Nine reasons Facebook will crash
In Facebook's own words, it doesn't look good.
In order not to feel helpless watching the Facebook (FB.O) train wreck, we decided to seek guidance from the company's 10-Q. There turned out to be little consolation in the document. In short, it ain't pretty. You don't even need to read between the lines since the bad news is literally spelled out.
1. The stock investors hold, now at $19.23 (as of 11 am on Aug. 17), is all there is. There will be no dividend. Since it's trading at about 30x next year's estimated earnings, it's hard to argue that it's undervalued. Both Apple and Google trade at approximately 12x expected earnings. From the 10-Q:
"[Y]ou may only receive a return on your investment in our Class A common stock if the trading price of our Class A common stock increases.
"We do not intend to pay dividends for the foreseeable future."
2. The lockup release flooded the market with more stock. Share price fell after 271 million shares were released on Aug. 16. For context, about 420 million shares were trading before. More stock will be released from lockup in October, November and December. From the 10-Q:
"Substantial blocks of our total outstanding shares may be sold into the market when 'lockup' or 'market standoff' periods end. If there are substantial sales of shares of our common stock, the price of our Class A common stock could decline."
3. The tax man cometh for the restricted stock units. According to the filing, about $1.2 billion has already been set aside to cover expenses for the RSUs granted prior to January 1, 2011. However, regarding the RSUs granted on or after that date, the 10-Q says this:
"As of June 30, 2012, there was $2,245 million of unrecognized share-based compensation expense, of which $2,164 million relates to RSUs, and $81 million relates to restricted shares and stock options. This unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately two years."
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