Facebook Stock: A Still Sinking Ship For Investors
3-4 Months ago I was writing on why Facebook stock was a bad idea. Of course those were mainly theories about why it would go down, but now there is enough data to prove a lot of said theories right - and more.
The original page is here:
Facebook stock turned out to be a very bad investment for most people, and I feel sorry for those that bought it when it was released as the price has sunken to under half its initial posting.
Proof of Failure
Facebook stock a few days ago was as low as 17 dollars per share, down from the opening price of around 38 dollars. This will only get worse as investors continue to try to bail out and get as much profit as possible. Furthermore, another 1.23 billion shares become tradeable which will flood the market with more stock, inevitably lowering the price further.
Stocks also sink with big investment companies predicting the price, the latest dollar decline was because BMO Capital Markets reduced its 12-month price target from $25 to $15. This is not a very promising outlook for the stock.
Peter Thiel was the first investor in Facebook with a nice 500,000 price tag. Last month he cashed out 20 million shares. It is kind of a bad sign when your oldest investors start trying to sell off huge amounts of stocks to get out with as much money as possible.
Advertising on Facebook Doesn't Work
This has been reiterated with a lot of companies complaints with Facebook and a huge drop in price. Facebook has been constantly struggling with providing non-invasive advertising, which at times it fails at. However, they have hit a wall with mobile devices and advertising. The constant struggle to get advertising into their mobile application has left some companies unhappy, and if the application ends up being too intrusive with their advertising people may stop using it.
Then there is the fundamental problem of "does Facebook advertising work"? GM doesn't think so, as they pulled their advertising job before the initial public offering of the stock. What do you think? Have you ever wanted to buy anything because of a Facebook advertisement or "suggestion"? I have not, and have not met anyone who has.
If advertising is the way Facebook makes money - and companies start realizing its worthless for anything more than email addresses, phone numbers, and browser data - the price will drop more because it will be nothing more than a glorified data collection center.
The Dangers of Smart Users
Facebook has a lot of users. However, most people don't realize everything bad about Facebook and all the suspicious things it hides from its users. In my article "Facebook the Sellout: Can We Trust Facebook Anymore?" I discuss a number of issues with Facebook's social issues.
However, I think when people start thinking about what dangers Facebook actually has they may slow down usage. If advertisements become more invasive AND people start realizing all the data being harvested from them usage may go down dramatically. This - the inevitability of social network death - is the main reason investing in Facebook would be ill advised and I think investors are wary of this as well.