That's the lowest valuation we've seen to date.
On the other hand the thirteen-fold increase in the private stock price over the last four years is pretty impressive.
The stock is down 52 cents at $32.51
Duh on you if you bought the Facebook IPO.
Double duh if you're thinking of buying Facebook stock now that it's fallen to $32 a share and lost $17.16 billion off its initial $104 billion valuation.
The company is only worth about $7.50 a share. And, no. That's not a typo. There is no missing zero or a placeholder.
That's reality. What is ludicrous is that Morgan Stanley and Facebook executives thought the company merited a $104 billion valuation at 100 times earnings.
As my good friend Barry Ritholtz pointed out recently, both Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG) debuted at about 15 times earnings. Today they trade at 13.6 and 18.2 times earnings and 3.75 and 4.9 times sales respectively.
As I type, Facebook's market cap is $86.84 billion and its price to sales is ridiculously high at 21.01. I think that's way out of line.
So what should the numbers be?
Try this on for size. If we use Google's price to sales ratio of 4.9 (and I am being generous here for discussion purposes), that equals a total market cap of $20.24 billion or 76.68% lower than where it's trading today.
With 2.74 billion shares outstanding, that's equal to only $7.39-$7.50 per share.
No doubt I'll get the evil eye from the Facebook faithful and Morgan Stanley for saying this, but think about it.
Revenue is already slowing and the company does not and cannot possibly dominate the mobile markets that are becoming the preferred channel for millions of people.
Worse, startups are already cannibalizing Facebook's user base as concerns over privacy and who likes who mount.
Companies like General Motors (NYSE: GM) are deciding not to renew their advertising. This is going to hit Facebook to the tune of $10 million a year for the loss of GM alone.
More will undoubtedly head out the door for the same reason, since Facebook friends don't necessarily translate into revenue.
Corporate buyers are beginning to figure out that advertising on Facebook is simply not cost effective versus other media alternatives - gasp - including good old fashioned television and radio advertising, billboards and tradeshows.
Facebook Stock: At the Mercy of the Merely Curious
Many people think this isn't a big deal. They couldn't be more wrong.
Facebook serves up its ads while you're kibitzing about your latest trip or checking out pictures of your family's newest arrival. This is very different from how Google works, for example.
Google's adverts appear after a customer has already entered search terms and refined the results they want to see. Facebook's approach is like pissing in the wind and about as effective.
In practical terms what this means is that Google search advertisers know that those who click on their ads are already hunting. So they're willing to pay a few hundred dollars to acquire a paying customer....MORE