It’s not going to take long, and the calls for Mark Zuckerberg to move on and find a new job will grow louder. The first mentions of such an idea are already there, even if most people have overlooked them, and they will probably get louder next week.
And that despite the fact that it isn’t completely Zuckerberg’s fault that Facebook’s value on the stock market is falling and, I am sure and I have said it many times before, will fall further.
Firstly it was clear that Facebook was never going to hold a share price of $38. It was all a fantasy which many Wall Street and other investors allowed to taint their (occasionally) good sense. It was also clear that the possible income for Facebook, based on games and advertising, would never meet up with the forecasts and, as a result, the investors would be disappointed.
But there was something else which should have been clear from the start too, alongside the fact that the share price would fall within days if not hours of the IPO. It’s the sinking ship principle, which works even when the ship isn’t even really in danger, and it involves the earliest investors such as Peter Thiel and several larger investment companies.
Peter Thiel is a name you’ve probably come across as founder of Paypal, which he successfully passed on – willingly or otherwise – to eBay. He is an early Facebook investor who laid $500,000 on the table and secured himself a board position as a result. When Peter Thiel decides he wishes to cash in, whether all of his shares or just a few, the price he gains makes no difference at all. With the present share price he stands to gain – should he sell all the shares and the price remain stable during the transaction – one hundred times his investment. No matter when he sells, he’s going to make a vast profit.
And when that happens, and it will, the calls for Zuckerberg to move on will become louder. The investors will show themselves unhappy that the share price has fallen so far and that they stand to make a loss on their investments. Of course it will be Zuckerberg who has to take the plunge, even though it is not his directly fault. The fault lies squarely with those who invested for such a high price, experts who should have known better, and with those who are now selling out. The share price is controlled by transactions on the stock exchange, in this case, and not by Zuckerberg’s presence at Facebook.
From my point of view I believe that the Facebook share price will level off, but nowhere near the IPO offer price. The company is worth, perhaps, $12 – $15 per share, no more, and that is where the investors should be looking now.
- Viktoria Michaelis.