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SAN FRANCISCO (MarketWatch)—No company wants to launch its public stock offering in a bad market, not even the wildly over-hyped Facebook.
Yet for all his controls over the company and his almost one billion users, Mark Zuckerberg can’t dictate to global markets. Facebook’s IPO later this month is destined to launch in one of the worst environments for buying stocks of the year.
Europe sinking into recession. China slowing and mired in scandal. And the U.S. recovery suddenly plagued by doubt and summertime blues as a vicious Presidential political season kicks off.
Certainly not the climate Zuckerberg and his bankers thought they might be debuting Facebook stock in, a month ago when the markets were rallying to new highs. Even with earnings outlooks better than expected in the past few weeks, and stock indexes stubbornly sticking to first-quarter highs, investor sentiment can’t help but be influenced by the spate of grim forecasts coming from outside U.S. borders.
Even if the U.S. does manage to skirt the recessions dragging down vast parts of the rest of the Western world, is this the type of environment in which any average investor wants to load up on another tech stock? See stock on Facebook valuation.
Are tech stocks, already up more than 17% year-to-date, as measured by the Nasdaq Composite Index (XNAS:^IXIC), ready to resume their rally now that Facebook will be part of all the relevant indexes? It’s a tall order by any stretch of the imagination.
Zuckerberg’s luck could still be in play, however.
The overwhelming pessimism concerning Europe this summer, the China story, and the outlook for the U.S. economy could be overdone to the downside. Rarely when everybody expects the same thing to happen—in this case a slow-motion car wreck of the euro and a China hard landing—do those events actually occur.
It could be that a healthy dose of Facebook hype is just what the bulls need to swing the story back their way and wrest control of sentiment from the doomsayers of the past five weeks. Possible, but not likely with just one IPO, even that of Facebook.
The company faces enormous challenges once it’s public, in terms of privacy, competition, regulation and corporate governance. The last thing it needs is a simultaneous global financial crisis. It won’t be seen as a safe haven when Spain bails on the euro some Sunday night.
Facebook needs a thriving, growing social media landscape and several new business opportunities to continue to scale its business. Granted, it’s built its empire in the teeth of the worst financial crisis in generations. The first billion users are the easiest, though.
The next fortnight will feature wall-to-wall coverage of the Facebook IPO, from the number of newly-minted millionaires to make the Northern California real estate scene to the potential for a sympathy rally for all the smaller social media stocks launched in the past year.
The company will be sure not to disappoint on its first day. But after the frenzy, it will just be another Nasdaq stock, despite its high profile. And its performance as part of millions of portfolios will be impacted by the greater macroeconomic currents of our time.
To realize its destiny, it needs to become an Apple Inc. (AAPL) or a Google Inc. (GOOG) in popular investor lore. Given what we know about its fundamentals and the way it is managed, that’s a bold call even in boom times.
In a world in which many small investors never returned to the stock market after the drubbing of 2000 to 2003, the Facebook offering might be counting on one “like” too many from its fans.
Facebook IPO faces global bear attack - Yahoo! Finance
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