Did you get Facebook at $ 38 when it came public? Let’s speak about Facebook the stock. It really is now at $ 21.05. In other words, it’s down $ 17 or 44%.
Facebook has practically a single billion people on their internet site but the stock went down. What occurred right here? Why has the stock gone down and what can you learn from Facebook as an entrepreneur, particularly when you are going to sell your organization?
1. Facebook’s business was slowing down as they came public. That indicates their stock wasn’t worth as much since they had been generating significantly less cash than what was previously forecasted. So the stock kept going down to a level exactly where the marketplace thinks it is fairly valued primarily based on its decrease earnings. I guess that is $ 21 and not $ 38!
If your earnings are trending reduce in your company, it will be worth significantly less to a purchaser. A wise purchaser is not going to acquire your organization just simply because it has a fantastic story or colorful history. Hype fades quickly and you need to be in a position to show a purchaser that you make income consistently. That’s the 1st step in making your enterprise really worth anything. Sweet!
2. Be upfront and usually do the proper thing. It seems that Facebook didn’t disclose that their business was slowing down as they have been on the road to sell the IPO to investors. Only the massive purchasers had been produced conscious of this, which produced them sell their stock when it began trading or even cancel their orders. This meant far more stock was sold to the smaller investors at $ 38. At some point Facebook insiders may want to sell a lot more stock to the public by means of what is known as a secondary offering. But the price they sell it for could be significantly less than $ 38.
Facebook and the investment bankers did not act out of integrity. That is why numerous investors just sold the stock, due to the fact they were pissed! It takes years for you to build trust and self-assurance from your clientele and clients. You could lose that in just five minutes if you don’t act with integrity, and don’t serve your customers in a way that makes them keep with you — something that could make your organization worth much less.
three. Your income need to have to be developing. Facebook insiders sold at $ 38. They cashed out at pretty a lot the peak. The public purchased at the peak. Ideal for Facebook insiders but not for the public. So what does this mean to you?
If you sell your business, buyers will ask you why you are promoting, and will be searching at the trends in your company. Are your earnings sustainable? Is your enterprise on fire? You want to be in a position to show the purchaser that your earnings are expanding, not decreasing.
4. Constantly re-evaluate your business model. The majority of Facebook’s sales come from advertising income. Operating a enterprise primarily based solely on ad income is quite difficult — Google is the only other genuine firm that is profitable doing this — and investors never feel Facebook has a strategic strategy for its mobile business.
The a lot more approaches you can make income in your enterprise, the greater. That way you can show a purchaser that your enterprise can ride out a storm which may help you get a greater price tag for your enterprise.
What do you consider about Facebook the business or Facebook the stock? Did you purchase Facebook stock? Do you want to? Or have you given up on investing due to the fact this is just an additional story about how the huge guys make cash and the small investors like us lose out?