“Fight
Against Stupidity And Bureaucracy”
Way back towards the end of May I wrote a post with
a big ‘F’-ing title about the greed-inspired stupidity and madness that
preceded the Facebook IPO. Remember, “Furious
Flabbergasted Facebook Fools Face Frightening Falls From Fanciful Flagging
Financial Flotation Farce”?
Launched at the ridiculous price of $38 a share, or
about 100 times the company's earnings, the price momentarily made it to $45,
but then quickly plummeted to $34.
In my post in May I suggested that the shares were
worth more like $18 a share rather than $38. As of yesterday (August 16th) the
price had fallen below $20.
I'm not saying this by way of blowing my trumpet, because I now think that my $18 peg may have been rather optimistic too. Investors have by and large turned against Facebook.
Apart from the odd blip, the stock has been on a
downward trend pressured by disappointing earnings and by the fact that from
today the so-called "lockups"
that have prevented some early Facebook backers from unloading their stakes
begin to expire. This simply means they will be able to sell shares into the
market and with around two billion shares eligible for a sell off between now
and May 2013, with a big one coming in November, the signs for a price
recovery are ominous.
In fact further falls are more than likely.
Those who can are shorting the stock like crazy.
(Shorting is where your broker borrows shares which you sell immediately in the
hope that you can buy them back later at a lower price.)
The number of Facebook shares on loan to short sellers
has risen from 63 million a month ago to more than 93 million.
So is it a good buy now at $18? I think not. Not for
a while anyhow, until these locked shares find their way into the market and
the price stabilizes and that will probably be well into 2013.
In the short term the status quo is probably down
down deeper and down.
Forget Facebook and enjoy some music from the 70s
instead.
The small print.
Fasab disclaimer: this blog post does not constitute
professional advice as regards investments on the stock exchange, such advice
would only be given and indicated thus if an outrageous fee were being charged
and this blog is being given to you for free. Also any investor should always
be aware that shares can fall as well as plummet and should act accordingly by
not investing any money they can not afford to lose.
No comments:
Post a Comment