FACEBOOK has no second act

Discussion in 'Stocks' started by tortoise, Jan 29, 2012.

  1. Here is my Hypothesis on how this game will play out:

    Right now, all the underwriters are holding Facebook's shares. About a year ago, they knew in order to make money from Facebook's IPO, they needed to ensure Linkedin hold up in price.

    Ideally, they wanted the price of Linkedin to form a nice uptrend, which help set a positive market mood for social network companies, so the underwriters could make a killing through Facebook's IPO. Unfortunately, Linkedin's stock price tanked. So back in July, the underwriters had to buy the stocks back to prevent the price from falling below $60. They tried hard to keep the Linkedin stock price up by selling the stock internally to their own customers and their own mutual funds, but the fundamental made it impossible--P/E ratio is deceitfully above 900 during this tough economic condition. It's a hard sell.

    Another leg down, making a lower low in December of last year, Linkedin's stock performance proved that this market has very little appetite for a social network company. Panic started to set in for the underwriters who owns Facebook's shares. They wanted to get out now before it's too late. So they quickly push for a Facebook's IPO in May.

    Once the Facebook IPO have been issues, the underwriters no longer need to support the price of Linkedin. We will likely see the stock price of Linkedin continue to travel down south together with the stock price of Facebook.


    PA
     
    #21     Feb 1, 2012