Investors and Facebook users provide perspective on IPO

By DAVID MOON, Moon Capital Management, LLC
June 3, 2012

After the Wall Street Journal published a piece last summer in which a number of business professionals suggested that Facebook was worth up to $234 billion, I chuckled and wrote that it was likely worth closer to zero than $234 billion.

At $29 per share, the market currently agrees.

Plenty has been written about the snafus on the day the stock began trading and during the process leading to that day. Was there a failure of the investment bankers? Should the NASDAQ have pulled the plug on the offering that day? Were the company executives greedy? Were they brilliant?

Instead of rehashing these same questions from an industry perspective, I decided to turn to the real social media experts: individual investors and Facebook users.

Clearly, Facebook is neither a gauge of, nor a development tool for intellectual acuity. My college roommate, Bill, is one of the smartest people I know, yet has no Facebook account and was exposed to the phenomenon when traveling with two Facebook fanatics last weekend. “The experience just confirmed my suspicion that Facebook is a giant waste of time and turns normal people’s brains to mush. If the Facebook IPO depended on me for success, it would have fallen further than it already has.”

That’s my roomie.

It's hard to blame casual observers for having been caught up in the emotional Facebook frenzy. The so-called television experts poured gasoline on the fire. CNBC’s Jim Cramer predicted “Facebook stock will succeed. There is a possibility it could double the first day.”

Cramer, meet Bill.

LaRon, an unemployed aerospace engineer from Huntsville, AL bought the stock immediately following the IPO, at $39 a share, yet thinks Facebook might still be the answer to his immediate cash flow problems. “The stock is below what we paid for it, but we won’t lose anything if we don’t sell it. It may not be another Google, but I still think I’ll make enough to live on in case it takes a while to find a position I want.”

Earth to LaRon; come in LaRon. Check your oxygen hose, please.

Michael drives a truck for Lowes and eats breakfast at Waffle House. “I read that Facebook is more valuable than McDonald's. I don't know about you, David, but I spend more money at McDonald's than at Facebook.”

Roger doesn’t quite understand how the market works. Just three days ago he bragged that his broker was still willing to let him buy shares at the IPO price.

Roger has a Tennessee driver’s license, so be careful out there.

Randall is a sometimes homeless guy who seems to perfectly understand Facebook founder Mark Zuckerberg’s original intent – and the unintended consequences of his creation. “Facebook is just a public photo gallery that lets you creepily look at beach photos of girls you went to high school with, while providing a forum for making dumb comments and posting drunk pictures of yourself that will most likely cost you your job.”

I think that’s a sell recommendation.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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