicon Valley rumors tell us that Facebook employees have been told to concentrate on work and not comment on the IPO fiasco.

    Meanwhile, Nasdaq criticism continues and lawsuits pile up as investors who are left with more FB shares than they wanted - worth less than they bargained - feel cheated.

    And Wall Street is left to bet on when or if FB stock will rebound.

    Click here to continue reading...

    Read More...
  • Five Ways to Avoid the Next Facebook IPO Fiasco On the heels of the Facebook IPO fiasco, many investors are wondering how they can find the next best thing and avoid getting "facebooked" in the process.

    Tall order? Not really.

    First, look for companies with ideas that can be applied across a wide variety of industries.

    If I had said this five years ago, you'd be looking for Internet- related startups or companies that can do "it" better, faster or cheaper.

    Going forward however, I think the true innovation will be exponential progress that's made linking living systems with their digital counterparts. Everything from synthetic biology to computational bioinformatics will grow a lot more rapidly than the broader markets.

    So will key markets related to healing human illness, solving hunger and figuring out how to deliver potable water to broad swathes of the planet.

    No doubt there will be tremendous ethical challenges along the way, but I believe we will see the line blur between what's needed to live and how we actually live our lives.

    Though it's hard to imagine given the state of the world at the moment, I believe a fair number of the best up- and- coming investments will be outside the traditional first- tier markets of the United States, Europe and Japan.

    In fact, I'd bet on it.

    Second, don't confuse the ability to organize or share information with the ability to generate revenue

    One might lead to the other but they are not the same thing.

    The way I see it, Facebook is a classic example of everything you don't want in a business. It is 900 million users who spend an average of $1.32 a year. Compare that to Amazon.com, which clocks in at a much more valuable and consistent $36.52 per person.

    Call me crazy, but I don't think Facebook stock will see the bottom for a while. As I wrote last Friday, at best Facebook is worth $7.50 a share.

    Revenue is slowing. Facebook doesn't dominate the mobile markets that are becoming the preferred consumer channel for tens of millions of people. And, in what is perhaps the death knell, startups are already cannibalizing Facebook's user base.

    The ability to "like" somebody is really no different than signing their yearbook in high school --only you're using a computer and the Internet to do it.

    Third, hunt for fringe thinkers working in their garages.

    It's not enough to think differently. The next big things will come from those thinkers operating on the fringes of what the rest of us consider normal.

    To continue reading, please click here... Read More...
  • 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.

    To continue reading, please click here... Read More...
  • 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.

    To continue reading, please click here.... Read More...