Facebook Is Compelling Me

Aug.13.12 | About: Facebook (FB)

As compelling as Facebook (NASDAQ:FB) may be, it certainly hasn't sucked me in as far as believing that I have more friends than I really do.

In fact, other than you reading this, I have no friends. However, Facebook has been a good way to keep track of my kids, who would only let me be their "friends" once they entered young adulthood.

It has also been a good way to get information out about my book and any "moronic" things I might be doing in an attempt to push the book.

Other than not wanting to be left out of the IPO process and then wondering why I ever succumbed to that temptation of "Zuckville," I haven't thought too much about the shares. I did pick some additional shares up in the beginning of July 2012 for my personal accounts and sold calls, seeing the shares get assigned a few days later.

But that was at $31.

With the not terribly surprising news that the lock up period expires this Thursday, I made Facebook one of my weekly stock selections for subscribers and sent out the Trading Alert this morning. Of course, since my timing is usually suspect, I sent the alert out when shares were just slightly below their morning high.

In general, when the market is moving sideways, I tend to sell in the money calls, or near the money calls, but not this time.

With a purchase price of $22.30, I recommended and did so for my personal accounts the sale of $23 August 18, 2012 calls.

But why? What's so compelling about Facebook to not only put my money into it, but to recommend it to subscribers who may judge a subscription service only on the basis of the most recent or worst selection?

No doubt that Facebook will be the stuff of business school case studies. No doubt that there are still thousands of people muttering under their breath and have been trying to figure out exactly how they can "un-friend" Mark Zuckerberg.

But still, here we are just a few days away from the lock up expiration when rational thought processes should compel a reasonable person to be cautious.

But Facebook isn't like some of the other recent social media IPOs that have come our way. Perhaps one can argue as to the comparative quality of products that the various such companies offer. Whether music playlists, virtual gaming or the daily deal space there are some good products and services that have loyal followings, yet still, when lock ups expired, the shares tanked.

What makes Facebook different is pride and ownership.

I have a son who works for a privately held and well known social media company. He was an early employee. He and his co-workers have incredible pride in their company and faith in its prospects.

Can you say the same for those that toil away at creating virtual farm implements, when their CEO is dumping shares and reportedly virtual manure on his employees? Can you say that the experience at a company where the CEO is not considered to be an adult and the best known adults on the Board of Directors are leaving inspires pride and confidence?

But then there's Zuckerberg and Sandberg.

Make all the jokes you want about hoodies, but the C-level commitment has more than trickle down influence on the actions of all of those that are soon to be released to cash in their shares.

I believe that the Facebook employees, by and large, have that same kind of commitment and believe that their shares have been unfairly and unduly punished. But more importantly, they believe that the direction for their shares is up and not down.

Of course there will be sales. At the very least, any sane person would at least sell enough of their shares to cover the cost of exercising their employee stock options, but it is inconceivable to me that there will be a flood of shares onto the market. Certainly not to the point of creating a prolonged depression in share value.

Whatever happens, Facebook may not get me any more friends or subscribers, but profits will.

Disclosure: I am long FB.