What's going on with Facebook? For our Insights and Opinions section today, Megan Lisa Jones, an investment banking vet, comments on the travails of Facebook, and its stock price and life as a public company.
It shouldn’t be. The company, less than 10 years old, still has a market cap of almost $50 billion. Still, the stock closed at $21.81 Friday, down around 40 percent from its IPO price of not many weeks ago. It has a drastically higher price to earnings ratio than Google, larger, which appears to be growing faster at this point. Most recent earnings reports from Facebook and partner Zynga, responsible for a portion of Facebook revenues, under whelmed.
Expiring lock-ups will lead to over 2 billion Facebook shares being available for sale within the next 4 months. Meanwhile, Facebook has about $10 billion in cash on its balance sheet but estimates of its employee stock compensation tax bill put the number due at between $2.5 to $4 billion, an amount Facebook had reportedly hoped to pay by doing a follow on public stock offering. While no law prevents them from still so accessing the capital markets common sense would dictate that investors may not be favorably inclined. Company executives and investors sold numerous shares in the IPO, leading to doubts as to their faith in long term company prospects. (More...)
Read the rest of Megan's editorial, Facebook, revisited.