Why the Facebook whine-fest goes off the deep end

Here's one instance where Willie Sutton's dictum gets it wrong. Following the money leads you to ask the wrong questions.

History in the making, May 18, 2012 CNET
From darling to dud in just three days?

Even on Internet time, that's pretty fast.

Truly, the whine-fest accompanying Facebook's first few steps as a public company has been remarkable, what with the screeching about a botched IPO now as loud as the hype that surrounded the run-up leading to last Friday's big event. It's also fed a growing backlash that has left investors and analysts howling about the $105 billion market capitalization that Wall Street gave the company.

And though this novella is far from played out, you know the rest of the story: as the share price continues to sag, the bag holders will blame "Suckerberg," the incompetents at Morgan Stanley, the Nasdaq -- and given time, why not the solar eclipse?

And two months from now, none of this is going to matter.

That's right. Zilch. Zippo. Nada. Bubkus.

NONE OF THIS IS GOING TO MATTER.

Investors may have given Facebook a black eye, but that doesn't mean its users should too. No doubt Facebook has had a forgettable three days as a public company, from a frenzied and confusing first day of trading, to the subsequent declines. With so much negative news in the air, it's easy to get caught up in a sky-is-falling scenario. One financial watcher went so far as to dismiss Facebook's real value as something that exists "in the minds of a billion friends, which is still a collective illusion that must be kept alive with future cash."

In other words, we're talking about a 2012 reincarnation of Pets.com. Really?

Facebook was priced for perfection, and then some. It also was priced for the hype of a giant, brand name consumer Internet company. You had to figure that everyone already knew that heading into the IPO, though many hedge funds and others lost, too. Ergo the bitter taste that the whole thing must have been rigged. I feel the pain of those who learned too late that they paid too much for a stock. But the daily stock moves for the near term have more to do with allocation and artificially determined pricing. It says next to nothing about a real company with real revenues and both immense opportunities and risks.

Here's one instance where Willie Sutton's dictum gets it wrong. Following the money leads you to ask the wrong questions. While all the talking heads shout themselves hoarse -- what's the betting line on when Jim Cramer's head explodes on TV? -- Mark Zuckerberg is back at at the Starship Enterprise, where it remains Warp Factor 5, Scotty, plotting his next step against the Klingons, um Google, et. al. He's still buying up companies -- Facebook snagged another on Friday -- and Facebook continues to hire like crazy.

So let's clear the air and get real about this. No, Facebook may not be the best investment right now. But in no way is it going out of business or even close to losing money. It throws off a decent amount of revenue and profit; it just hasn't fulfilled its potential for how much money it could make yet. And that might yet be a 'ginormous' number.

Or not. The operative word is yet. Get rid of the crazy $100 billion valuation and you still have a company with a bright future. Despite all the faux outrage over Zuckerberg's penchant for hoodies, his unorthodox sartorial style says nothing about the way he runs the company or his vision for its futures. What we do know is that he's extremely bright and one of the best entrepreneurs of this generation.

Making money may take a backseat to the user experience in his mind, but with an eager public shareholder base applying pressure, he'll have his big brain focused on myriad business options over the near term. With nearly 1 billion monthly active users, Zuckerberg and Co. sure have a lot of options. And who knows? Maybe Zuckerberg and Co. will be so disgusted with with their stock's dud opening performance that they'll dedicate themselves to becoming that much more fierce in colonizing the world for Facebook. Crazier things have happened.

For now, the noise of the markets is just that. A distraction.

 

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