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No. of Recommendations: 6
It’s Becoming Clear That No One Actually Read Facebook’s IPO Prospectus or Mark Zuckerberg’s Letter to Shareholders. Because if anyone had read the Facebook IPO prospectus, they would have learned, among other things, the following:

Facebook's growth rate was decelerating rapidly
Facebook's user-base was rapidly transitioning to mobile devices, which produce much less revenue
Facebook's operating profit margin was already an astounding 50%, which suggested it had nowhere to go but down
Facebook's CEO had a nearly unprecedented amount of control over the company.
Facebook's CEO had set up this astounding level of control intentionally. Mark Zuckerberg knew all about how impatient public-market shareholders are. And he set up the whole company so he would never have to pay attention to their whining.
In the 9 months following the IPO, insiders would be free to sell more than 2 billion shares of Facebook that they had been holding for years
Facebook was going public at an astoundingly high price for a company with these characteristics--about 60-times the following year's projected earnings, in a market in which other hot tech companies like Apple (AAPL) and Google (GOOG) were trading at less than 15-times.

Facebook shareholders may be annoyed by those facts, especially now that the value of their stakes are getting demolished.

But they can't say that they weren't warned.

And they also can't say that the stock has been unduly punished:

At $18, using the correct share count (2.7 billion), Facebook is still valued at almost $50 billion. And it's still trading at ~28-times next year's projected earnings of $0.65, an estimate that looks just as likely to be too high as it is to be too low. Meanwhile, Apple is still trading at less than 15-times projected earnings. So you can't argue that Facebook is now "too cheap."
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