The Facebook Debacle: Stand & Deliver, Your Money AND Your Life


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If anyone were to look at the lyrics of Adam & the Ant’s 30 year old single, one would be amazed at the relevance if some of its oracle-like predictions were applied to Facebook and its billionaire CEO,  Zuckerberg. Moreover, if recent news is anything to go by, we are seeing just how much highway robbery one can legally get away with these days and still be one of the most “liked” people in the world. Dick Turpin eat your heart out!

Facebook…where does one begin to unravel the hype and scrutinise what’s actually going on? And where does one start to look at the reality behind the astronomical numbers and make sense of the endless smoke and mirrors that is Facebook? It has been reported, in the last 24 hours or so, that over 8% of Facebook’s accounts aren’t real. That translates to well over 80 million accounts!

Let’s translate those figures into something more realistic to us mere mortals: it can be estimated that out of the hundred billion dollar valuation that Facebook recently had before its IPO, each account, that means your account, my account and the other billion-odd people’s accounts were worth, to Facebook, about USD100 each. Just the facts now: that means that (at least) USD8 billion of the Facebook valuation by Goldman Sachs, Morgan Stanley and the other underwriters was BS, something we know now as the shares languish at more realistic levels.

And for Facebook to now start reporting that nearly 10% of its user accounts are fake seems to any  normal person to be fraud. Were you or I to go into the market, take money off people and then turn around and say well… I lied,  without even an iota of apology: “I didn’t know until a few days ago that my business is actually smaller, erm, than I told you, erm, and its moving to a platform that I cannot control, erm,” would definitely be punishable by a term in a federal penitentiary.

But highway robbery doesn’t stop just there, and Zuckerburg and his gang of advisers and lawyers certainly makes Dick Turpin look like an amateur. With its shares, just yesterday, falling to nearly 50% of their IPO price, an intraday price of USD19.84, it surely stands to reason that the US attorney, Preet Bharara, Wall Street’s sheriff, should start taking an interest in what’s going on here as this is nothing short of legalised robbery. Investors have been short changed, with Facebook valuation not only being hyped up to an extra USD50 billion, but also being subjected to more and more bad news each quarter  – all of which the company denies it knew about before the IPO.

It becomes harder to believe that Facebook didn’t know about these fake accounts six months ago, as it is hard to believe that Facebook was not fully aware of the slowdown in advertising and the impact smart phone and tablet sales were having on its business. Material disclosures of these kinds would have affected the valuation of the stock, however, Zuckerburg with his army of lawyers and billions of dollars in the bank will not be an easy target, even for the Sheriff.

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