Global Mining Investing $69.95, 2 Volume e-Book Set. Buy here.
Author, Andrew Sheldon

Global Mining Investing is a reference eBook to teach investors how to think and act as investors with a underlying theme of managing risk. The book touches on a huge amount of content which heavily relies on knowledge that can only be obtained through experience...The text was engaging, as I knew the valuable outcome was to be a better thinker and investor.

While some books (such as Coulson’s An Insider’s Guide to the Mining Sector) focus on one particular commodity this book (Global Mining Investing) attempts (and does well) to cover all types of mining and commodities.

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Monday, May 21, 2012

Why Facebook shares dived

It’s not surprising that Facebook shares dived – I can give you a number of reasons:
  1. Facebook does not control much of a revenue stream – it controls a conduit which is proving hard to make money from.
  2. Clicks and impressions simply are not converting into sales
  3. Investors wanted out at the top – that is why the company was listed
  4. The initial listing is the best opportunity a company will get to offload stock because of the liquidity floating in the market.

At some point the company will support the stock with a buy-back. It will do that in order to support placements of more stock at comparative prices. Facebook is a high-risk proposition. It is still very easy for competitors to challenge its market position. 


People can look at the collapse as a testament to market weakness; but I see it as a strategic decision by long-term stakeholders to exit a risky stock. That rationalisation however will serve as a useful basis for manipulating a recovery in the stock price. Facebook is trading at an EPS of 74x earnings compared to 18x for Google.[i] Facebook of course has the less well-proven revenue model, but that is just part of the risk. The way we interact with the internet is open to big changes, and there is no reason to think that Facebook can buy out ever fad that threatens it, or even pick the right ones. It is going to struggle to prove that it has the capacity to raise earnings 40-500% in the next few years. There isn’t enough stock in the market to see a huge collapse, but expect such a move with the next offloading of stock.

References


[i] “Facebook shares plunge 11pc, spooked investors look for answers”, NZ Herald, website, May 22, 2012.

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