Inside Track
Bloomberg Surveillance
This morning, I am doing double duty at Bloomberg — from 7:00 am to 8:00 am, I will be on Inside Track with Erik Schatzker discussing the IPO you are already to sick to death about. Then from 8:00 am to 10:00 am, I will be guest hosting Bloomberg Surveillance with Ken Prewitt and Tom Keene.
Since the IPO cannot be avoided, here are my 10 bullet points:
1. There are enormous differences between Facebook (the company) and FB (the stock). They each face very different challenges.
2. Valuation for the stock is extremely rich — about 28X sales, and 100X earnings (Apple is 3X sales and 10X earnings — ex-$100B cash its even cheaper)
3. Insiders — the smart money — are selling; Anecdotally, I am hearing about lots of retail buyers in the bulge bracket (Merrill/Morgan) channel.
4. Anyone who clicks on a Like button is counted as a monthly user, making that 900 million monthly user number grossly exaggerated.
5. Facebook does a very poor job monetizing users, getting a mere $5 versus $30 for Google and $144 for Netflix.
6. Enormous questions exist as to the efficacy of advertising on Facebook;
7. Facebook mobile offerings have even more limited engagement than web based;
8. Zero penetration in China;
9. What will the arc of Facebook’s adoption cycle be? Next generation users? Consider other sites like AOL, eBay and MySpace whose users eventually went on to the new new thing.
10. Ongoing privacy issues continue to dog Facebook. EU and FTC investigations can cause future problems; User trust Facebook the company much less than Apple, Google, Twitter or even Microsoft.
If you are going to trade this, by all means do so. If you are investors, I would suggest you need to watch the valuation carefully.
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