It was the biggest no-brainer in the history of Earth, it turned out.
Short Facebook (FB) at its open.
I wrote an angry screed over at TheStreet.com last weekend about the way this IPO was handled. Before the day was out the bankers who brought this turkey to dinner were having to lay out their own cash to keep it floating above its offering price.
Now that their commitment to the stock is over, the shares are seeking their own level. And that level is going to disappoint all those insiders who thought during the roadshow that they were all about to get easy billions.
Hey, Bono, don't quit your day job.
What is Facebook really worth? It's a fairly mature Internet company, which will have enormous difficulties entering new markets because it is immersive, a destination for peoples' lives and the data surrounding those lives. China isn't just closed to Facebook by law, but has its own Facebook clones, all of whom follow Chinese law rigorously.
The same will likely become true in other major markets.
Why will Facebook be restricted in ways Google (GOOG) will not be? Because Google is an essential service leading to other Web sites. It's not a destination, it's a way to find such destinations, and that service can be delivered in an impartial manner that doesn't step on local politicians' toes.
Facebook is not. Facebook is a destination site. It expects people to spend most of their Internet time on it, not on the wider web. Governments are bound to seek greater control of such destinations. Without Facebook, a local government can license other destinations. Without Google, those destinations will have a hard time getting found.
Moreover, as a destination, Facebook is already pretty mature. Its best bet for growth is to expand its range of games and digital content so that it becomes the main place its users go to for just about everything - the single site they trust most.
But in seeking that kind of deep involvement, Facebook faces risks. When groups of customers decide they are tired of Facebook, for any reason, that has a profound impact because they have a lot of other places to go. (Notice that even MySpace is making a comeback these days, thanks in part to Justin Timberlake. In poker we call that a tell.)
Facebook has also been investing heavily in data centers. That's an upfront cost that will depreciate, putting real pressure on its balance sheet.
This doesn't mean Facebook isn't valuable, at a price. But that price is probably closer to the 20 multiple enjoyed by Google than the 108 multiple it had at its offering.
Which means shorting Facebook may still be a no-brainer for some time.
Disclosure: I am long GOOG.
