June 4, 2012
Experts Claim Facebook Stock May Still Be Good Investment
The falling prices of Facebook stock, which has plummeted more than 25% since its initial public offering price, has rubbed many stock market investors the wrong way, but some experts argue that shares of the popular social network might be worth gambling on, should the price continue to fall.
According to a June 1 report by Jessica Toonkel of Reuters, "Technology glitches and a communications breakdown marred Facebook's $16 billion IPO on May 18, leading many observers to believe the initial stock was overvalued, contributing to its free-fall over the past two weeks."Still, she says, some Wall Street experts insist that the company, whose shares opened at $38 two weeks ago yet had dropped to $28.01 per share at the close of trading on Friday, "isn't value-free“¦ and at some price, shares represent an opportunity."
One of those experts is Mark Hawtin, portfolio manager of the GAM Star Technology Strategy for offshore investors. He called Facebook "a value asset in the Internet world" and stating that he believed that investors would be wise to invest in the company should it reach the $18 to $25 range.
He also told Reuters that he believed the website will eventually begin charging users for the right to use the site, and that he envisions it one day becoming "the launch page of people to get to the Internet."
Like Hawtin, Jordan Opportunity Fund manager Jerry Jordan told Toonkel that the fact the price of Facebook shares did not immediately begin to soar could ultimately help the company down the road.
"If they were well-coached by their bankers, they may have been told to wait for three to four months after the IPO (to announce) any big projects," Jordan, who on Monday sold Facebook shares he had obtained prior to the IPO for a slight loss, said. "You don't want to show your leverage before an IPO."
Manor Growth Fund Portfolio manager Dan Morris disagreed, telling Reuters that he planned to steer clear of Facebook and competing social media websites because he believed they were overpriced.
"The valuations are not there," he said. He cites companies like Apple Inc and Google Inc -- both top holdings in his fund -- as having the strongest "valuations in the technology sector." He said that it could be several years down the road before it becomes clear whether or not he was making the correct call.
"Sometimes you get it right, sometimes you don't," Morris added.
Nasdaq "has done little to conciliate market making clients — a number of which lost tens of millions of dollars each due to the trading problems" that occurred during that IPO, Reuters reporter John McCrank wrote on June 1. "There has been no outright apology. And as angry as some customers may be, experts say they have little alternative but to keep trading on the exchange."
According to Reuters, the stock market announced that they would be establishing a pool of nearly $14 million in order to help offset losses, and conducted a “member´s-only” conference call with one of their executive vice presidents. Four of the Nasdaq's top investors -- UBS, Citigroup, Knight Capital, and Citadel Securities -- reportedly lost upwards of a combined $115 million, McCrank added.