better days ahead for Facebook(FB)?

yes

I think so.  Insiders appear to be unwilling to sell at the current market price and Wall Street seems to have forgiven FB for what I regard as the less than ethical behavior of the company’s main underwriter during the IPO.

recent trading

Yesterday marked the end of the third–and final–period over which FB employees and early investors had agreed not to sell shares.  Just north or three-quarters of a billion shares were thereby released from lockup.  Wall Street was bracing for the worst.

But only about 50 million shares appeared for sale at 9:30.  Total volume for the full day yesterday was just under 230 million shares, or about 5x normal.  More important, the stock went up 12.6% in a flat market.

As I’m writing this just after midday Friday, FB is up about 6while the S&P 500 is flattish.  Volume is high again, but I read this as professional investors reacting positively to the small percentage of insider shares that were put out for sale and to the strong price action that soon developed.

the IPO, in hindsight

Not Morgan Stanley’s finest hour.

The main underwriter threw gasoline on speculative flames instead of tamping them down.  And NASDAQ’s computers broke down just as it was dawning on individuals dreaming of instant riches that they’d been had.

That was bad enough.  But the really damaging part of the IPO, to my mind, was the way I think the underwriters “spun” the mandated company disclosure in a way that made FB look better than it is.

Any professional investor would take it for granted that Morgan Stanley knew exactly what it was doing.  The real question is whether company management was complicit in this shady process–in which case they couldn’t be trusted and buying the stock could be hazardous to your career.  On the other hand, maybe FB executives were just too inexperienced or naive to understand what was going on.

The price action of the past two days seems to me to be saying portfolio managers and buy-side analysts have decided the latter is the case.

So, two plusses for FB.

Greater Fool Theory (II): Zynga (ZNGA)

ZNGA

Zynga (ZNGA) is a maker of casual social games played principally on Facebook.  The most famous of them is FarmVille.

The company follows in the footsteps of the Korean smash hit Kart Rider, which showed how immensely profitable “free” casual online games can be if they charge money for items players need to succeed (microtransactions).

going public

ZNGA went public in mid-December 2011–before GRPN shares began to give up the ghost–at $10 a share.

Shareholders weren’t as lucky on day one as GRPN IPO participants, however.  The stock opened at $11 and rose to $11.50.  It then faded back to $9, before closing the day at $9.50–below the IPO price, despite presumably the best efforts of the underwriters to “stabilize” the price at $10.

The stock did have a brief renaissance in February, when it reached almost $16 a share, before beginning its downward journey to the current $2.78.

 ZNGA as a “greater fool” stock

two investment variables

To my mind, the most important investment issues surrounding ZNGA were/are:

–whether it could follow the success of Farmville with other, hopefully bigger, games, and

–its relationship with Facebook.

on the first count,

It’s pretty easy conceptually to figure how much a given game is worth.  Games have a lifecycle that’s a function of:

–how many users it has

–how often, and for how long in each session, they play

–how long the game remains at/near peak popularity before players become interested in something else and fade away.

The detailed data may be difficult to come, but this is a straightforward discounted cash flow problem.  Figure out the value of a game–let’s say $3 a share–and that tells you how many successful games are already being presupposed in a given stock price.

Long before the IPO, industry sources were indicating that ZNGA was having trouble finding a follow-up success to Farmville.  Its subsequent games were attracting fewer players–who were playing them less intensely than Farmville, and losing interest more quickly.  Therefore, on all DCF counts, they were (much) less profitable.

To my eyes, ZNGA had all the earmarks of a one-trick pony.  Yet, to me the $10 IPO price presumed a parade of new hits.

on the second point,

experience, common sense and basic microeconomics all suggest that symbiosis can be a fragile thing in the business world.

From FB’s perspective, the fact the ZNGA games were a significant source of its revenue had to start it looking for other game makers to feature.  That would hedge against the possibility that ZNGA was a flash in the pan.  And it would diminish the leverage ZNGA would otherwise be gaining over FB if the hits kept on coming.

From ZNGA’s perspective, the fastest way for it to grow would be to tap non-FB gamers by establishing a platform separate from FB.  That, of course, would be potentially bad for FB.

The issue has two facets:

1.  Was ZNGA successful because FB steered traffic to it?; or was FB successful, at least in part, because it had preferred access to ZNGA games?  The more important partner should get the lion’s share of any profits from the partnership.

2.  The FB/ZNGA relationship had become profitable enough that the question of the respective profit shares came up.

Here again, the issue was settled pretty decisively over a year before the IPO.  ZNGA is successful because of  FB, not the other way around.

why subscribe to this IPO?

What must the subscribers to the IPO have been thinking?    …all I can see is the thought that “greater fool” had worked once with GRPN, so it would likely work again.

And, if you flipped the stock into the early strength on the first trading day, it did.

Tomorrow:  what were the underwriters thinking?

has Facebook (FB) bottomed?

I think it has–at least in relative performance terms.  But I also think that FB’s conduct during its IPO has created an enduring credibility problem for it.

bottoming?

The biggest factor depressing FB stock during its debut, in my view, was the joint, last minute, decision by the FB chief financial officer and the lead underwriter to expand the dollar amount of an already large offering by 40%.  That left no buying demand for the aftermarket.  If you think the underwriters didn’t know precisely what they were doing, there’s a bridge connecting Manhattan and Brooklyn you might be interested in buying.

However, it has only recently come out that the NASDAQ trading problems on the first day were much larger than I had originally appreciated.  CNBC has reported that investment bank UBS alone may have racked up FB-related losses of $350 million.  How so?

If you remember, NASDAQ’s computer systems weren’t able to handle FB orders at all for the first several hours of trading.  Some retail investors didn’t know for the better part of a week how much FB stock they had bought or sold.  It turns out, though, that institutional problems were a lot bigger.

CNBC says an unnamed UBS trader entered a buy order for 1,000,000 shares of FB.  He didn’t get a confirmation from NASDAQ.  So he entered the order again   …and again   …and again   …and again.  Then, apparently, confirmations for all the orders came at once.  It’s unclear whether the confirms came on Friday, or during the following week.

CNBC also says UBS only liquidated some of the stock at below $30 a share.  Do the math.  If we say the UBS trader bought the stock at an average of $40 and sold at $30, that’s a $10 loss on each share.  If so, he pressed the “buy” button 35x!!!, without thinking about the possible consequences  (Welcome to the world of trading.).  

Presumably the UBS trader wasn’t the only one doing this.

Notice, too, that the FB price didn’t dip below $30 a share until almost two weeks after the IPO.  So it took UBS at least that long to trade out of its unwanted position.  Throughout all that time, FB was under unnatural selling pressure.

I think that’s over.

prospectus disclosure

The IPO materials suggest that FB wants to portray itself as carrying out an ethically good social mission.  Mark Zuckerberg says as much when he leads off the IPO video.  Thereby, I presume, it hopes to gain investor trust and support–and a higher PE.

FB has just released correspondence between it and the SEC about the prospectus.  Media analysis of the documents indicates that FB withheld from the first version of the prospectus two items of information that I regard as the two most important facts about company operations.  They are:

–the regional breakout of subscriber growth and profitability, and

–the effect on profits of the switch to mobile use of FB.

(Note:  I haven’t looked at the correspondence, which is contained in SEC filings by FB.  But every major news source I read has reported the same story.)

You might say that in the rough and tumble of economic life, the most prudent course for a company is to disclose as little as possible to potential competitors.  You might also say that the initial draft of the prospectus is intended solely to stake out a negotiating position with the SEC.  In one sense, that’s right.  But if you do this, I don’t think you can pitch yourself as being socially responsible or try to cultivate potential investors as partners in the noble cause you’ve embarked on.

Think of it this way:

A married couple.  One partner likes to gamble but always loses.  One day, that partner comes home late from work, after losing $500 playing poker.  The other partner says, “I see that look on your face.  You’ve been gambling again.  How much did you lose this time.”  The reply:  “$5.”

Is this last statement true?  I don’t think so.

Yes, it is factually correct.

But it’s also incomplete.

If the two people were commercial adversaries, maybe the statement would be okay.  But in a relationship where the partners have assumed an obligation to be fully and completely truthful with the other, the reply is a lie.

No, the prospectus isn’t a marriage proposal.  On the other hand, I don’t think that FB can invite us to become partners on a socially uplifting journey while stamping caveat emptor on all its disclosure to us.  We can’t be both trusted allies and sheep ready to be fleeced.

The “like me, trust me” route does generate a higher PE multiple, in my experience.  But to the degree that investors perceive a double standard, I think the stock’s PE multiple will be lower than if it clearly chose one approach or the other.

the strangest stuff about the Facebook IPO

Looking back on the FB IPO, I find several aspects of it strange. I don’t just mean that it was horribly bungled by the underwriters–and to an extent that almost defies comprehension. There’s more:

the last-minute prospectus additions

They concern the effect of increased mobile usage on FB results in the US. This trend appears to have been evident for a long time. It’s certainly material. At All Things D, Mary Meeker (more on her presentation in another post), the former Morgan Stanley internet analyst–she and Henry Blodget were the uncrowned Wall Street royalty of the late Nineties internet mania, said about half of US FB users do so via the less-lucrative mobile route. If so, why the only passing mention in the original prospectus?

subsequent rumor mill fodder

Over the past couple of weeks, stories have emerged that FB is going to:
–create its own branded cellphone
–acquire the Scandinavian browser company, Opera, and
–buy Research in Motion.
Who knows whether any of this is true. But if FB has plans on any of these fronts that are any more than idle musings, there should have been some mention in the prospectus.

no demographic information

Clearly, FB has transcended its original purpose of allowing college classmates to learn about each other more quickly. I’d be interested in knowing, for example, if the heaviest users are high school and college students–and if usage falls off sharply as they leave school and begin working. FB must know stuff like this. But, again, nothing in the prospectus.

the attitude of Morgan Stanley

The CEO is reported to have said in a cable TV interview that retail investors were “naive” and had participated in the IPO “under false pretenses,” if they expected FB shares to go up after the IPO. FB shares have set a world record for loss of market value by an IPO after its debut. That’s not normal. Arguing that investors should recognize that they are sheep to be fleeced whenever wool is needed–even if that’s what he really thinks–isn’t a great way to get new customers, or to keep current ones. He might have said he didn’t mean for this to happen and he was sorry.

IPO arcana: underwriting vs. sales, and the over-allotment. Who knew?

As I mentioned in an earlier post about FB, it’s surprising to see how little the financial media understand about how IPOs work–whether it be newspaper reporters and their firms’ related blogs, or the talking heads on cable.

Two aspects:

the over-allotment

In the case of FB, it was 63.2 million shares (the number is on the front cover of FB’s registration statement).   As noted in the sentence that gives the over-allotment number, this amount of stock is not included in the 421.3 million share figure listed in bold.

What is it, then?

The over-allotment is a kind of insurance or safety precaution that the company issuing stock and the underwriters build into the offering.  The company agrees to sell a specified amount of extra stock to the underwriters at the IPO price if the underwriters ask for it.  In the FB case, it was 62.3 million shares.

When the underwriters divide the stock up and sell it to clients, they distribute the larger amount.  So the FB stock sold to the public amounted to a total of 483.6 million shares (421.3 + 62.3).

If the issue goes well and the stock stays at a price higher than the IPO level, the underwriters purchase the extra stock from the company and deliver it to clients.  That’s the usual case.  For FB, that would have meant an additional $2.4 billion from the IPO.

If, on the other hand, the issue goes badly, the underwriters can buy stock in the open market at the IPO price up to the amount of the over-allotment, without taking any financial risk themselves.  Don’t ask me why, but underwriters are legally allowed to do this for a short period after the IPO is launched.

The underwriters did this kind of intervention with FB just before noon and again during the final hour of trading on its first day.

How do we know?

The underwriters make no attempt to hide their identity or their intentions.  They want other traders to know they have a huge amount of buying power and intend to defend the IPO price.

How did I find out?  I looked at a chart of FB on my cellphone.  I saw the stock stopped its normal minute-to-minute gyrations just after 11:30 and flatlined–just like when someone dies on a TV medical drama.  That’s not natural.  Someone was making a statement about the $38 level.

In listening to hundreds and hundreds of IPO roadshows, I’ve never heard the over-allotment mentioned–ever.  Professionals know it’s there.  For the underwriters, it would be like a restaurant saying it had a great food-poisoning doctor on call.

underwriting group vs. sales syndicate

This is really arcane.  There’s no reason to read any further, except that this distinction may explain the bad treatment of some retail investors in the FB IPO.

The money that brokers charge in an IPO is for two slightly different functions.

–They have a percentage interest in an underwriting group.  Although I use underwriter and broker as synonyms in everything I write, that’s not precisely correct.  The underwriting group buys the stock from the company and then resells it. It’s paid a small amount for taking the “risk” that the members will be unable to resell the stock.  Remember, though, that the brokerage companies have firm–though not legally binding–commitments to buy the stock from clients who know they’ll never see another IPO allocation if they renege (legally, any client can return the stock and get his money back up until shortly after the final prospectus is issued.  See my post on preliminary and final prospectuses).

–the underwriting group employs a selling syndicate to distribute the shares it buys from the company.  It’s made up of the same firms that comprise the underwriting group, but possibly in different proportions, based on the size and strength of institutional and retail distribution networks.  Normally, the selling commissions are much higher than the underwriting fees.

Why write about this?  The accounts I’ve read mention only Morgan Stanley as a broker whose retail clients received much larger allocations of FB stock than they anticipated.  My guess is that Morgan Stanley carved out for itself an especially large piece of the selling syndicate pie.

Facebook (FB), looking back after three days of ugly trading

a failed IPO

The long-awaited IPO of FB has come and gone.

The stock opened late, due to a NASDAQ computer snafu.  It almost immediately gave up its initial gains.  It closed a mere 25¢ a share above its $38 offering price–and that only due to “stabilization” (read: price-fixing) efforts by the underwriters in the final hour of trading.

It’s been falling since.

a successful offering??

One interesting aspect of the fiasco is that many commentators–as well as many retail participants in the offering, and apparently also the CFO of Facebook–are basically clueless about how the IPO process is supposed to work.

In particular, I’ve heard media proponents of the tooth-and-claw school of capital markets trying to burnish their Darwinian credentials by claiming that Morgan Stanley actually did a good job with the offering.  Explicitly or implicitly, they point to the poor trading performance of FB as evidence that the bankers achieved the highest possible price for FB.

I think this is crazy talk.  When FB conjures up in investors minds words like “overpriced,” “disaster,” and “huge losses,” that’s not good.  Nor is it when retail investors feel they were tricked into buying more stock than they wanted   …or when the lead underwriter is being investigated for disclosing negative opinions about FB only to a few customers.  And, of course, none of the money from sales of extra shares went to FB itself.

An IPO is supposed to go up!  

Not necessarily by 100%, but maybe 20% or so.  Why?

Psychologically the company is associated with success when its stock rises.  Retail investors, who will buy/use the company’s products and loyally support management, feel good about themselves and the stock they own.  This positive association lays the groundwork for the market to absorb more stock when lockups expire and when employees want to cash in more of the stock that’s a key part of their compensation.

A failed IPO, in contrast, generates questions–well-founded or not–about the stability of the company and about the trustworthiness and competence of its management.

what went wrong?

As I see it, there were two separate problems:

1.  The main one is that FB issued too much stock all at once.  Up until a week ago, the plan had been to sell 388 million shares at a maximum price of $34 each.  That’s $13.2 billion.   Which is enough money to buy all of the stock of Sony or Omnicom or Applied Materials or Ralph Lauren or Limited Brands, at yesterday’s closing prices.

Last Wednesday the amount of stock was increased by 25% to 485 million shares and the offering price was upped to $38.  So the total take from the IPO went up by 40% to $18.4 billion.  That would be enough to buy Marathon Oil or Kellogg or Yahoo–or to pick up Whole Foods or Charles Schwab and have a couple of billion left over.

This decision had two negative effects:

–it took $5.2 billion out of investors’ pockets that might have gone into buying FB in the open market after the launch.

–worse, the underwriters were unable to find happy homes for all that extra stock.

In any “hot” IPO, institutions routinely place orders for many times the amount of stock they actually want, in the hope that this will influence the underwriters to give them larger allocations than they’d get otherwise.  You want 250,000 shares so you ask for a million.

I don’t think this tactic works, since the parties know one another very well.  But people do it anyway.  Maybe it makes them feel good.  Occasionally the move backfires and the institution gets more stock than it wants.  Maybe it gets 500,000 shares.

When this happens, the message is clear–the issue is in trouble.  The institution probably decides to stay on the sidelines rather than buy more.  Or it turns into a seller.

Lots of retail investors seem to have been playing the same game with FB.  Institutions have battle scars and regard being burned like this as a cost of doing business.  But for a retail investor, finding 5,000 share of FB in you account last Friday when you expected 500 must have come as an incredible shock.   That’s enough to turn you from a greedy buyer into a panicky seller.

2.  NASDAQ had a computer meltdown.  The details aren’t clear.  My broker, Fidelity says it still doesn’t have complete execution information on buy and sell orders it placed for clients during the first few hours of FB trading last Friday.  This doubtless raised the level of panic individuals have been feeling.

Just as important, I think the NASDAQ mess also had the effect of transferring some selling from last week into this–prolonging the period of trading turmoil.

who decided to up the offering size?

Normally it’s the underwriter, who, after all, is the one in continual contact with potential buyers.  If so, Morgan Stanley and the others had exceptionally tin ears.

In this case, my reading of stray media comments says that the Facebook CFO made the final decision.  At the very least, he seems to be the one being thrown under the bus.  I’ve never seen comments like this before.  My inclination is to say this means they’re true–and that the underwriters don’t like David Ebersman very much.  Let me amend that–they don’t think they’ll need to be doing business with him again.

who benefits from the pricing decision?

The underwriters, of course, whose fees are determined by the size of the offering.

Company officers other than Mark Zuckerberg are still listed as making no sales.  Mr. Zuckerberg remains as seller of 30 million chares, which he notes will go to pay taxes.

The largest chunk of extra stock, 54 million out of the 97 million added, is listed in a catch-all category of people who have given voting rights to Zuckerberg.  Their sales go from 71 million shares to 125 million.  The rest of the shares come from venture capital investors.

To me, this says the company FB had nothing to gain by raising the offering size.

what to do

This is still the same company, with the same prospects, as before.  If you liked it at $38, you’ve got to like it more at $32.  I don’t know the company well enough to have an investment opinion.  The stock does seem to be starting to trade more normally today, though.

Facebook: my take

how is FB describing itself to the financial community?

I think the roadshow video is very instructive.

First of all, it is very expertly and painstakingly scripted and filmed.  A great deal of time, energy and thought went into it, in my view.  Therefore, it should be taken seriously as saying how FB wants to position itself in the minds of investors.

What are the main messages?  I think there are three:

1. FB is as much a social cause as a company.  And, by implication, we all now have a chance to be a part of the movement by becoming owners.

Mark Zuckerberg says both in the video and in a letter in the prospectus that he didn’t initially intend for FB to be a company.  He created it (I think I see a slight change in his delivery as he says this on the video) because it needed to be done.

“Facebook was not originally created to be a company.  It was built to accomplish a social mission–to make the world more open and connected…There’s a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future…We hope to strengthen how people relate to each other,” he writes.

2.  FB is in a unique position among internet companies. 

Everyone else has succeeded only in creating the “raw tools” that FB is cementing together into a comprehensive communications network.  Because of this unique position, future applications developers will doubtless build their products on the FB infrastructure, giving the company huge profit expansion potential.

3.  FB is only at the start of its “rewiring” of the way people communicate with one another.

There’s very little discussion of current operations in the video–despite the fact it’s a half-hour long.  You’ll see why below.  To me, the implication is that the concept of a possible future is much more important than the present.  It’s a sort of “If you build it, they will come” message.

what about current operations?

Here are the numbers I find most interesting:

users

As of March 31, 2012, FB had 901 million registered users worldwide who have interacted with Facebook in some fashion at least once over the prior month.

As of the same date, it was averaging 526 million registered users who have some interaction with Facebook on a given day.

Of monthly active users, 83 million use mobile devices exclusively to interact with Facebook; 405 million others use both computers and mobile devices.  This is a big change.  Mobile usage grew by 69% over the past year.  It contributed most of the gains shown in North America.

Overall user growth was 33%.

geography

FB breaks out active users into four geographical areas:  US and Canada, Europe, Asia, and Rest of World.

US/Canada

20.7% of all users

average quarterly revenue/user = $2.86, up 14% year on year

user growth was +91% two years ago, +46% last year, +15% this year

biggest boost to growth appears to have been through mobile devices

Europe

27.9% of all users

average quarterly revenue/user = $1.40, up 18% yoy

user growth +94% two years ago, +46% last year, +20% this year

Asia

25.5% of all users

average quarterly revenue/user =$.53, up 23% yoy

user growth +268% two years ago, +93% last year, +47% this year

RoW

26.9% of all users

average quarterly revenue/user = $.37, up 19% yoy

user growth +137% two years ago, +58% last year, +33% this year

what these figures mean

To me, they suggest that the North American market is maturing rapidly and that Europe may be only a year or so behind.  Not surprising, given that Facebook users in North America already outnumber non-users.

The two regions make up three-quarters of FB’s revenue.   So, if it isn’t already, emphasis in North America has got to shift away pretty soon from grabbing as many new users as possible (to prevent rivals like Google+ from snatching them us) to raising revenue per user.  How that will go is unclear (to me, anyway).

income statement

FB has two sources of revenue:  advertising and payments, the latter mostly generated by microtransactions in games. During calendar 2011, FB collected $3.154 billion in ad revenue and $557 million as its share of payments (the lion’s share of that from Zynga).  That was an 88% yoy gain.  Net income was up by 66%.

For the latest quarter, however, net was down yoy, despite a 45% yoy rise in revenue to $1.058 billion.  How so?

Expenses rose by 97% yoy during the period.  R&D was up by 168% to $153 million, marketing by 134% to $159 million, spending on infrastructure by 65% to $277 million.

I interpret this as FB’s recognition that to continue to grow it has to do so in a new way.  It either has to sign up a whole big bunch of low-revenue users outside the US and Europe, or find new ways to raise average revenue per user in its more affluent, but more mature markets in North America and Europe.

It’s conceivable that during this transition time, eps growth will be nothing to write home about.  It’s also not 100% clear FB will be successful, although it is in a very powerful position in the social networking arena.

conclusions

FB’s IPO materials tell two different stories.

–one, portrayed in the video, is of a unique company with boundless potential in an increasingly interconnected world.

–the other, from the numbers in management’s discussion of operations in the prospectus, is of a company that has already picked most of the low-hanging fruit and which is ramping up spending to fend off slowing revenue growth.  The price of this ramp may be lackluster profit growth for at least a while.

Which story to believe?

Here I have no strong opinion.

On the plus side,

…good growth companies tend to reinvent themselves every few years.  For example:

–Microsoft was originally the PC operating system company.  Then it was the Windows graphical interface company.  Then it was the corporate Office productivity suite company.  Then, a dozen years ago, it stopped growing.

–Apple was the iPod company.  Then it was the “halo effect”/Apple Store company.  Then it was the iPhone company.  Now it’s the iPhone/iPad/iCloud company.

–Amazon, which I think FB resembles the most closely, was originally an Internet “concept” company that sold books in cyberspace and didn’t make much money.  Then it “pivoted”, expanded the range of products it sold itself and began to act as an online sales conduit for third parties.  Profits exploded.

What could go right in this fashion for FB?

Let’s say that corporate advertising on Facebook could double–I’m not sure whether this is an aggressive assumption or an underestimation–over the next two or three years, while FB maintains something like its current cost base.  If so, earnings would rise by about 150%.  Companies would arguably shift ad dollars to FB because it’s cheaper and because customer targeting is better.

Or something really good that’s unexpected by the investment community could develop, as happened in all the cases I’ve cited above.

On the minus side,...

…the valuation, based on current profit levels, is high at 96x earnings per share.  That’s not necessarily a deal-breaker.  LinkedIn, which I don’t think is as promising a company, trades at 686x.  Amazon trades at 186x, with a similar story of heavy investment in new product development.

Priceline.com, clearly a more mature company, trades at 30x.

An “old” warhorse like Apple, where the price earnings multiple has been contracting for the past several years, trades at 14x.

Microsoft, which hasn’t shown any innovative spark so far this century, trades at 11x.

what will professional investors do?

Value investors will hold onto their MSFT and not touch FB with a ten-foot pole.

Growth investors will probably take all the FB they can get in the IPO.  Knowing that the stock will very soon be part of the NASDAQ index, I think they’ll try to build their positions to the point they have only slight underweights and then await further developments.

For me, the stock would be a roll of the dice–something I try to avoid.  It’s not simply a question of valuation. If I thought FB’s earnings in three years would be close to triple the current level, as a doubling of revenue/user would achieve, I’d be very happy to buy it.  I don’t know the company well enough to have that conviction.  But I believe this is the key question potential investors should have an answer to.

Note:  Since I  wrote this post, two new pieces of information have come out:

–FB amended its prospectus to reflect what was apparently a management answer to a question posed during the roadshow.  FB said that some users were switching to accessing Facebook through mobile devices rather than through computers.  This has a negative effect on revenues, since FB runs fewer ads through mobile devices and advertisers pay less for them.

–apparently demand is strong enough for the issue that FB is talking about raising the IPO price to $34-$38.