Sorry…Facebook (Nasdaq: FB) is Still Only Worth $7.50 a Share

For instance, Team Hoodie seems more intent on creating new applications than they do on making money from customers. There seems to be a disconnect between what’s cool and what actually makes money.

Take the recently unveiled tablet-based Facebook application for example.

Sure, it gets Facebook on a mobile device but there’s no plan I can discern for how the application creates a different experience nor how it will generate money from all those eyeballs.

Then there’s the Facebook phone. First it’s happening, then it’s not. This suggests that Team Hoodie may have serious internal strategy battles and be fraying around the edges.

Facebook’s “Fiscal Cliff”
Call me crazy, but I think Facebook’s numbers reflect this already.

One quarter into its public life, Facebook’s net income dropped by $295 million to a loss of $157 million.

The cost of customer acquisition is going up so that’s clearly digging into its bottom line.

So is the way the company chose to account for stock-based pay in adjusted earnings. Had management not chosen to exclude stock-based pay, the loss may have been orders of magnitude worse.

And finally, Facebook has its own fiscal cliff of sorts.

The 91-day lock up period imposed on employees and company insiders following Facebook’s IPO expires later this month. That means another 268 million shares could come up for sale further depressing the value of the 2.1 million shares already outstanding.

With the stock now off $16 from its $38 IPO price there’s definitely an incentive to sell. A large number of employees are probably anxious to get out before the markets destroy their windfall gains. I know I would be.

As the chart below shows, former employees have already hit the dislike button and sold.

Figure 1: Source: SecondMarket, Inc.

Call me a skeptic but I find it especially convenient and more than a little coincidental that 79% of the total Facebook-related market volume comes from former employees and 86% of the total Facebook-related transactions come from the same group.

Investors are the next biggest group of sellers by total dollar volume accounting for 12.4% of the total and 4.8% of the number of sellers. Perhaps they haven’t given up the ghost yet.

Either way, the chart is kind of scary when you consider the exponential growth associated with Facebook stock sales because the old adage certainly applies. What goes up, must come down.

Don’t get Zuckered again. The clever folks are the ones who already sold.

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