And thereby “hangs” a Tale..!!
indar kumar is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
While Yahoo! (NASDAQ: YHOO) plans to please its shareholders by rewarding them after it sold the stakes of alibaba.com; there is hardly any relief for investors of Facebook. The much hyped IPO of Facebook (NASDAQ: FB) had taken a nosedive and looks like it won't recover anytime soon.
Many high profile investing firms including Morgan Stanley, which bought more than 2 percent of the shares sold through the $16 billion offering at $38, have suffered huge losses and fresh reports suggest that NASDAQ OMX Group was also on the back foot defending the $62 million Facebook payout. But optimists believe “All is not lost;” However meandering in the 20’s the shares have an uphill climb.
The social networking giant launched its much awaited high profile IPO in May this year making it the first U.S. Company to debut with a market capitalization of more than $100 billion. Conversely the excitement faded out soon as the shares began to slump clouded by doubts about its lofty valuation and skill to sustain the brisk growth that has made it a business and an edifying phenomenon.
The Menlo Park, California based Company lost $157 million, or 8 cents per share reportedly due to tax changes in the first quarter. Though the shares picked up momentum in the second quarter and showed some sign of hope on the account of more users joining in and new advertising techniques, there is still significant catching up to be done.
Zuckerberg in his recent public outing said that he was “disappointed” but argued that Wall Street will slowly understand the long term potential. He added, he is trying to keep the staff morale high and will do everything possible to return the smile on the face of investors. This positivity helped the shares to creep up. Zuckerberg and non working directors are also stated to “hold on” to the shares of the company for at least a year restoring faith in the patrons. In opposition, Co – founder Dustin Moskovitz is on a selling spree and has been selling 150,000 shares a day taking the total up to 450,000. Clearly a trade off like the old times, between the founders.
Below is a SWOT analysis which is a great way to understand the company's present status as well as its future prospects.
1. The company, although failing miserably in the initial public offering, still is growing briskly and has added 250 million people more this year which takes the total to a whopping 950 million users.
2. There are 552 million daily users – a heaven for advertisers.
3. Heavy investments in mobile apps like face.com, Karma and Instagram helps to reach its short term goals.
1. No clear goals on how it will generate revenues from advertisements as more and more people start using FB on their phone.
2. The current position in Wall Street – the mediocrity of the IPO
3. Skeptics believe that Facebook is a fad and will follow Myspace.com's footsteps and disappear in the future.
4. Failure to monetize the existing users.
1. The web will be an ever growing space – Facebook, already a leader, will have great avenues to explore.
2. If it gets its advertisement strategy right for smart phones, facebook will be a rage again.
3. High brand value – enables it to launch its own version of smart phones.
4. Some experts rate Facebook better than Google in terms of advertisement strategy and returns, this in itself presents FB with a huge opportunity.
1. Initial failure have made the investors wary and impatient – won’t give many chances.
2. Facebook has a pile of challenges where short run is considered, Long term strategy might have been worked out, but short term goals are equally necessary.
3. Now that the company is public, they would have constant pressure from the market to make more and more money.
Hence, the lucid dream has turned out to be a nightmare, but the positive thing is that they are beginning to learn from their mistakes. Time is certainly not on their side and they have to act quickly if they want to survive the storm. As per the investor’s point of view, it’s going to be a long haul, so don’t expect it to take place overnight. For Mr. Zuckerberg the nightmares are far from over who by now must have realized that the grass is certainly not greener outside his Harvard Dorm.
indarkb has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.