While we promised the sparkling Mark Zuckerberg a bright future, in particular thanks to the IPO of the most famous social network, it seems that the clouds are gathering above his head and the Palo Alto firm. Indeed, since the catastrophic IPO, including a loss in share value of nearly 50% and the results which are relatively disappointing, it is not clear how Facebook could get out of this slump, at least in the short term...

The stock market definitely doesn't like Mark Zuckerberg!

You are not unaware that Facebook created the sensation sotck exchange from New York last May when Mark Zuckerberg finally decided to introduce part of the capital of his firm. The specialists (the same ones who claimed that “subprimes” were a marvelous invention and that Madoff was a genius…) almost all predicted extraordinary demand and therefore a rapid rise in the stock. The game was so won in advance that the boss of Facebook, very “judiciously” advised by Morgan Stanley, the bank in charge of the introduction, took the daring decision to say the least of launch trading at $38 per share. Unfortunately, demand was much lower than expected as the Palo Alto firm seemed overvalued at this price... The share price very quickly fell by almost 20% in two weeks.
Worse still, following the announcement of disappointing figures to say the least, with relatively weak turnover growth in the second half, the stock has chained five consecutive days of decline, falling to 20.04 dollars during the session of August 2. We are therefore a long way from the introductory course... If, like some journalists, you are wondering whether this stock market Bérézina risks sinking the most famous social network on the planet, I want to reassure you, that will probably not happen! Indeed, even if it is not really very good for the image of Facebook which seemed to succeed in everything, remember that there is only a small part of the capital that has been floated on the stock market. The rest is still tucked away in the pockets of the founders and some of the first shareholders who did not have the good idea to sell their shares.
En somme, cette situation n’est difficile que pour ceux qui ont eu la mauvaise idée de se précipiter les yeux fermés sur le titre dès la première journée et pour Mark Zuckerberg ! En effet, rendez-vous compte que cette mauvaise passe de sa firme l’a fait sortir du très prestigieux classement des 10 premières fortunes de la high-tech américaine. Pire encore, sa fortune ne serait plus que de 10 milliards de dollars, autant dire une misère ! Quand je vous disais que la bourse ne l’aime plus…

Facebook loses 4 of its senior executives

Comme les mauvaises nouvelles ne viennent pas seules, la presse spécialisée annonce mi-août que Facebook vient de perdre quatre de ses hauts dirigeants. Il s’agit d’Ethan Beard, directeur des partenariats, Kate Mitic, en charge du marketing, Jonathan Matus, qui dirigeait la publicité mobile et Ben Blumenfeld, en charge de la conception. Or, ces départs concordent avec la levée de l’interdiction de vendre des titres supplémentaires (le lock up). Potentially, no less than 1.9 billion new shares could be sold.

Problems but few solutions…

Far be it from me to let you believe that I have a grudge against Facebook, that is absolutely not the case. However, it must be recognized that the Palo Alto firm has been accumulating disappointments in recent months. Between the overvaluation which led to the dizzying fall of the stock and the revelations on the impressive number of fake accounts, Facebook has one bad news after another. Thus, in its first financial report, the social network recognizes that among its 955 million users, 83 million do not exist. In addition to the fact that this leads to very bad publicity, these fake accounts automatically lower the average revenue per user. Yet another good reason for analysts and advertisers to have serious doubts about the sustainability of the social network and in particular its ability to monetize its traffic.
This is undoubtedly why an ever-increasing number of experts consider that the current price remains overestimated. Thus, Trip Chowdhry from Global Equities Research affirms in the daily Les Echos that “the current level of the stock means that the company can grow by 80% or 90% year on year, which is impossible”. It's certain that said like that... Frankly, we don't really see how the situation could improve in the short term for Facebook. And it is not the eternal return of the “sea serpent” that is the Facebook phone which should change anything in the situation.
In conclusion, it can be said that Facebook has been in turmoil for several months. It is difficult to see how the firm could emerge from this, at least in the short term. It is therefore a safe bet that the next figures to be announced will be almost decisive.