FACEDBOOKED

[email_link]

Dummies! Yes…dummies. The bankers blew it again. Just when they were making the large bucks again, they go too far. Since everyone has been chiming in, figured I would throw in my two cents.

Price matters. Valuation matters. The bankers forgot this in the case of Facebook. They had a chance for this to be a big win and turned it into a disaster. The reasons:

AGAIN, PRICE AND VALUATION MATTERS. There were just too many shares at too high of a price. They knew but decided to push the envelope. Now I understand valuations can go to extremes, and who knows, maybe this stock goes much higher…but right now it has the feel of lower prices.

DID YOU KNOW FACEBOOK’S BUSINESS IS SLOWING? Yup…in all the hype, bet you didn’t know that once a company becomes too large, things have to slow down. In the past 3 quarters, earnings went from 83% growth to 17% growth to a MINUS 9%. Yes…that is a MINUS 9%.

THEY BROUGHT IT PUBLIC DURING A CORRECTION. Actually, I can give them a pass on this one as it is very tough to time the day of IPO.

OVERHYPED! You don’t need me to tell you how breathless everyone was and how everyone had expectations of big money being made. I will let you decide on who takes the blame on this as there is enough to go around.

IS FACEBOOK REALLY SMART? HMMM! They paid $1 billion for a company called INSTAGRAM that has 11 employees and no sales. Let me repeat…NO SALES! Now…I am not smart enough to know whether they will be able to leverage Instagram and make the $1 billion price seem cheap. I can only deal with now…and right now, this type of purchase reminds me of every bubble we have ever seen.

THE BOTTOM LINE…If it was me, I would have brought out Facebook at 25% less the price with 25% less the shares. It would have given the average investor a better chance. Then again, I think the average investor will get a better chance as the stock feels lower…and if the $38 is taken out, expect a lot of the mo-mo hedgies and others to run for the hills. I would also expect many retail investors to ask for their money back as this stock was probably sold badly to them. In other words…’Mr. Jones, this is going to be hot! You have to buy!”

BOTTOM LINE #2…Just another case of the bankers going for the short-term big fees instead of looking at the longer-term big picture. What a shame! They continue to never learn from their mistakes which means they will keep repeating them.

Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. The information herein has been obtained from sources believed to be reliable, but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results.