Every generation has its one revolutionary innovation that stands above the rest. That single invention alters the way society works, changing the way we think and molds the future. For our generation, that designation goes to Facebook.
We all know how popular and impactful Facebook is, so I won’t bother belaboring those details. But that same sweeping popularity is what ushered the company into the public market on May 18 this year.
According to a Bloomberg Businessweek article, Facebook has lost a colossal $50 billion in market value since its initial public offering four months ago. The corporation needs to stop the bleeding on Wall Street, which is why on Tuesday, CEO Mark Zuckerberg made his first speech to investors since the IPO. But is that what Facebook really needs?
Last year, I wrote a column about the Facebook IPO and why I was keeping my money in my pocket. I’m quite glad I did. However, I don’t think anyone foresaw the catastrophe that ensued. The Facebook IPO will be remembered as the worst in history, due to the alarming amount of money lost by the company and its investors in such a short time frame.
Why did the IPO fail? It’s simple. The company was astronomically overpriced because of the seemingly boundless hype generated by the announcement of an IPO. Investors saw the hundreds of millions of users and took that as a potential for huge profits, but it just didn’t add up.
To put it in perspective, Brian Hamilton, CEO of Sageworks, told Fox Business News that if the valuation methods used with Facebook’s $100 billion IPO were applied to Apple’s IPO in 1980, Apple would have been valued at an estimated $2.7 trillion. A market value of this magnitude is unheard of on Wall Street, and is honestly laughable when regarding an IPO.
People put too much faith into a company that currently has a meager-at-best business plan. The money Facebook raises is from advertising and licensing, but that simply is not enough to compete with the likes of Google.
In Zuckerberg’s speech, he addressed the sullen state of Facebook’s stock by talking about the company’s future plan. The plans include a revamped mobile application that will increase revenue through more frequent usage. Whether it was his delivery or the content, I was left unimpressed and uninspired.
The performance of a company profoundly affects the performance of its stock, but there is definitely a discrepancy. Wall Street-billionaire Mark Cuban, owner of the Dallas Mavericks, made a statement on the Huffington Post about his purchase of Facebook stock and his subsequent losses. He said that Facebook’s management was not to blame but that he, the investor, was. He reasoned that, “No one sells me shares of stock because they expect the price of the stock to go up”, and that, “You look for the sucker. When you don’t see one, it’s you.” Regardless of the reason for Facebook’s plunge, both business and stock performance must improve.
Mark Zuckerberg, although a technical genius, is not whom Facebook needs to conduct all public matters. What they need is someone who will give the company a strong personality. Someone needs to motivate potential stockholders to invest in the company. They need someone to share responsibility for the company’s performance and inspire the skeptics into giving Facebook a chance. Who this person should be is a mystery, but I do know he or she is out there.
Many of the America’s most successful companies were or are controlled in tandem. Google has Larry Page and Sergery Brin, Apple had Steve Jobs and Steve Wozniak, and Microsoft had Bill Gates and Paul Allen, just to name a few examples.
Investors across the nation, myself included, who refrained from investing in the beginning stages of Facebook’s stock, are watching the markets with itchy trigger fingers. We are all looking for the bottom of the ravine Facebook has tumbled into. We just need to be inspired and take the plunge, but Zuckerberg needs help in doing so.