Cramer's Rant On Facebook

Aug.21.12 | About: Facebook (FB)

Cramer just went nuclear on Facebook (NASDAQ:FB), specifically, the report that:

Facebook Inc. director Peter Thiel sold most of his stake in the operator of the world's largest social-networking website, bringing his proceeds to more than $1 billion, after restrictions on insider sales ended.

Thiel, one of Facebook's earliest investors, sold about 20.1 million shares in the company on Aug. 16 and Aug. 17, raising $395.8 million, according to a filing yesterday with the U.S. Securities and Exchange Commission. Thiel, a venture capitalist and hedge-fund manager, had already generated $640.1 million in sales during the initial public offering.


What I said originally about the offering is this:

Want to lose money? Buy Facebook's IPO and hold onto it.

This is not to say that there might not be some decent day-trading or short-term opportunities in the stock, as I'm sure there will be. Anything volatile has the opportunity to make money embedded in the price swings.

But that's not the question -- the question is whether at 99 times earnings there's inherent value in what amounts to a fad company selling advertising to people who hang around posting pictures of themselves doing beer bongs.

In a word: No.

Never mind that the world is increasingly going mobile and the mobile world is inherently intolerant of advertising. It's not just the form factor of mobile devices, although that certainly enters into it -- when you get a tiny little sliver of the bottom or top of a screen, you can't sell much (and thus the marketing is not worth much on the price side.)


The world is increasingly going mobile and mobile applications generate zero, or close to zero, in ad revenues. Never mind that there's no convergence between "pictures of me doing beer bongs" and someone wanting to shop for something.

Google (NASDAQ:GOOG) is a different matter; when you're using Google you're looking for something. Probably something to buy.

When you're on Facebook you're not.

There is no "business model" associated with giving away free pages to people who then post pictures of their cat and themselves slamming shots.

The Wall Street Hype Machine sucked in people once again, and the so-called "critical media" was unwilling to call this what it was prior to the offering, although some people did sound the alarm.

No matter how much spray paint and polish you put on a turd, it's still a turd.