Facebook is a success, no matter what naysayers think

It is almost as if the media takes a certain delight when talking about the fall in Facebook’s share price post the IPO.

Facebook has lost 18 percent from its IPO price of $38 in just three working days. Experts are saying that Facebook will never perform while others are blaming the underwriters. Investors who did not participate in the IPO have an “I told you so” smirk on their faces. However, what is lost in all this noise on Facebook’s IPO is that the company is a success story and everyone has a lot to learn from it’s rise to the top.

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Facebook has given hope to hundreds and thousands of young entrepreneurs across the world. Mark Zuckerberg is still in his twenties and a billionaire many times over and he earned his billions through sheer conviction. He could well have sold out much earlier at a price that was one-tenth of the IPO valuation of $104 billion. He held back from selling too early and he’s still convinced of the company’s potential as he controls 57 percent of the voting rights.

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Mark Zuckerberg’s rise to the top is purely due to his own efforts. He did not inherit wealth nor did he have wealthy or influential backers. He came up purely because around 900 million people across the world found it worthwhile to open a Facebook account. He showed that you do not require money or experience to become successful; you only require conviction and the right ideas for success.

Facebook did not require a bull market to come up. It’s valuation has gone up from zero to $100 billion in eight years at a time when US equity indices have moved up by just 20 percent over the same period (2004-2012). The right ideas do not require right conditions for execution.

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The fact that the company was able to raise a record $16 billion in a month where financial markets were being roiled by the debt crisis in the eurozone and trading losses by JP Morgan suggest that there was good demand for its shares from both institutional and retail investors alike.

Investors would not have expected immediate gains from listing and if they had then they should not have bought into the IPO in the first place. There was enough information available to investors to make an investment decisions, despite the last-minute risk factor additions by the underwriter Morgan Stanley.

Facebook users will continue to log in and use Facebook for social networking, as it has become a daily routine. Facebook is to social networking what Google is to search engines. It will be difficult to dislodge them from their perches unless another whole new Internet revolution comes up. The IPO price, or the fall in valuations post-IPO, will not in any way keep users from Facebook. However Facebook has to guard against caving in to the market and protect its users privacy.

Any success story brings in its critics and Facebook is no exception. Critics may have a point regarding valuations, future profitability, etc. However, the fact remains that critics did not get to participate in the rise of Facebook in whatever capacity, either as an investor, employee or vendor. There are a lot of sour grapes out there that are revelling in the fall in the share price of Facebook, but the fact is that Mark Zuckerberg, his employees, his users and many of his investors are not complaining.

Arjun Parthasarathy is the Editor of www.investorsareidiots.com, a web site for investors