Thursday, May 17, 2012

Have you got your Facebook stock shares yet?


Other than the great, big Greek conundrum and JP Morgan's $2 billion bad bet, it's the hottest news of the day. When the markets open on Friday, your favourite social network will go on public offer, opening things up for people to buy into Facebook for more or less the first time.

So far, Facebook has remained the exclusive property of only a handful of people: Founder and CEO Mark Zuckerberg, a couple of initial investors, and employees of the company. Of that tiny little circle, 56% of the company belongs to Zuckerberg, making him the majority shareholder and giving him the absolute final word on all matters regarding Facebook. Last quarter, the company earned $205 million net income over $1.65 billion sales revenue, which means that its fortunes are already on the slide from last year.

Still, when the company goes up on Nasdaq on Friday, experts are expecting that its value may climb to anywhere between $115-200 billion. If that should be the case, then Zuckerberg, who turned 28 only a few days ago, would be worth anywhere between $64-112 billion. Not bad for a 28-year old. At his age, I was broke as hell in London, jumping subway ticket turnstiles to get around, and practically living on charity.

There's already a frenzy among regular folk out there to snap up the shares that Zuckerberg and his friends will be offloading on Friday, so that they, too, can be part of the Facebook phenomenon not just as users, but as owners. Perhaps you're thinking about it as well. How nice it would be to say, yeah, I own shares in Facebook.

Would be nice. Problem is that, one: folks like you and I are probably not gonna be able to get in on the offering on Friday. Despite the fact that the stock shares are expected to come in between $35 and possibly $100 a share, which would make them quite affordable, speculation is that a good portion of the shares are already gone, anyway, sold off in back deals to the well-connected, while whatever is left for Friday will be quickly snapped up by other privileged investors. Slim chance for you and I.

A second, perhaps more significant problem is that everyone on the market believes that even if you wangle your way to the shares, they'd be humongously overpriced on initial offering, and then, go downhill from there. So, you can count on losing a substantial sum on the initial value once the trading dust settles.

At the moment, Facebook makes its money from advertising. However, major advertisers are already growing cold feet because, according to surveys, most of us users don't actually click on those ads. I know I don't. This week, General Motors announced it is pulling its $10 million Facebook ad account, complaining that the ads are not bringing in sales. In time, others will likely follow suit, which means that Facebook ad revenue will continue to slip.
To hedge that trend, the company recently moved to buy upstart photo-sharing firm Instagram for $1 Billion, a move that the Federal Government is reportedly already investigating. The word on the street is that Zuckerberg made the decision alone, something that some prospective investors find a little troubling.

Since I last raved here about Apple's "money-minting" stocks, those shares have actually lost about $100 in value, and the trend is still pointing down. The thing, however, is that Apple is a product manufacturer. Right now, the company is already prepping its next roll-out of products, including a slimmer MacBook with retina display, and a much rumored redesign of the iPhone with a larger screen. So, no matter where the stocks are headed at the moment, your investment is safe. Experts still expect Apple shares to hit $1,000 this year.

Facebook, on the other hand, is not a manufacturer. Though they constantly talk about developing new "products", the bulk of the company's revenue will still depend largely on advertising for the foreseeable future. With Zuckerberg at the helm, the company might continue to grow and expand, which means that it may not all be scary stuff ahead. One can tell with the Instagram purchase that he's closely reading the Steve Jobs Playbook, banking on his instincts, and betting to come out triumphant at the other end.

With all that said, given how much Facebook has become an almost integral part of our daily lives, would you take the bet and buy into it, if you could, so you can get a share of whatever you think Zuckerberg is creaming off of you, or at least, add that to your bragging rights?

There's something in knowing you're not just a coaster on the ride, or at least convincing yourself that you're not. There's something to be said for being a part owner even if you're absolutely insignificant in the equation. So, I'll probably buy a symbolic single share at some point when the wretched of the earth like us are allowed a chance. How about you?

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