Why the Facebook whine-fest goes off the deep end

commentary From darling to dud in just three days? Even on internet time, that's pretty fast.

History in the making: 18 May 2012.
(Credit: CNET)

Truly, the whine-fest accompanying Facebook's first few steps as a public company has been remarkable, what with the screeching about a botched initial public offering (IPO) now as loud as the hype that surrounded the run-up to last Friday's big event. It's also fed a growing backlash that has left investors and analysts howling about the US$105 billion market capitalisation that Wall Street gave the company.

And although this novella is far from played out, you know the rest of the story: as the share price continues to sag, the bag holders will blame "Suckerberg", the incompetents at Morgan Stanley, the Nasdaq — and, given time, why not the solar eclipse, too?

And two months from now, none of this is going to matter.

That's right. Zilch. Zippo. Nada. Bubkus.

None of this is going to matter.

Investors may have given Facebook a black eye, but that doesn't mean its users should, too. No doubt Facebook has had a forgettable three days as a public company, from a frenzied and confusing first day of trading to the subsequent declines. With so much negative news in the air, it's easy to get caught up in a sky-is-falling scenario. One financial watcher went so far as to dismiss Facebook's real value as something that exists "in the minds of a billion friends, which is still a collective illusion that must be kept alive with future cash."

In other words, we're talking about a 2012 reincarnation of Pets.com. Really?

Facebook was priced for perfection, and then some. It also was priced for the hype of a giant, brand-name consumer internet company. You had to figure that everyone already knew that heading into the IPO, though many hedge funds and others lost, too. Ergo, the bitter taste that the whole thing must have been rigged. I feel the pain of those who learned too late that they'd paid too much for stock that had no business being priced that high. But the daily stock moves for the near term have more to do with allocation and artificially determined pricing. It says next to nothing about a real company with real revenues and both immense opportunities and risks.

Here's one instance where Willie Sutton's dictum gets it wrong: following the money would actually lead you to ask the wrong questions. While all the talking heads shout themselves hoarse — what's the betting line on when Jim Cramer's head explodes on TV? — Mark Zuckerberg is back at the Starship Enterprise, plotting his next step against the Klingons — Google. He's still buying up companies — Facebook snagged another on Friday — and Facebook continues to hire like crazy.

Let's clear the air and get real about this. No, Facebook may not be the best investment right now. But in no way is it going out of business, or even close to losing money. It throws off a decent amount of revenue and profit; it just hasn't fulfilled its potential for how much money it could make yet. And that might yet be a ginormous number.

Or not. The operative word is "yet". Get rid of the crazy US$100 billion valuation, and you still have a company with a bright future. Despite all the faux outrage over Zuckerberg's penchant for hoodies, his unorthodox sartorial style says nothing about the way he runs the company or his vision for its future. What we do know is that he's extremely bright and one of the best entrepreneurs of this generation.

Making money may take a backseat to the user experience, in his mind, but, with an eager public shareholder base applying pressure, he'll have his big brain focused on myriad business options over the near term. With nearly 1 billion monthly active users, Zuckerberg sure has a lot of options. And who knows? Maybe Zuckerberg and co will be so disgusted with their stock's dud opening performance that they'll dedicate themselves to become that much more fierce in colonising the plant for Facebook. Crazier things have happened.

For now, the noise of the markets is just that. A distraction.


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thesorehead posted a comment   

Very much agreed. To me the shitstorm surrounding the FB IPO highlights just how fake the whole share market trading system is: it's an enormous sea of electronic dollars, washing this way and that on the tides of hopes and wishes and dreams at an ever-increasing pace thanks to the speed of the algorithms that goven 99% of daily transactions.

Also it was a reminder that somewhere in there is what remains of my superannuation, and that it's time to take it elsewhere.

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