Facebook’s IPO last week was supposed to be a moment of triumph for the social network, but the event quickly devolved into an ugly tale of duplicity, hubris and greed, as the stock lost 18 percent of its value in the first two days of trading.
The mess started when a Nasdaq technical glitch delayed orders for nearly two hours. Nasdaq has faced withering criticism for the glitch, especially after reports surfaced that the exchange knew its systems weren’t working properly but went ahead with the deal, anyway.
But there’s plenty of evidence to suggest Facebook’s stock would have tumbled even if Nasdaq executed its orders properly, as Facebook’s own internal data raised more questions than answers about the company’s business model.
Doubts about Facebook’s viability arose before the May 18 IPO. On May 9, Facebook submitted an amended SEC filing that said the company doesn’t “generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven.”
But a more-curious omen came just days before the IPO, and was never disclosed to the public. According to a Reuters report, the banks underwriting Facebook cut their internal forecasts for the company’s growth prospects immediately before the IPO — without telling the public. Such selective disclosure of material information is illegal, and the underwriters were quickly sued, along with Facebook itself.
Although Facebook officially went public last week, shares of the stock were being traded privately for years on sites, such as SecondMarket and SharesPost. These services, which require massive minimum investments often exceeding $100,000, allowed Facebook to inflate the value of its stock before the IPO while skirting the public disclosure rules public companies are required to follow. And just before it went public, Facebook watered down the stock by increasing the number of shares offered by 25 percent. As soon as the stock went public, many insiders cashed out in a classic case of “pump-and-dump” chicanery.
That said, many smart investors saw through the Facebook hype. The company’s struggle to turn its massive audience into a reliable revenue stream wasn’t helped when General Motors pulled its ads from Facebook, saying they simply weren’t influencing consumers. And at $38 per share, Facebook’s opening day stock price was 100 times the company’s per-share earnings. By comparison, more-established companies Apple and Google have price-to-earnings ratios of 13.6 times and 18.2 times, respectively.
While Facebook may have a broader reach than Apple or Google, that reach is in many ways shallow and superficial. It still relies on advertising, a notoriously unreliable source of income, for 85 percent of its revenue. Time will tell how the company performs, but for now, investors are correctly assuming that Facebook isn’t as innovative or useful as has been suggested.
Opinion
Facebook’s fizzle was no surprise
- Opinion
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On our Opinion: Cheers
To the DEP's "The Watershed Experience," the Oneonta High School Envirothon team, and to ROPS rebate funding.
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Make sure Blodgett project holds water
Many thanks to Dennis Finn and the Planning Commission for allowing unrestricted public comment on the Blodgett Drive housing project at the commission’s May 15 meeting. Most who spoke are residents of the area who know the safety and drainage issues well.
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We need a law against Google Glass
It’s a technological marvel; a product ahead of its time, or at least ahead of the law for the time being, that is.
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Make sure you vote in school tax election
School superintendents have it anything but easy in these challenging economic times. In addition to dealing with myriad day-to-day and semester-to-semester issues, they have to have Solomon-like political acumen and management skills.
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No foreign aid until our needs are met
I couldn't agree more with Sal Furnari's letter published in the Weekend edition. I would also like to add that when I was growing up I was taught to "take care of my own first" and then share with others.
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THIS WEEK'S POLL
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It's sad to see Rich Murphy retire
It was a sad day for Otsego County when Rich Murphy announced his intention to retire from the county board at the end of his current term.
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Liberal media only care about themselves
Sounds like it all depends on 'whose ox is being gored' when it comes to the illegal phone tappings of reporters.
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Street Talk: May 20, 2013
Do you think that recent high school graduates have a harder time finding a job than previous generations?
- Saturday, May 18, 2013
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Casino in our area worth talking about
If Gov. Andrew Cuomo has his way, casinos will be awarded to three upstate locations.
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Public financing could cure pols' paranoia
Paranoia is an irrational fear of persons, places or events that have no basis in reality.
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Resort proposal is just too big
Belleayre Mountain Ski Center is a New York state taxpayer-owned recreational area. People who have paid for BMSC with their hard-earned dollars should not have to also pay for the infrastructure necessary to assure an enjoyable ski experience for the visitors to a private developer's monster mega-mall/spa resort on a mountaintop.
- Friday, May 17, 2013
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Take precautions to prevent kidnappings
It has been nearly two weeks since the arrest of Ariel Castro in Cleveland on rape and kidnapping charges for acts that should send a chill through the spines of everyone in America.
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Redistributing wealth just isn't fair
Yesterday a dozen of us were eating lunch in the break room where I work, most of us complaining that all we could afford was peanut butter and jelly and bologna ... except for Rob.
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Hoping many will adopt a grave
It's that time of year again; adopt a grave. I am hoping when you buy flowers or a plant for a family member or friend's grave that you will buy some for another grave. I wish everyone would open up their heart and honor someone else by putting flowers on their grave. My hope is that groups, families and youth groups adopt a cemetery or a grave, and at least once a year that person or persons will be remembered. I started out with two and now am up to 14. It doesn't have to be expensive; just what your heart tells you to do.
- Thursday, May 16, 2013
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IRS, Justice actions violate our trust
After the recent actions of the Internal Revenue Service and the U.S. Justice Department, belief in the integrity of our government is hanging by a very slender thread.
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Blame Dems for Social Security woes
In his inaugural address President Kennedy said: "Ask not what your country can do for you, ask what you can do for your country.'
- Wednesday, May 15, 2013
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After 40 years, it was time to get married
This newspaper publishes lots of wedding announcements, but one that appeared prominently in Monday's edition was especially heartwarming.
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Newman housing would benefit city
I would like to comment on the excellent letter written recently by Alan Cleinman concerning the "Newman Development."
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Paying what you can afford won't work
Our president said:
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On our Opinion: Cheers
