Facebook stock draws record short interest

Sentiment is downright morose as investors bet shares have further to fall. If you're itching to buy, just lie down until the feeling goes away.

By Jonathan Berr Jun 7, 2012 11:54AM
Facebook (FB), whose botched IPO will be remembered for decades to come, is attracting record numbers of short sellers.

According to data from Bloomberg News and Data Explorers, short interest in the company is about 6% of shares outstanding. No other S&P 500 company with at least $50 billion in market capitalization has a short interest higher than 3%.

As of June 4, about 37.5 million Facebook shares were sold short, compared with an average daily volume of 72.6 million shares, excluding the first day of trading, the news service said.

Sentiment regarding Facebook isn't bearish, it's downright morose. Shares of the social networking company have slumped nearly 30% since its IPO as investors wonder whether the reality matches the hype. For now, the answer appears to be a resounding "no." This is not simply Schadenfreude, a German word meaning rejoicing in the misery of others.
 
Earlier this week, analysts at Bernstein slapped a $25 price target on the stock, below where it trades now, arguing that there was a "material risk" to the stock because investors will question Facebook's ability to meet 2013 forecasts. Indeed, many investors, who recently believed Facebook could do no wrong, now seem to think the company can do no right. It's easy to understand why.

The IPO raised more questions than it answered. Some companies such as General Motors (GM) are questioning the social network's usefulness as an advertising platform. Many parents are concerned about Facebook's plans to allow children younger than 12 to access its site. Though Facebook is phenomenally profitable, the company's growth is slowing -- news that apparently was disclosed to some investors ahead of others. Net income in the first quarter slumped 12% amid growth in the developing world, where average revenue per user is lower than it is in the U.S. or elsewhere in the developed world.

At some point, Facebook will get too cheap to ignore. That point has not arrived yet. The company is trading at a multiple of 82.26, exceeding Apple's (AAPL) 14.04 and Google's (GOOG) 17.66. Facebook's shares are priced for perfection, meaning that even the tiniest hint that growth is slowing will cause the shares to collapse even further.

A clear buying signal for Facebook may not arrive for months, if it arrives at all. Investors itching to buy the stock should lie down for a few minutes until the feeling goes away.  Meanwhile, the short interest in the stock is only going to get higher.

Jonathan Berr does not own shares of the listed companies. Follow him on Twitter@jdberr
 
25Comments
Jun 7, 2012 12:11PM
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I'm firm bid at 26..................................cents.
Jun 7, 2012 2:36PM
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THe saddest part is that Mr. Zuck will ride into the tax free sunset with his Singapoore bound sweetheart and all the thousands of shareholders will be stuck holding the bag....

The rape and pillage of USA continues by the system that allows it without punishment...

Jun 7, 2012 2:57PM
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Who would have guessed, no real intrinsic value, just never any thing tangible there! The same for the whole market, they just live from bubble to bubble, ponzi scheme to shell game. They just made congress quit trading on insider information "yea right". The so called smartest man on Wall Street just had one of his own products blow up in his face. When the CEO of JPMorgan don't know what the hell he is doing and you people are going to second guess the market?

Until some real reform is brought to Wall Street it would take a fool to play this game!

Jun 7, 2012 2:22PM
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I am not tooting my horn, in my mind but this company has always been a joke, they are a fad, I predict that within 2 years, you will have to go to page 50 of the NYT's to get any news about fabebook.

 

Use it as a day trade it's junk.

Jun 7, 2012 3:43PM
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Who cares about the stock, when is the website going to be shut down for good?

Jun 7, 2012 3:14PM
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No one wants to hold the Facebook stock for long.  Facebook will fade out like Yahoo in the next few years, sell it now, sell it now before too late
Jun 7, 2012 2:20PM
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FB is going to die with its a$$ in the air.  This is why i say this.  Suckerberg will wait until he falls to 10 or 12 billion.  Then Mrs Suckerberg is going to say "i want to go home now".  To look at her what country do you think her motherland is?  He will take the money and prop up his new country because he renounced his U.S. citizenship (like his partner).  Now to all you FB share holders: you are part owners of a supposed company that produces 0, owns 0 and has 0 inventory.  Add all this up it equals 0.  Suckerberg will turn off his Commodore 64 and announce: Sorry everybody but the company went broke and is "offline".  This is the best part I think.  To all you shareholders now you get to liquidate 0.

Remember how FB dies?  Remember jokingly saying with your friends "when I die I hope they bury me face down so everybody can kiss my a$$". hahaha

  

Jun 7, 2012 3:21PM
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taught me a valuable lesson, never invest in the stock market, it is full of crooks out to get your money legally
Jun 7, 2012 2:15PM
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Facebook will be downed like Yahoo in the next 8 years.  Facebook stock price high at $45 then going down to 44, 43, 42, 41, 40, 39, 38, 37, 36, 35, 34, 33, 32, 31, 30, 29, 28, 27, 26, 25, toward number 13, the number that Facebook decides to let our children to join their social network.  Ask yourself a question, why Facebook does not buy back their stock when it drop down to $25 range ?
Jun 7, 2012 6:03PM
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FB is a sucker's trap.The insiders and early investors made a bundle on the IPO selling it to the suckers.
Jun 7, 2012 1:33PM
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I may buy at about $5 OR LESS a share after the founders dump the rest of their stock in September.
Jun 7, 2012 2:39PM
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facebook fiancial fiascos.. will be the next big economical tidal wave that affects the world economy...
Jun 7, 2012 4:35PM
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MASSIVE SOLAR FLARE = Facebook Value $0.00
Jun 7, 2012 3:36PM
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Nobody is invincible to a public led by the intent of professionals crashing a company. You must invest in company for it to be sucsessful. Not try to make it go bankrupt.  
Jun 7, 2012 2:09PM
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"I may buy at about $5 OR LESS a share after the founders dump the rest of their stock in September."
 
September? Lock up is 90 days from IPO. Trading started May 18, Lock up ends in August. $5 puts it at 15X earnings. It's growth current and potential is worth more than that.
 
 
Jun 7, 2012 2:28PM
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Check my early comments on other threads the same IPO,

 

I told ya so!

Jun 7, 2012 6:41PM
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yea sure right, but Fakebook and while ur at it invest in solyndra, I mean just look at ALLLLLL the "green" jobs the libs wanted so badly come to fruition, wow! can u stand all these jobs the obama regime created, I mean I'm just amazed oh and don't forget to buy a 45K chevy dolt, I mean volt with all ur new found wealth, and of course vote for comissar commie barrack hussein obama to complete ur total financial failure and ruin
Jun 7, 2012 3:32PM
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I am getting pretty tired of the facebook bashing. This is just as much a insider bashing as insider trading gets.
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