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Facebook Faces the Music

For those of you who inadvertently wandered here in search of a sure-fire get-rich-quick scheme, pleased be advised this site does not offer investment advice. Our portfolio includes a few strong positions in state lottery tickets, while most of our money is tied up in cash, but we claim no expertise in such matters.

We can boast, however, of a few bad investments that we never made. Through all our financial follies we never bet a dime on Solyndra or the Fisker Karma, for instance, and as of now we’re feeling rather shrewd for having avoided the initial public offering by Facebook.

After several years of extraordinary hype, including a major motion picture, Facebook’s foray into public ownership was probably the most ballyhooed financial event of the past several years. On Friday the popular social medium’s initial public offering — better known as IPO to the more savvy types — attracted the sort of full-court media pressure usually reserved for celebrity romances, Republican sex scandals, and the National Football League’s annual draft. The company wound up fetching a handsome price of $38 per share, and all weekend the news anchors sang ballads of the legend of Facebook founder Mark Zuckerberg.

On Monday the stock price fell 11 percent, even as the broader markets rallied on news of falling gas prices, and suddenly the headlines were less exultant. “Investors Pummel Facebook,” proclaimed the Wall Street Journal.  “Facebook’s Stock May Keep Falling: ‘There’s No Bottom’” shouted CNBC. The Associated Press wondered, “Where are Facebook’s Friends?” No one, it seemed, was giving Facebook’s stock the little thumbs-up “like” sign.

The business reporters speculated that the problem was too many shares, or technical difficulties that interfered with trading, or perhaps even Zuckerberg’s nonchalance, and in every case they seemed surprised by the turn of events. Without having done any analysis of Facebook’s financial fundamentals, but having some familiarity with its product, we can honestly say that the stock’s sudden downturn was not unexpected.

Facebook has become so ubiquitous that even such determined Luddites as ourselves have not escaped its insidious influence, and there’s no doubt some economic value in anything that can claim 900 million customers, but we never believed that a forum for people to bore other people they vaguely know with misspelled accounts of their mundane doings and half-baked opinions was a solid investment. The company’s product has proved useful to us on a few occasions, such as apprising us of a couple of divorces and thereby sparing us the embarrassment of asking certain acquaintances how the little lady is doing, or helping us to figure out who that person was that seemed to regard us as an old friend at a party, but it never seemed to have the same value as automobiles, indoor plumbing, ground beef, or other more essential products.

Indeed, Facebook always struck us as something of a soon-to-be-passing fancy. On our occasional visits to the site we’ve already noticed that several people who once posted regularly are no longer announcing their latest exploits, and we don’t wonder why they might have grown bored with it. The Facebook craze might well persist in a less frenzied fashion for a few more years, but it’s not surprising to see that so few investors are betting on it.

— Bud Norman

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