On the first anniversary of its IPO, Facebook (FB) is still down a third from the price it received on that day.
I have no problem with that. Morgan Stanley was representing sellers in the IPO, not buyers. It had no obligation to sell at an artificially low price so some speculators could get a "pop." Those who obsessed over the first day's trade with their orders in hand, waiting for that pop, deserved what they got.
But at its present price of about $26.50, Facebook is being priced at 100 times its anticipated earnings for the next year, based on its most recent quarter. And now the knives are out for the stock, and the chief knife-wielder turns out to be Rupert Murdoch (NWS), who tweeted yesterday: "hours spent per member dropping seriously. First really bad sign as seen by my crappy MySpace years."
Why did Murdoch tweet that? It's because he got hosed spending $500 million for MySpace in the middle of the last decade, and the best way to show that its fall wasn't his fault is to see Facebook disappear. But MySpace was his fault. All his fault. He thought he could simply re-brand a youth site as "Fox" and kids would stand for it. They didn't. They went to Facebook instead.
Still, is he right on his call? As time goes by, with any site like this you're going to see a similar pattern. Everyone rushes to the rail, then those who see no value pull away, and you're left with a solid core of profit.
Is that core big enough to generate the profits Facebook seeks? No. But Facebook isn't just a social network now. It's a gaming network, and a cloud player. It has the best mobile monetization schemes out there. It doesn't need to have everyone on it in order to grow. In other words, Facebook the service and Facebook the company are now different things. There's reality to the company that doesn't depend on the base service, but that will support that service over time.
All that is not to say a market cap of $64 billion is justified. The reason LinkedIn (LNKD) has resisted the fall that took Facebook, and continues to rise, is partly due to its smaller market cap -- just $20 billion. It's also because of its proven membership-based business model and its use among people who know they're being watched, and are mature enough to make money from that. You're also not going to see something like Amnesty International's "Trial by Timeline" applied to LinkedIn because it's not used in the same way.
What Facebook the company is trying to do is create valuable services that make it more like LinkedIn. Over time, I think it will. Doesn't mean I'm a buyer of Facebook here. In the near term it's overpriced, and the next move here is down.
But it will come good in time. It's just going to take five years.