We have received many emails asking us what we have against the company. All social issues aside, we will talk about it as an investment. These views are our personal views and are no way a recommendation. Do your own homework.
1. Kids are fickle, volatile, and cost conscious- Our speculation is that the vast majority of its users are young adults and kids. They spend countless hours updating their "virtual images" and trying to increase their "popularity". It is the "cool thing" to do right now and it's free!
2. It is trading at more than 25 times trailing revenue and it is not fully determined exactly what are their earnings.
3. The risk of being able to monetize their users is huge. We don't think the majority of their users will adapt too willingly to fees or ads. A new "outlet" will attract the kids and FaceBook may not be so cool anymore.
4. The basic premise does not hold water. Eventually the "ideal images" and "perfect lives" portrayed by users will be seen as a pathetic excuse for attention. Susceptible to fad swing.
5. Lock-ups will expire, shares will increase. Potential sellers abound.
What would we pay for shares? 10 dollars.
WHAT WOULD CHANGE OUR MINDS?
1. They do claim 900 million users......that could be monetized.
2. A strategic shift into actually trying to "improve" society.
3. New technology
4. Strategic alliances
