Facebook at a Crossroads

The fact that George Soros, and  Soros Fund Management has purchased 341,000 shares of Facebook stock in the second quarter for 10.6 million dollars should not be too deeply analysed.  The fact is a) that’s not a big investment for Soros b) the potential gain far outweighs the potential loss.  In other words, it’s a good gamble.  There have been a number of other firms who have upgraded the stock but what is the basis for the upgrades?  It’s been said the stock may have bottomed out.  There is no place for the stock to go but up.  I have never liked this kind of thinking because there are numerous examples of stocks that have gone down despite the thinking they couldn’t fall further.  I have not liked Facebook from the IPO and I am still not a fan.  But that doesn’t mean at $21 per share, it’s not a worthwhile gamble.  Remember, the damage is already done for those who got in early.  The stock opened at $38, it’s almost half that today.  One other very important note; today the first lock-up is lifted.  The lock-up prevented those on the staff and those who had pre-purchased shares at the pre-IPO price from selling their shares.  That translates to more than 270 million shares potentially being sold.   But that probably won`t happen with the stock price so low.  Over the next nine months billions of shares could potentially hit the street as the selling ban on the stock is lifted.  All of this is simply a diversion from what hasn’t changed, the fundamentals.  Speculators, speculate but that doesn’t mean the prospects are any better than two weeks ago or yesterday.  The fact remains, Zuckerberg and his crew must develop ways of using that huge network to make money.  Until that happens, the stock should remain where it is.  That being said, the prise may rise a bit simply because of speculation and people not wanting to miss out if the stock does suddenly begin to increase.  Anyone who owns shares should hold them and perhaps purchase some shares to balance out at an overall lower price.  But again, nothing has changed, so a meteoric rise would be unlikely short-term.

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