Editor’s note: This article was first published in July 2012, two months after Facebook’s May 2012 IPO. The share price, Zuckerberg’s rankings, the results due “next week”, the lock-up end and the price forecasts all refer to that moment. Facebook, Inc. renamed itself Meta Platforms in 2021.
These are bad times for Facebook and its founder, Mark Zuckerberg. Ever since the social network’s disastrous stock market debut, the bad news and doubts about whether its business model is viable just keep coming.
To begin with, Zuckerberg is no longer on Bloomberg’s list of the 40 richest men, and he will probably drop quite a few places on the Forbes 400 list of the richest people in the United States, where he was ranked number 14.
This is mainly due to the fall in Facebook’s share price: the stock has already lost about 27% of its value compared with the IPO price and is currently trading at around 29 dollars. And as if that weren’t enough, next week Facebook faces the market’s biggest test, as it presents its quarterly results with a set of figures that are unlikely to be very positive, given the current bad news.
Figures from various US agencies claim that Facebook is losing users in both the United States and Europe. Not only that, users are spending less and less time on the social network. Basically, the word is that people in mature markets are starting to get tired of Facebook.
Although the number of users has grown in Spain, in its main market, the United States, Facebook is said to have lost more than 1% of its users, while Europe as a whole has lost close to 1% on average. Add to this the difficulty Facebook has in breaking into the Chinese giant, and the situation gets a little more complicated.
Facebook has been focused on finding a way to make money from its business model on mobile, which was one of its weak points in terms of revenue, and, according to the company itself, it looks like it will succeed.
Even so, it is not expected to post favourable results this quarter, so its shares will probably fall even further. On top of that, Facebook’s banks and employees are reaching the end of the period imposed by the SEC that prevented them from selling the company’s shares.
We could see Facebook trading below 20 dollars in the very short term. Then again, many tech companies started out with investors distrustful of how they would make a profit, and in the end they surprised the markets. Will that be the case with Facebook? Would it pay to buy into the falling stock in search of a long-term return?
Anything can happen with this company. Perhaps one day it will diversify into solid, tangible products, or perhaps it will stick to the social network alone until it goes out of fashion. Or perhaps it will finally manage to enter China and win another 300 million users.
Our colleague Victoria Bernal believes that in the long run Facebook could trade above 200 dollars. In her view, it is being punished for the “greed” and poor management of the IPO, but in the end the team will find a way to multiply its profitability, because it has a great team and strong capital behind it.
As for me, I’m no longer sure about anything with Facebook. Besides, I can just picture Warren Buffett telling me: “I told you so, I told you so… have a Coca-Cola, it’s got more potential” 🙂
Featured image: TechCrunch, CC BY 2.0, via Wikimedia Commons.
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