The investors may bitch their way to get a refund, but it is already known that Facebook is a toxic stock. It is determined that Facebook revenues will be base on advertising and possible charging a fee to the user. Unlike Google, Facebook does not have a business model that will impress Wall Street. The uncertainty of Facebook is giving angst to the investors. There is concerns that Facebook may end up like Netscape. Huh? Exactly!!!
(Forbes) Facebook ended Tuesday, its third day of trading at $31 per share — $7 less than where it launched on Friday.
Clearly, investors don’t like Facebook, at least not at this particular price.
But what price would they prefer? Trip Chowdhry, managing director of Equity Research at Global Equities Research, thinks between $15 per share to $18 per share would be a fair valuation. Twenty dollars per share has been tossed about as well.
One theory is that Facebook’s stock will drop in the near term, maybe even by half as Chowdhry thinks it should — but eventually will claw its way back to $38 per share and then beyond.
That is what happened to Amazon when it went public.
Or possibly it will follow the path of a more recent tech offering, Groupon. It didn’t take long for investors to become disillusioned, although the company pleasantly surprised shareholders with its more recent earnings.
Or reaching even further back in tech stock history, there is Netscape’s dubious example. Facebook could follow the same model, Scherer, now managing partner of Salto Partners, says.