H4cked Off: Buy Facebook, Dump Apple

By Stuart Sumner
05 Nov 2012 View Comments
stock market tete a tete

Buy Facebook. Dump Apple.

There, I've said it. And I'm not trying to pull a fast one here, I don't own any shares in either firm, and nor does any member of my family. I just want to be able to point to this article in six months' time as proof of my prescience.

Facebook's stock has performed horribly since its IPO in May this year. Computing smelled a rat when the brand made a raft of product launches and announcements immediately prior to its flotation. Most companies hold that sort of news back prior to an IPO, and release it one drip at a time to keep excitement (and prices) high for weeks or months after the inevitable turbulence of the launch.

That weight of releases smacked of a firm that knew it would freefall, and just wanted to push the initial price up as high as possible, since keeping it there was obviously out of the question. The company valuation has roughly halved in the six months since its launch, partly due to problems monetising its mobile platform, which is increasingly the medium of choice for the social network's users.

Also, Facebook insiders have only recently been legally permitted to sell their own stock, and they've been taking advantage of the fact in their droves. David Spillane, the brand's chief accounting officer, sold 256,000 shares for £3.4m according to a document filed with the US Securities and Exchange Commission last week. Chief operating officer Sheryl Sandberg sold 353,000 shares netting £4.7m, while general counsel Theodore Ullyot also grabbed himself a slice of the action.

As for that darling of the IT industry, Apple, it has gone from strength to strength since launching the original iPhone in June 2007. The enormous success of the firm's smartphone is matched only by the phenomenal success of the iPad, itself first released in April 2010. Apple became the most valuable company in history by market capitalisation in August this year.

But still, buy Facebook and dump Apple. Here's why.

Facebook was always going to be overvalued at launch. The excitement around the IPO and the popularity of the brand meant that many people wanted a slice of the pie for sentimental rather than sensible reasons. Some technical aspects of the IPO were less than expertly handled, which has resulted in various lawsuits and payouts. So the price has crashed, but that doesn't mean Zuckerberg et al are sitting around a derelict warehouse sipping special brew. The firm did very nicely financially out of its launch, and it has invested the cash wisely in new products, and ways of monetising them.

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