Facebook : Going All In At $25
The recent IPO of social network giant Facebook(FB) continues to stir more than its share of controversy for no reason other than what has been an unimpressive (if not a pathetic) showing of the larger-than-life event it was built up to be. Investors caught holding the bag are not only angry but demanding answers that these same Wall Street experts are now unable to provide.
The prevailing question is, what's next?
Whenever a sure thing fails to deliver, lawsuits are certain to follow. Answers that cannot be given on Wall Street are certain to be extracted through litigation -- it's the American way and yet another example of the perverse human characteristic that likes to make easy things difficult. Investors once happy at the chance of risking money on stock turn quickly into victims when the word "risk" became a reality, blaming among others Morgan Stanley (MS) and Nasdaq for not only mishandling the offering but for appearing unprepared to service investor demand of its own buildup.
I once said Facebook's stock had no business being compared to Apple(AAPL) , Google(GOOG) or Amazon(AMZN) from the standpoint of its $100 billion pre-IPO valuation absent a sound fundamental business to sustain growth expectations. It even offended me to think it deserved to have a market cap higher than tech bellwether Cisco(CSCO) . As the stock continues to drop, though, it will begin to approach a level where its price-to-earnings ratio can offer a glimpse of where it might become fairly valued.
For me, that price continues to be $25, and I suspect this is where its bottom might be met over the next several weeks (this is not to be mistaken for some magic formula). On the heels of learning that Facebook's estimates were allegedly lowered by Morgan Stanley a week ahead of the first day of trading, I began doing some comparative analysis. But the challenge was, how do you compare a company such as Facebook that has no peer, one that will continue to remain a speculative play at best?