Despite Gains, Facebook Is Currently Worth $24 Billion Less Than When It First Went Public


The market awarded Facebook a 25 percent share price spike today, following a strong earnings report that showed off the company’s ability to retain mind share among youths, build its total global usership, and monetize mobile traffic better than nearly any other company. Period.

The firm pop in its shares has pushed Facebook’s valuation past the $80 billion mark, where it currently rests at $80.21 billion. Not a bad day’s work, but that number is somewhat shadowed by the fact that, as a company, Facebook has torched tens of billions of dollars of shareholder equity since it first went public.

We draw two conclusions from that fact: Given that Facebook is now a tremendously stronger company than it was a year ago, and yet it is valued under its former price, a pox on our own house for overpaying for the company’s shares; and, naturally, that Facebook is more than another strong quarter away from being simply flat.

Here’s TechCrunch’s Josh Constine and Kim-Mai Cutler the day before the fateful, and botched, IPO:

Facebook shares will start trading at $38 tomorrow, the company confirmed in a release, giving it a valuation of $104.12 billion. Facebook and its early shareholders will raise just over $16 billion in tomorrow’s much anticipated IPO.

At a $104 billion valuation, Facebook is worth more than any other tech IPO candidate at the time of its offering. It also perfectly matches what Facebook shares have been trading at in secondary markets over the last several months. Google was worth $23 billion at the time of its very unusual Dutch auction IPO back in 2004. As of tomorrow Facebook will be worth about half of what Google is worth now.

The implicit point in the second paragraph is that if Google managed to so greatly grow its valuation compared to its IPO price, to what heights might Facebook race? Despite general market furor, Facebook popped but a nibble to $42 a share on its first day, and then declined rapidly enough that its banking partners held the line at its initially offered price.

To illustrate just how off the market was concerning the pricing and sale of Facebook stock, here’s the same set of TechCrunch writers during its first day as a public company:

While the price is going to fluctuate a lot today, there’s a crowdsourced bet from Twitter users on that the company will close at a $54 price and a $135.7 billion valuation.

Nope, Twitter users, that wasn’t the case. In fact, those shorting Facebook made out the best.

The gap between $104 billion and roughly $80 billion is $24 billion. But that’s not even the least-kind way we could describe Facebook’s total decline from former heights. Facebook opened on its first day at $42.05, meaning that it was worth more than $104 billion; those who bought in at that price would have enjoyed a far heavier decline in the value of their stock if they held onto it.

But, in effect, this is our fault. The Facebook IPO price, as noted in the first blocked quote above, matched secondary market interest. The market bore Facebook at a $38-per-share price; the IPO went off, hitches aside.

Christopher Hitchens once said that the ironies of history occur most pungently to those that don’t believe in them, and that applies greatly to us in the technology industry. We have undergone a number of periods in which valuations of technology companies have gotten far ahead of their earnings. Again and again we have bought into our own hype only to watch the money of the average Joe evaporate as founders and investors pocket cash at IPO prices. That’s fine. It’s simple market capitalism. But you’d think we would have learned a bit by now.

Facebook as a financial entity is much stronger than it was during the quarter it went public. Let’s do a little comparison for fun [Facebook Q2 2012 financial data versus Q2 2013 financial data]:

  • Revenue, Q2 2012: $1.18 billion
  • Revenue, Q2 2013: $1.81 billion
  • Net income, Q2 2012: -$157 million
  • Net income, Q2 2013: $333 million

Aside from higher expenses and a lower operating margin, it’s hard to find a metric by which Facebook is worse off than it was a year ago. And yet we the market public value the firm at $24 billion less than on its first day.

We were out of our skulls in 2012, and we are still paying for it. That said, Facebook is damn killing it recently, and is slowly growing into the valuation that its bankers and investors found palatable four quarters ago.

New question: Is Facebook overvalued at its current $80 billion price? The comments are yours.

Top Image Credit: Steve Snodgrass

Facebook is testing Twitter-like trending topics on its News Feed

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OB YS902 FACEBO D 20130830140217 Facebook is testing Twitter like trending topics on its News Feed

Facebook is testing Twitter-like trending topics and some users can find it on their News Feed. As reported by the Wall Street Journal, a section module will appear at the top right-hand side of the News Feed displaying popular topics being discussed. Each listed topic is based off of hashtags, which the social network started supporting in June.

It’s unknown whether this new feature will ever see the light of day as some items that Facebook tests eventually get shuttered. A company spokesperson told WSJ, “Right now it’s only available to a small percentage of US users and it is still in the early stages of development.”

Facebook Tests “Trending” Section in News Feed (WSJ)

Photo credits: Justin Sullivan/Getty Images, Facebook Trending Topics via The Wall Street Journal

Facebook Introduces A ‘New Type of Gift Card’

If you’re still desperate to get that Facebook acquaintance something for their birthday or some kind of anniversary, the Social Network has instituted a new way to give. You’ll be able to pick up gift credit for the likes of Jamba Juice, Olive Garden, Sephora and Target, plucking what you’d like from the “gift cards and digital” category inside the existing Gifts tab, and stating an amount and the name of the lucky gift-getter. The friend will be immediately notified and a lovingly Facebook-branded card will be sent to their residence. The credit can be used immediately, reused and even hold multiple balances for the differing providers — ideal for the times you need fragrances, electronics and … olives. Balances can be monitored direct from your Facebook page or app, even updating and sending notifications when credit is being used.

Read the full story at Engadget.

Facebook Might Have to Pay You $10

Generally, Facebook is making money off you (or at least trying) by collecting all your info and then parceling it all out for ads. But now the tables have turned, maybe kinda sorta. Thanks to an ongoing class action lawsuit, you may be entitled to up to 10 whole dollars from the social networking giant. Take that, Zuck! In October, Facebook agreed to a settlement about this whole Sponsored Stories issue, wherein they may have used your likeness in a Sponsored Story ad without your permission. The settlement set aside $20 million for you poor, wronged souls, and now Facebook is starting to get ready to pay it out. How do you know if you’re included? Well, if you got a super-legal-y it-almost-looks-like-a-scam email from Facebook about “LEGAL NOTICE OF SETTLEMENT OF CLASS ACTION,” you’re in.

Read the full story at Gizmodo.