According to a Reuters report last night, a group of Facebook investors is looking to get out of the company by selling $1 billion worth of shares on the secondary market. Doing so would value the company, which has not yet gone public, at about $70 billion. The sellers, the story says, have lowered their asking price after previously trying to sell in a deal that would have valued the company at $90 billion.
The new deal would call into question just how much Facebook is worth and what its growth prospects are ahead of an expected initial public offering next year. Some investors and analysts are starting to think the company is overvalued or that its future might not be as bright as expected.
Well, duh. At some point when investing in stocks, it makes sense to stop looking at the numbers and start thinking about the realities of what a company does and how people use its products and services. I’m not an active investor in any company, but if I was, Facebook is probably not one I’d go anywhere near because of this.
Simply put, almost no one I know enjoys using Facebook. It’s anecdotal, I know, but most of the people I know who use the site only do it because they feel they have to. They’ve been pressured into it by their friends, or they feel like they miss out on social events and interactions by not being on it. I can’t say I know anyone who really loves it. In that way, Facebook is almost like a cellphone contract – nobody wants to be in it and they can’t wait till they can get out of it.
Facebook has not done itself any favours. With its constant redesigns and privacy blunders, the company has deservedly earned the wrath of many users. While Quit Facebook Day proved to be a flop last year, it actually spoke volumes about the future of the website – who really wants to invest in a company that provokes this sort of reaction among its own customers? You don’t see Apple customers organizing too many Quit iPhone days.
As for businesses, it doesn’t make a lot of sense for them to be on it either. Many companies have gone through the trouble of setting up pages on the site and advertising on it, which is funny because they already did that once before, you know, with things called websites on the public internet. Sooner or later, businesses are likely to realize the extra time and expense of running essentially two online presences isn’t worth it. And guess which one they’ll pull the plug on?
I remember hearing once that the best companies to invest in were the ones that had the longest lineups, and I sort of half remember this being called the “grandma school of investing,” although I’m not sure why. Do grandmas spend a lot of time standing in line? Anyway, it comes to mind every time I stand in the really long lines at IKEA, where I think, “Man, I really should buy stock in this company” (you can’t because IKEA is privately owned).
Facebook has big lineups of customers alright, but they’re pointed in the wrong direction – toward the exit door.