Even though Facebook’s opening day at NASDAQ had all the excitement, glamour and glitz, no one really knows what caused the poor landing and the drama’s happening right now. Here are a handful of reasons.
#1 It Was Too LateEverybody has been taking aboutFacebook’s IPO at least from the last 12 months. But it came too late, after keeping its shares frozen for a long time. Even the investors had bid up for the $100 billion value an year ago. Facebook was not waiting for the right time, maybe it’s due to Zuckerberg’s hesitation to take his company public.
#2 Zuckerberg and InvestorsEverybody knows one thing- Zuckerberg never wanted to take his company public. In the IPO road-show that the company conducted earlier this month, it became clear. The 28 year old chief executive reportedly made many investors angry by arriving late to the event and keeping them waited. He also skipped many stage shows in the following day which he was supposed to attend. Zuckerberg was also criticized for wearing his hoodie into the stage. As a Forbes writer states it “Zuckerberg’s view of shareholders is like President Obama’s view of blue collar workers. He needs them but secretly laughs at them.”
#3 Facebook Left Nothing For Ordinary InvestorThe Facebook’s entire shares are looted by the Celebrity Silicon Valley Angels and the Private Equity firms. It left no bite to the common investor. It was not the celebrity Angels who made Microsoft and Google its valuation. Microsoft’s market value was 780 million, when it went public in 1986. It made many ordinary public investors a millionaire in its next 13 years by a 700 times jump in valuation. Even Google’s story was somewhat similar. But when it came to Facebook, Zuckerberg and his friends took it all.
#4 Facebook Debuted in MayMay is always considered as the bad time to go public. Even though this stock market belief, “Sell in May and Go Away” is largely ignored, for the past few years, almost all of the stock market gains are occurred in time period from October to May. And for Facebook, who made the debut in a cloudy situation, the saying is turning out to be true.
#5 Facebook Boredom is GrowingAccording to the statistics, Facebook is nearing to 1 billion members. But what about the growing Facebook boredom, particularly among the professionals? The social network has reportedly lost 6 million U.S. users in last May and according to a recent study, the engagement of the above-25 year-old people with the website is decreasing. With Facebook’s removal of ban for under-13- year- olds joining the site, the number may eventually reach billion. But finally, it’s not about the numbers alone.
#6 Facebook (Investment) is Not NecessaryAs the great investor Warren Buffett states it, “investing in tech companies is never easy. It’s about necessity, not the PE values.” There are many companies like IBM, Cisco, Google, Intel and SAP which the world economy depends on. We can live without them for sure, but the switching cost will be high. On the other hand, Facebook is a social network which is not integral to the global economy.
#7 After All, it’s Another Social NetworkFacebook makes 90 percent of its money from advertisements. The network purely runs understanding your tastes and feelings. One enters and uses the network mainly for time pass rather than for a purpose. On the other hand, a network like linkedIn has a special purpose and a professional doesn’t feel like wasting his time. There may arise plenty other social networks in the near future, which targets a particular population in the billions like the recently launched social network for the dying!
