Facebook “advised analysts to cut (valuation) forecast before float”.

23 May

Facebook…A Place For Feds

The Press Agency Reuters claims that Facebook told selected business analysts to reduce revenue and earnings forecasts for their stock flotation while it pursued it’s marketing campaign to raise it’s share price.

You can read the full Reuters article here.

It is unclear at present which market analysts were contacted with the new downward-revised forecast by Facebook and which were not but it is apparent at present that public investors may not have been contacted, nor were privy to the revised forecast.

Facebook shares have already dived 8.9% since launch, wiping more than $19,000,000,000 of market capitalization from the original $38/share initial offering.

It appears that private investors (the many ordinary members of the public who may have bought shares) were not informed by Facebook of this new, reduced estimate of the true share valuation prior to flotation.

On the contrary, Facebook was busy plowing ahead with it’s intense publicity campaign, actually talking the share price up while Morgan Stanley and other select analysts were being told the real news.

Since the legality of such behavior is currently under scrutiny, and since Facebook’s revised (downward) estimate of it’s true value are linked to the discovery that the market for future revenue was incorrectly analyzed by Facebook, this may mark the high-water point in Facebook’s place in the history of contemporary Social Media.

It has always been my personal contention that Mark Zuckerberg wished to float Facebook partly to escape impending legal culpability for law-suits brought about by Class Actions; his position at the top of Facebook left him personally exposed to truly massive personal financial loss and even prison sentences while he stayed in control.

My estimate is that Facebook will now lose share value at a rate of 30% over the next 12 month period, caused by aquisition of unstable Start-Ups, Supreme Court litigation and migration of its users to other sites.

My estimate is that Facebook will be as insignificant a player in the Social Networking sector as MySpace by 2015.

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2 Responses to “Facebook “advised analysts to cut (valuation) forecast before float”.”

  1. Thomas May 23, 2012 at 7:53 pm #

    The bigger they are, the more noise they make when falling. In Sweden there was a similar thing a few years back. The government controlled telephone company “Telia” was made a company with stock and shares. One minister told the people that they should buy shares. The “hype” was enormous. What happened? The real value showed up and the regular people lost huge sums of money. Will Facebook be the same “up as a sun, down as a pancake”?

    • roadwax May 23, 2012 at 7:59 pm #

      Hi! Yes, it is in one sense a real tragedy that Facebook has so many times taken corporate actions that work against the common good. Facebook has had so many opportunities to be a “good” entity but has instead made one “bad” decision after another.
      In another sense, Social Media is already leaving Facebook behind and the market is changing.

      Pancake, indeed!

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