Jim Harrer

STARTUPS, TURNAROUNDS, APPDEV, AGILE & LIFE...

Facebook's Stock, their float and the importance of a solid Investor Relations (IR) strategy.

I took a mini vacation for the past week, I came back to several emails regarding my thoughts on Facebook and why I was holding on to the handful of shares I purchased in the IPO.  I didn't think the post would generate so many negative emails. Before I respond, I want to make it clear, I don't edit comments left on this blog.  I would prefer you post comments, rather than send me emails debating my blog posts so others reading this blog can also chime in. You can post as a guest if you don't want to leave your name. 

Facebook's Overhang

Several of the emails I received felt I didn't emphasize the amount of stock which would flood the market through the rest of the year. To recap, prior to last Thursday, Facebook had 421 million shares in it's float, on Thursday they unlocked 268 million shares which is what helped drive the stock to an all time low of $19.05. In October, another 192 million shares will unlock and then right before Thanksgiving, a large block of 1.2 billion shares will unlock.  As many of you pointed out in your emails, this is a fundamental supply and demand problem.  One email went on to say that technology fund managers may also reallocate their portfolios this quarter, which will add additional downward pressure in September. Another said that some fund managers no longer believe they need to have Facebook in their portfolio and pointed to the mass exodus on Zynga and Groupon from popular tech funds. 

I can't argue with these comments and the fact the Facebook brand is taking a school yard beating right now. In hindsight, the overhang in the stock should be a concern to any investor thinking about $FB.  I can't agrue with supply and demand. Who is going to buy this 1.4 billion of new stock? Does anyone know the answer? 

Another email said I didn't spend enough time pointing out Mark Zuckerberg's lack of maturity and that I should have suggested he would better serve his shareholders as a Chief Technology Officer, not the CEO.  I see his point, however I don't have enough information to agree or disagree. I don't know Mark or his BOD. Call me old fashion, I invest in people and am usually LONG in my investments, therefore I haven't given up on Zuckerberg just yet.  Their BOD must have faith he can hold the top job.

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Facebook Q2 2012 Results Analysis From The Cigar Club

facebook buy sell holdSo last night the peanut gallery, uh sorry, my cigar club, wanted to talk about Facebook's Q2 2012 results.  Here is a recap for those who don't know:

Facebook, Inc ($FB) reported pretty flat year-over-year earnings growth. They earned 12 cents per share in the quarter that exceeded the consensus estimate by three cents. However, including stock-based compensation, payroll taxes and income tax adjustment, Facebook lost $.08 cents per share compared with earnings of $.011 cents per share in the year-ago quarter.

Revenue jumped 32.3% year over year to $1.18 billion, slightly better than Wall Street's estimate of $1.15 billion. The year-over-year growth was driven by strong advertising revenue (84% of the total revenue) that climbed 28% year over year to $992.0 million. The rest of the revenue from payments & other fees in the quarter. The strong upside in advertising revenues was primarily driven by an 18% increase in the number of ads delivered based on growth in the user base and an increase in average number of ads per page from the prior-year period.  Cash flow from operations increased by $242 million.

How are investors taking the news this morning?  Facebook is down 14.14% to $23.05 (7/27/2012 @ 11:32 EST) check it now

My weekly cigar group went into last night's smoke pretty depressed.  A couple of them got in on the IPO of $38.00 and thought they had purchased extra special rare gold on May 18, 2012 when it appeared on NASDAQ's wall.  Half of the group of six passed on buying Facebook after hoodie-gate, they're words not mine.  I was on the other side of the fence, I purchased a small block, in the after market when it first dipped.  So the group is pretty equally divided three and three, stockholders of Facebook vs really old money who love Wells Fargo and AT&T.  Yes, that is a dig and I will pay for it next week.

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