At half price, FB shares still not a steal for some

WASHINGTON - Facebook shares have lost nearly half their value since a highly touted initial public offering (IPO) in May, but it's still not a bargain for some.

Facebook in the past week dropped below US$20 (S$25) a share for the first time since its US$38 offering price in May.

Last Friday, the stock rebounded 5 per cent to US$21.09, but remained down by a hefty 44.5 per cent.
There is some fear that shares could take another hit in the middle of this month, after the expiration of a "lockup", a 90-day period after the IPO during which insiders are barred from selling.

Mr Michael Comeau of the financial website Minyanville said that 268 million shares could come onto the market, in addition to the 460 million that are already floated. And more will become available later this year.
"I'm fixated on the 268 million shares that will hit in two weeks," he said.

"Will there be enough buyers to satisfy the new supply?"

Mr Comeau said that analyst full-year earnings estimates on Facebook "are actually coming down" from 51 cents per share to 49 cents.

"Declining earnings estimates are usually a negative indicator for momentum stocks," he added.

Facebook underwhelmed the market last month, when it reported its first earnings as a public company, barely meeting estimates for earnings per share and delivering disappointing revenue growth.

The results showed growth for Facebook in overall revenue, operating profits and the number of users - which increased to 955 million by the end of the quarter.

But the company indicated in a regulatory filing that as many as 83 million accounts may come from dubious sources - duplicate accounts, pages for pets and those designed to send spam.

Mr Trip Chowdhry of Global Equities Research, who has consistently said Facebook was overpriced, said that the company may be a victim of its own success.

"Everybody's on Facebook. Your parents are on Facebook. Your neighbours are on Facebook," he said.

"So what do people do? They create fake IDs or they go hang out somewhere else. People are reducing their engagement on Facebook."

Mr Chowdhry said that it remains unclear if Facebook can "transcend" the current generation of users, or will be replaced by something else.

Additionally, he said that there is "a lot of uncertainty" about the expiration of the lockup, adding that the stock is still not a bargain.

"The stock is reflecting that the company can grow 80 to 90 per cent year-over-year, which is impossible," he said.

Mr Larry Chiagouris, a professor of marketing at Pace University, said Facebook has yet to define its strategy for long-term growth and profits.

Mr Chiagouris said founder Mark Zuckerberg's mantra, that he wants to "help every person stay connected" and "be a great social experience", is too fuzzy.

"That is not focused enough," he told AFP.

"They probably expanded too quickly without articulating their mission. From a profit-making perspective, Facebook has kind of lost its way."