I am by no means a stock market professional. I've looked into learning about it a few times here and there, but I've really paid attention to the Facebook IPO. Watching the errors made by the technology giant is pretty much a "do not do these things to your tech company" learning lesson in stocks for me. I'll repeat I am not an expert.. but this is what I've taken from the experience… 🙂
What I've Learned
• Do not use "perfect price' unless your company is perfect – Pricing your stock value at "perfect price' (everything is perfect in your company.. this is what it would be worth) and then purposely leaving out that your earnings are failing for the quarter, would mean your "perfect price" is doomed to fail.
• Do not over value your company when your numbers do not back it – Facebook's valuation was roughly 100 times their previous years profit and way higher than other tech companies.. Like Apple or Google… who also happen to actually make way more proven profits.
• Know where your flaws are in your business. Fix them quickly before going public – Mobile is the way the web is moving and Facebook never figured that out before going public.
• Do not over sell your company when your numbers are already inflated – Facebook increased the number of shares 25% just before it launched… A strange idea considering the stock was already over valued and the previous points I just mentioned. This would cause people to sell when the stock didn't work out because they got "more than they wanted".
• Do not do insider trading in any way.. If the legal system somehow lets you go, the other investors will not – 57% of Facebook Inside members sold. Typically its about 10% from insiders. That's a big number difference in the stock world. Insider trading went rampant, legal investigations have begun and a good portion of the other 'regular guy outside' investors, got spooked and sold too.
• Do not annoy your big advertisers when you are about to go public – When a large company like General Motors pulls out publicly from supporting your company at the same time, you've just driven the nail in the coffin of anyone who was on the fence with the previous points.
*Can Facebook Recover?*
Facebook needs to somehow justify its 100 Billion Dollar Valuation. It needs to figure out its mobile platform, which so far even almost 4 months later is still no further along.
Facebook has lots of options it could do at this point, subscriber models, premium features(like featured posts or special new features) . A paid model even? Would most humans shell out 10$ a year to keep their account open? Maybe they will do something massive with Instagram. But will any of these be accepted or received by the 8 year old audience?
Currently it will have to continue to plague its audience with advertising and more than it is right now. A fate that happened to once social network giant – My Space. How long before users switch to other, less cluttered social sites – Google+, Pinterest, Twitter, Foursquare to name a few?
Here are some recent articles you can have a look at to learn more about this too: