It seems like all those huge financial institutions holding a majority of Facebook shares over the past year may have been a little too aggressive with their plans to dump their shares on small investors at huge premiums compared to Google and other high tech flyers.
As the crazy waves of massive selling continue, the share price is getting hammered lower than a corner post on a fence row. After being offered Friday at $38 and and nearly reaching $42 early, the share price has pulled back to $30.50 in after hours today.
Will there likely be a big short term bounce to try to trick all the people who “think they are smart” for waiting on the sidelines up until a bottom was put in? Probably.
This type of machine gun selling of shares into the faces of retail investors at the height of market hype and demand isn’t really unique to FB. It does send a clear signal that institutional investors don’t have faith in the stock.
Personally I think Facebook at a 70+ earnings multiple is still ripe. I believe it’s best profit growth periods are just now behind us. Everyone is pulling back ad spend on Facebook including Firecyde. Major brands such as GM are pulling 8 figure annual budgets away from Facebook. The longer people are on Facebook the less likely it seems they are to engage ads to me. Now that Facebooks member growth has shifted into reverse in the US conversion prices continue to rise for many advertisers.
I’ll be looking closer at $20-25. Will you?
It has been tanking. Today a story came out about FB letting the underwriters know that 2nd quarter earnings were going to be softer right before the IPO. Smaller investors weren’t informed, however. – http://www.businessinsider.com/exclusive-heres-the-inside-story-of-what-happened-on-the-facebook-ipo-2012-5
$20-25 seems like the sort of price that should have been agreed on in the first place. Either way, there was still money to be made in going short on a stock that the institutionals themselves seem to think was overpriced. In the long run, though, Fb can go either way. It seems logical for some kind of consolidation in the social media market (how many logins do we have!?) at some point and that might be a saving grace for Facebook. Will just have to wait and see…
Dee