Facebook (FB) just settled at a market cap of right at $41.65 billion. This has been a source of endless embarrassment for early investors. Mark Zuckerberg finally admitted it's been "painful". Peter Thiel finally mostly bailed ship, selling over 70% of his stake.
Well over a year ago, when Facebook was being evaluated at $50 billion by plenty of investors in the company, I wrote an article blasting the idea, saying:
I'm not sure how many join every day, but a 6th of the world population is already part of the network, according to Facebook - there's only a potential increase of 600%, ever, unless new ways of monetization are possible.
Even then, most of the arguments so far are something like, "If the company doubles a couple of times in the next couple of years, you'll get normal returns." It's just evidence that the company is grossly overvalued.
I received several emails from people telling me I obviously just didn't understand anything, because Facebook was The Next Big Investment.
And when it comes to monetization, that's just the problem. The company has developed better income streams since then, but has yet to come up with something to justify a $50-100 billion evaluation.
As mobile continues to displace huge chunks of traditional browsing, it's getting even more difficult for companies to monetize.
There are ways Facebook could suddenly be worth more. But they'd have to be ideas that increase monetization that have a huge role changing an industry. There's plenty of talk and even work going on, but until Facebook gets serious, the company will be stuck at best at these far lower prices.
Don't forget, a company's potential future earnings on a potential new project that might be potentially profitable isn't something you bet a lot of money on, not when there are far, far more secure deals out there.
It looks like the market in general agrees, as more and more embarrassing stock news hits Facebook. If prices keep falling, ironically, I'll reconsider buying at some point, but not until Facebook begins to show -- for a while, not just a short bit of time -- that it's serious about stable, huge income increases from its huge network of people.
There's an old expression: "Don't count your chickens before they hatch". Early investors who lost money with Facebook should consider a more obvious one: "Don't count your chickens before you've even got eggs."