Facebook (Nasdaq:FB) is getting some buzz or press that younger users are fatiguing and not using the service as much. Not sure if these younger users had enough money to satisfy advertisers. So maybe that’s a good thing.
In the meantime investors need to look at a 115 PE ratio. so when you read an analysts buy recommendation underline the part that says it’s a good idea to buy a 115 PE ratio.
George Gutowski writes from a caveat emptor perspective.
Image via CrunchBase
Facebook and 26-year-old boy wonder Mark Zuckerberg gained PR top dog status by announcing a $100 million gift to the Newark School system. Some cynically point to timing and a new movie called “The Social Network” coming to a theatre near you. I think we should be cynical about the donation but for other reasons.
The Wall Street Journal has confirmed that the gift will be in the form of stock. Newark needs to pay its bills in cash. The stock can be sold on private exchanges. Facebook buzz keeps mentioning a huge IPO and $20 Billion valuations. Lots of people want to get their hand on the stock. Limit supply and force the valuation up. So as Newark sells the stock greedy suckers will swarm around and drive the price up. By the way it’s not nice to screw a school so everyone will want to buy.
There is some talk that the gift will be spread out over five years in twenty million dollar tranches. So as the price goes up Mark Zuckerberg sells less shares but still hits his $20 million commitment. so if you want more stock can someone try to force the price down. just how do these private exchanges work. Is the SEC watching this one or do they also need an educational grant.
Newark is still the big winner and they really needed the money. But Zuckerberg has put the Facebook stock into play in a most ingenious manner. Watch for others to copy this pre-IPO technique.
Taking it one step further how does the Newark school system know it can sell and recoup $100 million. What has been salted into the system and how? Then again if the stock will be worth so much more in the future does Newark have the fiduciary obligation to keep the stock well into the future? buckle up this will be an interesting ride. Wonder if Oprah will buy some for herself.
Disclosure: No position in stocks mentioned in this post.