J. Brian Anderson

technology. venture. learning. together.

- 4 - #SecondMarket priced out Facebook upside

UPDATE: As of the last post 6/15/2012 PPS was 30.014 as of today 4/16/2013 PPS was 26.92.  Forward looking P/E ration is 34.51.

-- I think an important consideration here is that the team at Facebook might be unconventional but it is a pretty amazing company with rockstar engineers.  You might look at the IPO as a bit rocky but you can't debate the product - which in my opinion is still stellar --

I believe private investors on SecondMarket (SM) (a private company share exchange) priced out all the Facebook retail value prior to the IPO because the company was traded on a weekly basis for 19 months prior to the IPO.  3 Bullets worth noting below… with the third as an upside bullet.

- Infographic -

1) 79% of Total Dollar Volume AND 84.6% of Total Number of Sellers were…   FORMER EMPLOYEES

For every FB insider he/she was more interested in the cash than the future of the company (bearish signal). Conversely, for every transaction executed there is a buyer on the other side who believes in the future (bullish signal).  The real difference between the two parties is information, chiefly former employees have it and private angels, investors, and HF’ers don’t.  

2)  Facebook diluted through product additions

Were you all aware that FB bought 17 companies since August 2009?  I’m not really sure what Facebook would really like to do with their platform because they’re trying to do so much, timeline, Instragr.am, Facebook apps (competitive with iPhone and Android apps etc).  This lack of focus is troubling it feels like their trying to become a social desktop, almost like an OS with friends.

3)  One of the most successful IPO’s in history … for the company


If you believe in the company and their engineers ability to create commercial value (I have a few ideas… I’m sure they’ve got even better ones), than I believe the company can be a great value buy.  Why? because they have $15 Billion in cash, that’s ~20% of its total Market Cap in straight cash or $4M USD per employee.  That is serious working liquid assets to buy all the talent they need and execute any strategy they choose.  If they double revenue in a year add in a trading range of $21.00 (44B MCAP) - $27.00 (57.78B) will equal a P/E ratio of 22 to 28.89 and that ain’t bad for a growth company… but are they? that's the real question.

Ann Winblad - http://video.cnbc.com/gallery/?video=3000093826&play=1

brian.

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