Having spent the
weekend reading through the whole story about facebook shares downward trend
since going public. The thoughts that comes to mind now is that going public a
blessing or curse to Facebook? The raising of IPO by Facebook about 3 months
ago came with lots of pump and pageantry with every investor hoping to get their
grip on the shares while some investors also expressing their concerns about
revenue and sustainability of the social media company. Their fears is becoming
reality going by the constant fall in its shares since the 'public show'.
The first phase of
lock up period was over last week which allowed the (institutional) investors to
hold or sell their shares. It is no more news that after lock up periods ends, most
company's share price usually goes down which is also evident in the case of
Facebook Inc. and making Facebook the second worst IPO performer in history
after lock up period ends with a sharp decline from $38 down to $19.87after
lock up.
I overheard a
discussion about the impact of share prices on the performance. I think in the
real sense there is no significant impact of the company's share price on a
company performance if the company keeps making profit and does not run out of
cash but having said that, a constant fall in share price makes it easier for
the firms to be a target for hostile takeovers or a rival company to buy up the
shares and offer irresistible deal to the shareholders of the target company.
Another problem of
a fall in share price is that it can affect the rate at which Facebook can borrow
money if the need arises. Creditors looks at the company valuation before deciding on the rate
of interest and the ability of the firm to payback upon maturity. This is the
major reason why companies ensure that their share prices is considerably
stable to fend off this potential treat.
October and
November later this year is another phase of lock up period for the social media
firm. We will keep you informed on the trend of share price and the revenue of
the firm.
My prediction is that even at the next lock up phase (October/November as stated) Facebook share price would either remind between its initial price at IPO and the price after its first lock up phase or decline. I doubt if Facebook shares would rallying any high than its highest price before then.
ReplyDeleteTHE HONEST TRUTH IS THAT, IN MY OPINION, I DO NOT THINK THAT THE SHARE PRICES ARE FALLING PER SAY, I THINK THAT THE SHARE PRICES ARE STABILISING. WE ALSO MUST NOTE THAT THE IPO WAS ONE OF THE MOST TALKED ABOUT IPO'S IN A VERY LONG WHILE BEING SOLD AS THIS COMMODITY WHICH WAS A "MUST HAVE", THUS, THE VALUE WAS PERCEIVED TO BE MUCH MUHC MORE THAN IT WAS, WHICH WELL, KUDOS TO THE PR FIRM WHO HANDLED THAT. HOWEVER, AS WE HAVE SEEN, I BELIEVE THAT THE FALLING PRICES ARE JUST THE PRICES STABILISING TO FIND A PLACE IN THE MARKET. ALTHOUGH, I WONDER MYSELF WHY FACE-BOOK WENT PUBLIC BECAUSE MARK DOES NOT STRIKE ME AS THE KIND OF GUY THAT IS READY TO DEAL WITH THE AGENT-PRINCIPAL ISSUE THAT COMES WITH PUBLIC FIRMS.
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