Well, in his quest to become CEO Of The Year, Mark Zuckerberg is certainly hustling, isn't he? Today the stock price is hovering just over $20 a share.
Now let's see...what did I predict it to bottom at? I believe
I said that a price of $18 per share would be fairly reasonable. I even hedged on that a little and said that it might even go as low as $8 or $9 a share if the hype was fully discounted. Well, guess what? The hype is beginning to be discounted.
I see no problem at all with making the $18 target and even the $8 target is beginning to look reasonable. Why? Well,
this article outlines three very important little problems.
First up is the imminent arrival of the "lock up releases."
FACEBOOK LOCK-UP RELEASES:
August 15th, 2012 (next Thursday): 268 million shares, 10% of shares outstanding.
October 14th: 249 million shares, 9% of shares outstanding.
November 13th: 1.332 billion shares, 49% of shares outstanding.
December 13th: 124 million shares, 5% of shares outstanding.
May 17th, 2013: 47 million shares, 2% of shares outstanding.
Over the next 4 months, in other words, 2 billion Facebook shares will become eligible for sale—about 70% of Facebook's total shares outstanding.
I'm guessing that's probably going to be a bit of a problem. I mean, if the current number of shares is in trouble I just don't see how the opportunity to introduce more...much, much more...is going to drive the price up.
Of course, the federal government is always here to help and in the spirit of "you didn't build that," well...
Facebook will likely have to write a check for $2.5–$4 billion to the U.S. government in a few months to pay the "withholding" tax on many of its Restricted Stock Units (RSUs), which will vest about 6 months after the IPO.
Yep, that's going to make the company more valuable 'cause paying taxes makes everything better. Everyone knows that.
But hey, at least the company still has lots and lots of value, right? Now let's see...what is it that makes Facebook so darned valuable? It can't be their members because as we learned within the last few days there are at least 80 plus MILLION fake accounts...probably more but hey, who's counting? So the real value is probably their brain trust...their employees. Sure is lucky they aren't going anywhere. Oh, wait...
...the current value of Facebook's RSUs [restricted stock units] is currently less than at any time since late 2010. This means that Facebook's "golden handcuffs" on its employees are likely to be considerably less effective than the company expected they would be.
Next stop, Suckville. Full speed ahead!
$8 a share is starting to look quite reasonable, indeed.
