Consider Groupon, Netflix, MySpace and Beware, says CEO
Atlanta,
GA –
Crown Financial Ministries CEO Chuck Bentley outlined reasons that should
concern investors who plan on “liking” Facebook for their portfolios. He
discussed his hesitance in a national e-blast to supporters of the 35-year
non-profit that helps people and businesses who are struggling after making bad
financial decisions and working to build a strong foundation to “do well.”
“The
buzz on Wall Street this week surrounds the long-anticipated initial public
offering (IPO) of the wildly popular social media giant, Facebook. It’s being
hyped as one of the biggest initial public offerings in history for an Internet
company, and investors are lining up to own a share. I’m not one of them,”
Bentley told supporters.
“There
are plenty of reasons not to ‘like’ Facebook’s initial public offering—despite
the hype that it’s the hottest investment opportunity going. One is the past
performance of two other technology darlings—Groupon and Netflix. When
Groupon “went public” last November, its stock opened at
$28
a share. I just checked the ticker—it’s now trading at around
$14
a share.
“Last
summer, Netflix was trading at nearly
$300
a share, but for a variety of reasons, including a substantial price hike
for its service, revenues have dropped and so has the price of Netflix
stock—now trading at around $78.50 a share … If Groupon and Netflix weren’t
reason enough to avoid the Facebook IPO, don’t forget the epic fall of MySpace,
once a contender as the leading social hub on the web. Rupert Murdoch’s News
Corp. purchased it for a whopping $580 million in 2004 and was happy to find a
buyer for it last year at $35 million.
“A
closer look at the numbers reveals that Facebook will likely follow a similar
pattern of over-subscription based upon opening day hype, only to be followed
by a struggle to maintain original market valuation … Facebook intends to offer
337.4 million shares at a price of $28 to $35 on NASDAQ under the symbol, FB.
Although advertising revenues are estimated to reach $6.1 billion in 2012, the
valuation would price Facebook stock at 24 times revenue,
compared to 5 times revenue for Google.
“Further,
the company is still led Mark Zuckerberg, who
turned
28 this week. He’s the unquestioned genius who founded Facebook in 2004
from his Harvard dorm room and promptly dropped out of school to build the
business. If the
reports
of Mr.
Zuckerberg
that I’ve read are at all accurate, I would be leery about placing confidence
in his
leadership,”
wrote Bentley. “There are always more geeky college freshmen with highly
marketable ideas. New and disruptive technology can surface overnight, and
there is little to keep users loyal to one over the other.”
***************
Crown
Financial Ministries, a non-profit, helps people and businesses integrate their
values into business practices, debt reduction, and financial decision-making.
For more than 35 years, Crown has been offering economic analysis and advice
based on timeless truths. Theirs is a strong, international grassroots
organization with offices in the U.S. and overseas. Crown experts work one on
one with individuals and business leaders, as well as through workshops and
seminars, teaching people how to build on a strong foundation that includes the
business principles and practices found in the Bible. It is well known for its
cutting edge materials first developed by its founder, the late Larry
Burkett. For more information, go to
www.crown.org
or call 800-722-1976