Little Apple's  Instablog

Facebook (FB) is not a stock that I would normally write about. But recently so many things have come up about it, that I now feel compelled to check it out. The big rumor, which many swear is true, is that the site got involved in the already explosive situation with Chick-Fil-A. Most of you heard the story about Dan Cathy, CEO of Chick-Fil-A making a comment against same-sex marriage. The company is widely known for its Christian values, and even remains closed on Sundays so employees can go to church. Gay rights activists then threatened to boycott the chain.

High profile Right Wing "Friends of Chick-Fil-A" retaliated and posted a Chick-Fil-A Facebook invitation page which invited people who supported Christian values to eat at the restaurants on August 1. That Facebook page was somehow suddenly taken down, or deleted from Facebook:

The Chick-fil-A day Facebook invitation page set up by Fox radio and TV host Mike Huckabee disappeared for 12 hours starting late afternoon Tuesday, causing some to fear that Facebook had intentionally deleted the page because of contents related to the gay marriage debate.

Chick-Fil-A however was not part of the planning of this Facebook page, and it released the following statement concerning the appreciation day:

Chick-fil-A Appreciation Day was not created by Chick-fil-A. We appreciate all of our customers and are glad to serve them at any time. Our goal is simple: to provide great food, genuine hospitality and to have a positive influence on all who come into contact with Chick-fil-A. As a privately held company Chick-fil-A does not comment publicly about our sales figures or volume.

Several mayors got involved, and joined the ban against the company. The mayor of Chicago said they will block another Chick-Fil-A being built in their city. "Chick-Fil-A values are not our values he said". And the mayor of Boston suddenly banned Chick Fil A from that city (see link above):

While the Chick-fil-A Appreciation Day page has been restored (by Facebook), Huckabee posted a new statement today about the controversy: "The Mayor of Boston says he won't allow Chick-Fil-A in Boston. Amazing that a mayor now has the power to stop commerce because he personally disagrees with the PERSONAL views of the CEO of a company."

Facebook has not denied that they deleted the page. Which brings into question their subjective manner in deciding what is posted on Facebook and what is not. Most of us know people personally, who have posted political statements, usually anti-liberal comments, that have been removed from their Facebook pages:

And a Facebook representative told the FOTF (Focus on the Family) advocacy arm that if the company had deleted the page it was because the "content violated our policies not because of public sentiment."

In another instance, conservative Christian author Dr. Michael Brown wrote a book documenting the Gay movement in the US. His page was also suddenly deleted, and was not restored until Dr Brown took decisive action:

.....(his book page) was deleted for allegedly violating Facebook's 'Community Standards.' But Facebook pages like 'Hitler Fetus is our Jesus,' 'Zombie Jesus,' and a host of other grossly offensive pages apparently do not violate these standards."

Readers might ask what does this have to do with Facebook stock? The big problem with all of this is that Facebook is now publicly owned. Yet they are operating as if they were still a private company. You can say and do a whole lot more in a private company than you can a publicly owned one. As an investor in Facebook, this mess is your mess. If I owned the stock, I would have sold the minute this started. And the situation still continues to escalate.

Since all of this happened, Facebook shares have tumbled. Was it due to this controversy? Only the investors involved in the sales can answer that for sure. But judging from the millions of people that jammed US roadways in support of Chick-Fil- A on August 1, I would say it had a major impact. Regardless of which way a person feels on the gay issue, this has become a freedom of speech issue. And there is a campaign being mounted against Facebook in support of the first amendment. Some writers even think that Facebook is manipulating information on the site by design. This was something most analysts did not see coming. And it only adds to all of the other problems plaguing the company.

For instance, Facebook is currently losing a lot of talent. A "post-IPO exodus" from the social networking company continued Wednesday when two senior executives announced they were leaving the company. Is it possible these two had anything to do with the Chick Fil A incident? The timing is certainly questionable in my opinion. But Facebook has not commented. According to the Wall Street Journal:

Ethan Beard, director, platform partnerships, and Katie Mitic, director of partnership marketing, both took to their Facebook pages to announce their departures. Mr. Beard ran the company's relationships with developers since 2008. Ms. Mitic has only been at the company for two years.

They both cited a desire to take part in other entrepreneurial activities. Mr. Beard said that after eight years in the industry, he was ready to take time off to figure out what he wants to do next.

"One of the things I've done is working closely with a lot of the start-ups and I expect my next move will likely bring me closer to this world," he said in an interview.

Still, the departures underscore one of the challenges Facebook continues to face in retaining top talent after its initial public offering in May. Once employees can liquidate their holdings in an IPO, companies frequently experience a "brain drain" in talent.

But there is more. Any investor who can get past all of the problems I just listed above will have to deal with other more severe issues. According to another Seeking Alpha writer, there will be millions of new shares added to the float in the next several months:

Facebook's stock is burdened with billions of shares poised to be released from lockup in 2012. Facebook's share lock-up expiration begins in August and will increase Facebook's float by 276% by November. On August 15th 268 million shares will be released from lock-up more than half the shares offered in May. This will be followed by 247 million released on Oct 14th, 1.33 billion on November 13th and 124 million on December 13th.

When Facebook was first released, I was really exited about it. I have a few different Facebook accounts for my "aliases" that I write under, and I am always checking them daily. But when I first saw the P/E, I remember thinking this stock is only worth $10 a share. But now the price of the stock is down to $20.88 and the P/E is still 72.25. With the threat of millions of new shares being dumped into the market, I think it may go lower than $10. If you love the stock, and really want to own it, wait until next January when all of the shares have been absorbed, and then there will be some stability in the price. But personally I would not touch it right now.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.