I gave an interview to E-Commerce Times on Facebook. Here is the back story.
Yesterday, 800 million Facebook shares came online. Shares opened at $20.08, and by afternoon were up by more than 11 percent, to $22.17. The increase was unexpected because a stock’s price generally falls when a glut of shares becomes available. For Facebook, the increase was particularly fortuitous, because the stock is worth just over half of its initial public offering price in May. So what happened.
Market dynamics can be complex. So, there is a lot going on behind the scene. To start with, Facebook had a better than expected Q3. It was able to beat revenue expectation. What is even more important, the company was able to jumpstart its mobile business. So, employees and investors have reasons to believe that the company is able take its business to the next level. This is probably the main reason, why we didn’t see people running to exits today.
Secondly, the fact that today 800 million shares were coming online was well known. For those market participants who speculated on a lower stock price it was time to cover any short sales. So, in that regard, todays increase could have been easily just a technical reaction to a market that was simply oversold.
The bottom line for Facebook hasn’t changed. It has to show that it is able to grow its topline. Investors will particularly take a closer look at its mobile revenue numbers.