What’s Next for Facebook’s Flagging Stock? Perhaps Investors Will Finally Get Real.
As everyone with a pulse knows, Facebook shares took another dive Friday to reach the lowest level yet since its ignominious public offering in May.
Shares closed at $18.06, down 5.4 percent, which is half of its happier $38 IPO price. Actually, more than half, with a 52.3 percent decline overall since then.
Investors are not pleased. Facebook employees are not pleased. Even the New York Times Dealbook’s Andrew Ross Sorkin finally got unpleased, and unloaded on Facebook’s CFO David Ebersman (who has been under attack, by the way, for a while now).
“When Facebook’s I.P.O. first started to appear troubled back in May, I purposely avoided weighing in. Frankly, I thought it was too soon to judge,” wrote Sorkin. “But we have passed the pivotal three-month mark.”
Actually, the Silicon Valley social networking giant will have to pivot for quite a while going forward, for a myriad of reasons.
Most of all, as John Paczkowski noted on Friday, and is also well known:
“The expiration of Facebook’s first lockup on 271 million shares earlier this month tanked the stock. And with four more yet to go, there is clearly further volatility ahead. On Oct. 15, 249 million shares will become eligible for sale. On Nov. 14, the lockup will expire on 1.32 billion shares. On Dec. 14, another 49 million shares. And on May 13, 2013, the final 47 million shares.”
In other words, that’s a lotta lockups to be unlocked.
And, as you can see from these two helpful lockup-expiration-focused charts for a range of other tech IPOs of late from SNL Kagan, that means a lot of downside for Facebook’s stock:
But, as I noted, this is already known by all, as Business Insider’s Henry Blodget — who has done some of the sharpest analysis on the troubled stock story at Facebook — correctly noted in a post titled, “It’s Becoming Clear That No One Actually Read Facebook’s IPO Prospectus Or Mark Zuckerberg’s Letter To Shareholders” on Friday.
“As Facebook’s stock continues to collapse, the volume of whining is increasing,” wrote Blodget. “As I listen to all this whining, I have a simple question: Didn’t anyone even read Facebook’s IPO prospectus? The answer, I can only assume, is ‘no.'”
No, they did not, or they might have read about everything from the company’s slowing growth rate to its mobile issues to, yes, all those billions of lockups to come.
Also, he noted, a bit of math would have yielded the high price-to-earnings ratio, which remains high at Facebook’s current low stock price, especially compared to Google and Apple.
That does not mean everyone is gnashing teeth. One of Facebook’s key Wall Street underwriters, J.P. Morgan, gave a stronger thumbs-up to the company in a note released yesterday for the future, even as it cut back on its target price by 33 percent.
The worst news: J.P. Morgan’s Doug Anmuth gave Facebook shares a $30 target, which is still far below his $45 target in late June.
Still, he also struck a sunnier note, saying he expects advertising revenue at Facebook to rise in the next year, even as payments revenue and overall profitability will be less.
Anmuth also said he expects Facebook to repurchase some of its now-cheaper shares to settle its tax bill related to restricted stock units via the credit or cash, rather than stock sales.
“This would essentially amount to a buyback of ~120M shares totaling $2.2B at current prices, and it would reduce the outstanding share count,” he wrote.
That’s probably cold comfort to shareholders, especially given most Wall Street analysts have urged buying, even as the stock has dropped.
Then again, since it’s not yet clear where the bottom truly is for Facebook shares, it is at least one less thing to worry about.