More Facebook ($FB) Thoughts

avatar By: IS
Date posted: 04.20.2012 (5:00 am) | Write a Comment  (3 Comments)

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It’s crazy when you think about all of the speculation regarding Facebook’s stock which is likely still a few weeks away (reports are that the the IPO will happen May 17). Can you only imagine what it will be like when it does start trading. The company continues to be in the news and while I continue to believe that it is trading at a very attractive valuation (of course, that could change by the time the IPO is done).

Facebook Acquires Instagram For $1B

This acquisition made a lot of heads spin. There are many reasons of course. Many saw Instagram as a very simple company started less than 2 years ago which had been looking for a valuation for half of that amount days before selling to Facebook. All of that is true. Did Facebook end up overpaying for Instagram? I personally do not think so. There are very few social services that have true appeal, strong growth and potential to become competitors to Facebook. Twitter, Linked and Google+ are probably the strongest contenders with others such as Instagram and Pinterest also in contention. Tons of potential buyers would love to acquire these firms and that makes acquiring them very expensive.
It’s difficult to know if this is an offensive or defensive move by Facebook. Both are certainly possible and I personally think it might be a bit of both. Let me say this. If Facebook wanted to spend $1B to acquire a growing competition in the photo sharing space, I can very much respect that decision. Especially given the possibility of seeing Instagram evolve into a different kind of social network. Since photos are core to Facebook, acquiring Instagram could potentially make sense.

The Larger Issue (Mark Zuckerberg)

I’ve heard a lot of people complain about the acquisition, especially about the timing of it, weeks before the IPO. I think these people are missing the point here. Mark Zuckbergerg owns about 30% of the shares but more importantly, he controls over 50% of the voting shares in the company. Even after the IPO, HE will be the guy in charge, not shareholders. Anyone who is seriously considering buying shares of Facebook anytime soon should be 100% certain that they are comfortable with the idea. I know that I am. But this does change things quite a bit. Facebook will continue to be focused on its long term mission, on its hacker mentality, etc. If you remember Google’s “Do No Evil” proverb, you can understand that it quickly faded as Google became much more like any other public company, focused both on long term but also quarterly earnings and targets.
That certainly raises a lot of questions for anyone involved. Many of the future earning possibilities that I see for Facebook are things that the company does not seem to spend any time considering right now. Will that change? It really is not clear. And that IS scary.
There is no doubt, there remains a lot of questions regarding Facebook but I am still very much excited about buying some of its stock once it turns public! Am I the only on here who feels that way?
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3 Comments

  1. Comment by Hans — April 20, 2012 @ 8:04 pm
    avatar

    I never take positions in companies that issue non-voting shares or special voting shares to the founding member(s) out of principals..

    Those that buy them are not owners of the firm but merely creditors with no recourse…

  2. Comment by Intelligent Speculator — April 21, 2012 @ 5:38 am
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    @Hans – I do see your point, that would certainly make an interesting discussion, thanks for bringing it up:)

  3. avatar

    […] to be made (recent revenues and profits decline, competition, lack of growth opportunities, questionable motives by Zuckerberg who has nearly complete control, buying shares with no actual voting power, etc). Looking at […]

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