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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