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Despite Gains, Facebook Is Currently Worth $24 Billion Less Than When It First Went Public

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The market awarded Facebook a 25 percent share price spike today, following a strong earnings report that showed off the company’s ability to retain mind share among youths, build its total global usership, and monetize mobile traffic better than nearly any other company. Period.

The firm pop in its shares has pushed Facebook’s valuation past the $80 billion mark, where it currently rests at $80.21 billion. Not a bad day’s work, but that number is somewhat shadowed by the fact that, as a company, Facebook has torched tens of billions of dollars of shareholder equity since it first went public.

We draw two conclusions from that fact: Given that Facebook is now a tremendously stronger company than it was a year ago, and yet it is valued under its former price, a pox on our own house for overpaying for the company’s shares; and, naturally, that Facebook is more than another strong quarter away from being simply flat.

Here’s TechCrunch’s Josh Constine and Kim-Mai Cutler the day before the fateful, and botched, IPO:

Facebook shares will start trading at $38 tomorrow, the company confirmed in a release, giving it a valuation of $104.12 billion. Facebook and its early shareholders will raise just over $16 billion in tomorrow’s much anticipated IPO.

At a $104 billion valuation, Facebook is worth more than any other tech IPO candidate at the time of its offering. It also perfectly matches what Facebook shares have been trading at in secondary markets over the last several months. Google was worth $23 billion at the time of its very unusual Dutch auction IPO back in 2004. As of tomorrow Facebook will be worth about half of what Google is worth now.

The implicit point in the second paragraph is that if Google managed to so greatly grow its valuation compared to its IPO price, to what heights might Facebook race? Despite general market furor, Facebook popped but a nibble to $42 a share on its first day, and then declined rapidly enough that its banking partners held the line at its initially offered price.

To illustrate just how off the market was concerning the pricing and sale of Facebook stock, here’s the same set of TechCrunch writers during its first day as a public company:

While the price is going to fluctuate a lot today, there’s a crowdsourced bet from Twitter users on FacebookIPOClosingPrice.com that the company will close at a $54 price and a $135.7 billion valuation.

Nope, Twitter users, that wasn’t the case. In fact, those shorting Facebook made out the best.

The gap between $104 billion and roughly $80 billion is $24 billion. But that’s not even the least-kind way we could describe Facebook’s total decline from former heights. Facebook opened on its first day at $42.05, meaning that it was worth more than $104 billion; those who bought in at that price would have enjoyed a far heavier decline in the value of their stock if they held onto it.

But, in effect, this is our fault. The Facebook IPO price, as noted in the first blocked quote above, matched secondary market interest. The market bore Facebook at a $38-per-share price; the IPO went off, hitches aside.

Christopher Hitchens once said that the ironies of history occur most pungently to those that don’t believe in them, and that applies greatly to us in the technology industry. We have undergone a number of periods in which valuations of technology companies have gotten far ahead of their earnings. Again and again we have bought into our own hype only to watch the money of the average Joe evaporate as founders and investors pocket cash at IPO prices. That’s fine. It’s simple market capitalism. But you’d think we would have learned a bit by now.

Facebook as a financial entity is much stronger than it was during the quarter it went public. Let’s do a little comparison for fun [Facebook Q2 2012 financial data versus Q2 2013 financial data]:

  • Revenue, Q2 2012: $1.18 billion
  • Revenue, Q2 2013: $1.81 billion
  • Net income, Q2 2012: -$157 million
  • Net income, Q2 2013: $333 million

Aside from higher expenses and a lower operating margin, it’s hard to find a metric by which Facebook is worse off than it was a year ago. And yet we the market public value the firm at $24 billion less than on its first day.

We were out of our skulls in 2012, and we are still paying for it. That said, Facebook is damn killing it recently, and is slowly growing into the valuation that its bankers and investors found palatable four quarters ago.

New question: Is Facebook overvalued at its current $80 billion price? The comments are yours.

Top Image Credit: Steve Snodgrass

Facebook never got big user data breach and if it happens, they won’t be able to recover

Facebook cannot avoid serious data breach if it happens from the foreign government, hackers or the crooks. Personal data on Facebook is not safe and if this will happen it will have chilling effect on commerce, drying sharing of data and will cut down the lifetime of Facebook.

However you cannot say that Facebook is not employing preventive measures to make it stop. Facebook is having its top talent team and white hats hackers to identify holes and bugs on their site.

An interesting as well as shocking fact shared by Facebook that computers of their engineers have faced sophisticated attack uploaded malware when they have visited mobile developer site. Facebook immediately called upon the police to investigate the facts behind this attack. There is still no evidence found that data of users have been approached. Yet, it is cleared that hackers have got access to the information about Facebook partners.

Facebook till the date has managed the world’s largest repository to the private information from getting into wrong hands. Other social networks are still striving on achieving this type of success. Twitter has recently encountered 250,000 accounts accessed by the hackers. In the same pace, LinkedIn has encountered 6.5 million accounts hacking last year.

It must be worth noting here that most of the data on social networks like LinkedIn and Twitter are public and on Facebook, it is personal. So, Facebook has much concerns and requirements about privacy as they have much more to lose.

The damage might not be severe for the eventual breach, as some messages and photos can be stolen and in worst scenario credit card info abut users can be stolen. Facebook in that case, will quickly response to the affected account and will respond to password change claims.

The damage would be psychological and it will destroy the real essence of brand. world will be in fear that their data will get stolen and they will advertise it to their friend circle, resulting more shut down of accounts.

Facebook requires to struggle against such perception and provides much security against shared data.

Related posts:

  1. Two third of facebook users have taken break, while 27% are planning to reduce their time spending in 2013- Study done by Pew
  2. The Slow Death of Facebook?
  3. Facebook in Macau and Twitter in Paraguay are most frequently visited websites through phones, according to the maps by Opera on Global Mobile Social Network Usage.

More People Are Using Facebook via Phone For the First Time Ever

It’s time for another quarterly earning, that kooky game wherein companies announce how much cash they’ve raked in, and then investors spank or hail them without much correlation to reality. Now up: Facebook, which has just entered crazy new territory.

For the first time, more people are hitting the site via mobile web or app than are heading to Facebook.com on a real computer. In fact, over 150 million people around the world access Facebook solely through a phone. That’s nuts. FB is a small screen experience, not the network you first toyed iwth in your dorm room. Financially, good and bad news. They beat expectations! Revenue hit $1.59 billion, which is better than what everyone expected. And yet, the stock is tanking, because Wall Street is mentally ill. More people are using The Book than ever before (1.06 billion), more of them are using it on a phone than ever before (680 million every day, up 57% from last year), and yet $FB has dropped 10% in after-hours trading. The Zuck cannot win.

How Facebook Can and Will Kill the Traditional Telephone

As the founder of a startup, I am probably the last person you’d expect to tell you that scale matters. And to be sure, there’s plenty of innovation coming from small, nimble companies that nonetheless are able to disrupt huge markets. However, with Facebook’s recent addition of voice calling to its Messenger app, the company is poised to demonstrate to the mobile industry the benefits – and power – of scale, first hand. And in what can only be described as the perfect murder, Facebook is now in a position to effectively kill the traditional telephone, starting with the phone number. The implementation of Facebook’s voice features are straightforward yet unique: You make a call by tapping a name, not a number, a username, or any other type of identifier. You’re calling a social connection. That in itself is not shocking, but Facebook can go even further.

Read the full story at Giga OM.

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