Back in January I said that Facebook wasn’t worth $100 billion even though its IPO would say it is. In May, post-IPO, I posted a “Told you so” article in which I said that if the value of a Facebook share dropped to $20 I would very likely invest. To me, $20 seemed about as low as Facebook could fall. I was mistaken.
FB stock is currently trading at $19.87 and has hit an all-time low of $19.69. Wow.
The company, worth as much as $115 billion albeit briefly at launch, is now worth $42.57 billion. That is some fall. And investors are still leaving in droves. The question now is, do I follow up on my assertion that I’d buy at $20 or do I believe there are even lower lows for the social networking giant?
The truth is, I don’t know. It was relatively easy to predict that Facebook’s value would fall shortly after they launched on the stock market. There was precedent. Google, LinkedIn and many more had suffered shortly after early optimism ebbed away to be replaced by grim reality. No big deal to predict that.
My view that the stock would fall to $20 a share (from a high of $45 at one point remember) was much harder and less obvious a prediction, but I called it right. Yay me, right? No, of course not. I want Facebook to succeed – just not at the expense of its uses as it chases more revenue (profit).
Where Facebook and its value goes now I really have no idea. They will have to increase advertising opportunities, which will mean intruding further into our Newsfeeds and mobile experience. They’re already doing it, in fact. This may even appease some investors in the short term, especially if they see a rise in profits. But long term it’s going to piss uses off. That might lead to a drop in active numbers on the network, which will in turn lead to a drop in revenue, which will in turn lead to a drop in investor confidence, which will in turn lead to a drop in the share price.
Uh-oh. I could call $10 per share based on that. But I won’t. I think $15 will be the worst it’ll get. Where I am revising my original view is in the fact that I simply won’t be buying any Facebook shares. It’s going to be a long, long time until they see a significant increase in value. My money is better spent elsewhere. So is yours.
Thank you for reading Facebook Value Hits All-Time Low. I Revise My Original View. Slightly., originally published on TechDrink. Ben Greenwood is the founder and editor of TechDrink. You can follow him on Twitter and Google+. You can also follow TechDrink on Facebook, Twitter and Google+.