Facts About the Facebook Stock

Posted on May 22, 2012 by Nikhil P Naik

For months, the hype over Facebook stock was so great that it was anybody’s guess how high it would go. When the bell rang, the answer was $38. That made it a reasonable purchase by any standards, but it certainly wasn’t remarkable.

Before judging it as some sort of company disaster, keep in mind that stock prices are volatile and/or inaccurate in proportion to their worth. It’s just the nature of the stock market game. Knowing this, Facebook may have planned the dropped price all along. Founder Mark Zuckerburg has a canny sense of what the average person wants. He and his advisers may have simply played a game to find out what they would pay. The answer was $38.

In the past, stock markets reflected real products. Buyers purchased stocks in companies that produced everything from gaskets to refrigerators. Those companies are still out there, but there are many more that are just shells. Is Facebook a producer or shell? With 900 users, its advertising potential is enormous. Sure it just sold for a mere $38 a share, but now its value will be decided by the market.

One buyer purchased his stock online. He made $11.99 on the stock within just a few days, but he paid a $9.99 commission for a net gain of $2 per stock. Since he is an average investor, he couldn’t buy enough stock to make it worth the purchase. Obviously it’s the big wheels who will get grease from this deal. They can buy tons of the $38 stock and add it to their padded portfolios. They can assume greater risk, hold it for longer and sustain losses while waiting for a payout at the end of the rainbow. That is, if Facebook pays out.

Where the price goes now depends on two factors. First, the company must maintain its user-base despite heavy competition. Second, it must avoid any public relations mistake that would cost it the trust of its users. If users drop away quickly, that would immediately erode its advertising base. Users now realize that their free Facebook account is not free. It is more of a vehicle for advertisers than it is a safe place for family and friends to visit with each other. Privacy advocates have known this for years, and they keep pushing Facebook to be more responsive and protect its users.

William writes on various subjects from the internet to cars. If you’d like to learn more about him you can visit his blog.

About Nikhil P Naik

Nikhil Naik has a Master's Degree in Information Systems, and is currently working as a Software Engineer at Microsoft. He also loves playing cricket, listening to music, and traveling. Twitter Handle - @buzz_nikhil.

Leave a Comment


This site uses Akismet to reduce spam. Learn how your comment data is processed.