<strong>WATCH: How Low Can FB Stock Go?</strong>
In his pre-IPO letter to prospective shareholders, Facebook CEO Mark Zuckerberg made two things crystal clear:
- Facebook’s “social mission” was much more important to him than its business
- He was focused on creating Facebook’s long-term vision, not on creating short-term “shareholder value” (e.g., stock price).
In other words, Zuckerberg warned short-term investors to stay the heck away.
And now, with Facebook’s stock sagging after the IPO, a lot of them are wishing they had.
In warning away short-term shareholders, Zuckerberg followed in the footsteps of another brilliant tech CEO, one who also wrote a pre-IPO letter to shareholders in which he told short-term investors to stay the heck away: Jeff Bezos of Amazon.
When Amazon went public, Jeff Bezos did exactly what Facebook did:
He priced the IPO just below the market level.
As a result, Amazon’s stock did not “pop” on its IPO.
And, just like Facebook, Amazon soon traded below the IPO price.
Bankers and investors and the media wailed and gnashed their teeth and hurled insults at Amazon—Amazon was a “broken IPO!”
But Jeff Bezos shrugged. And he used the additional money that the company raised on the IPO (instead of giving it to short-term stock flippers) to build a great company. And those who believed in the Bezos vision had the opportunity to pick up some Amazon stock below the IPO price.
And that’s exactly the opportunity that folks who believe in Facebook’s long-term vision now have.
Of course, Facebook is still arguably a much more expensive stock than Amazon was at its IPO. And Facebook’s private investors have already captured a huge percentage of the upside that Amazon’s public-market investors were rewarded with. (Amazon went public at a value of $500 million. Facebook went public with a value of $104 billion).
No new Facebook news has come out over the weekend.
So investors who were clawing and scratching each others’ eyes out to get at the stock last week now have the opportunity to buy it for 10%-15% less.
Will they take that opportunity? Or will they now admit to themselves that they were really only buying into the IPO in the hopes of a huge short-term “pop?”
Or will they wait for Facebook’s stock to get more reasonably priced, which it is on its way to doing?
Or, will Facebook’s stock soon recover and make this a once-in-a lifetime buying opportunity that many investors miss in their rush to condemn the company for not giving out more free money?
Time will tell!
(In the meantime, I’m not rushing to buy it. I still don’t understand why the stock deserves a multiple so high relative to Apple, Google, et al. I think a fair price for it is about $20.)