A memory of a coach telling us as players, “If you dance in the end zone, you better be able to back it up” comes to mind with Facebook, especially given the events that have occurred over the last few business days.
While many of the stories we have seen come from a slant of “The game is rigged!” our thoughts again focus on a price or capitalization that was assumed when the Facebook IPO occurred.
Yes there were issues, GM pulled their advertising, the NASDAQ had opening problems, Morgan and Goldman (lead underwriters) have had mishaps before. While all of these items are true, in the end it appears price does matter even for an alleged very hot issue.
While there are certainly sharks swimming in the Wall Street ocean, the valuations and growth rates used to establish the price of Facebook may have been aggressive, making us feel like, for now, Wall Street is a more realistic place.
Here is a chart of the action since Facebook started trading through mid-day today.
Have a great Tuesday/Monday!
We are not recommending any investment (long or short) in Facebook and do not own or have any shares short at this time.