The Great Facebook Stock Pump

Written By Elisa Lee
2012-05-18

Facebook stock IPO date is going public today. They will be listed on the NASDAQ exchange with the symbol FB. Mark Zuckerberg is trying to get top dollar for the public debut of the stock. He's put on a grand dog and pony show to generate excitement in the stock IPO. It all stinks like a big pump and dump.

Facebook's stock valuation is too damn high. The projected market cap is estimated at 100 billion dollars. How much more can a company grow at that valuation? To put this in contrast, when Microsoft (MSFT) debuted their IPO, they put the company at 700M valuation. Microsoft stock had lots of room to grow and it many people made a lot of money.

Bill Gates didn't need to pump his stock like Mark is doing. Bill was busy selling Windows and Microsoft Office. Steve Jobs was busy running his company too. Mark on the other hand has been trying people excited about his company's stock. He even has a special presentation for the IPO. Nice little advert for his silly stock.

Facebook advertisement revenues are ridiculous. GM just announced they were suspending facebook advertising because the adverts were ineffective. The marketing company Greenlight found that over 40% of facebook users never click adverts on Facebook. Google adverts can be shown for less than 5 cents each if nobody outbids you. The cheapest facebook advert is 95 cents. This is insane pricing for a crappy ad with terrible return on investment.

Besides advertising, not many other revenue streams are available. I don't even know where there is a buy now button on the site. I've heard I can add credits to my Farmville game, but what can I buy from facebook besides advertising? As a comparison, Amazon also has a 100 billion dollar market capitalization. They generate 48 billion dollars in annual sales. It's almost a challenge to find a page on Amazon that doesn't have a buy now button.

Facebook going public is the worst thing that can happen to the stock. It will have to face the vicious reality of the stock market. Everything about the stock valuation reeks of a dot com pump. Caveat Emptor, Buyer Beware!