For an analyst that says he will not pay more than $2-3 per Facebook share it is some unusual to comment price moves between $20 and $30. Anyway I think it is a good moment to ask the crucial question when Facebook shares will reach $19. I.e. when the loss for investors from the IPO will become 50% and they will have lost half of their money.
So "when" will this happen?
My prognosis is that in a quarter time we well see this 50% loss. It is realistic even to say "in a month time". But we must be conservative and not to bet too much on too forced market moves. Yes, Facebook is over valuated. But in fact the forces that led to this overvaluation are still existing and they will resist on the slide. Facebook is still a great media that can manipulate much people. It is still the most fresh company of the generation of "new dotcoms". Mark Zuckerberg is still too famous and is a media star - a great celebrity. And some big investors have big positions in Facebook shares and can protect their investments by pouring additional money in this bubble.
So generally the trend down is almost impossible to change. But the speed of price-fall can be controlled. And I think this will slow the slide down. Of course it is not impossible any market shock or unexpected factor to accelerate the fall. But I think a good investment is to be short on Facebook, but with readiness to wait at least 3 months before closing the position.
A 50% below the IPO will be a remarkable moment. And the old shareholders that sold on IPO and in hours after that, are obviously clever shareholders. It was wise to sell and as we remember - at the last moment, additional sellers appeared. Additional sellers among insiders... :))
June 5th 2012