The world’s largest social networking site Facebook (FB) on Monday submitted documents to the U.S. SEC (Securities and Exchange Commission), saying to cut the company’s $3 billion credit line to $1.5 billion.
Facebook got $3 billion short-term bridging loans for a period of 364 days, in order to fund the taxes of staff exercise restricted shares of FB stock, before Facebook IPO (initial public offering) on May 18 this year. But since the IPO, FB stock price has cumulatively declined 49%, this means the actual amount of taxes of the employees funded by the company to have been substaintially lower than the company previously expected.
According to the initial plan, investment bank JP Morgan Chase, Morgan Stanley and Goldman Sachs will provide Facebook with loans. But the latest documents show investment bank Barclays Capital and Deutsche Bank will provide loans to Facebook.
The documents also show that Facebook amended it’s a sum of $5 billion credit line.
FB stock price recently hit a new low of only $17.55 per share, down 54% from its IPO price of $38. Investors are also concerned about the high level stock returns paid by Facebook to its staffs. Facebook co-founder and CEO Mark Zuckerberg is only 28 years old, relatively young compared to many large companies, and his experience is not rich. What matters most is that Facebook’s progress in generating revenues in mobile filed is very slow.
Nonetheless, Facebook still has a strong brand equity, and more than 1 billion monthly active users, as well as an average annual growth rate which maintaining about 30%. In view of the present situation, it is difficult to imagine which site can attract users away from Facebook.
For Facebook, there is a lot of potential methods can transform such huge amount of traffic into large sums of money. But, it is really a bit slow that Facebook expand the progress of launching advertising in the mobile end, but thankfully, Facebook is stepping up its speed in this field. RBC Capital Markets analyst Andre Sequin said the market has underestimated the improvements of Facebook, and once some of these improvements achieve good results, then Facebook’s daily revenues will be several times the current amount.
The market estimated Facebook’s market value at $72 billion when its IPO, but based on the current stock price, Facebook has a market cap of only $41.82 billion, down nearly 42% from the estimate. Meanwhile, FB stock price is constantly recording new lows, therefore, it is estimated that the market value of the company will fall below the current level soon. If an investor of FB stock wishes to get a 20% return each year, then Facebook’s market cap must reach $204 billion 10 years later. However, this forecast is only envisaged without guarantee, especially in the case of cachexia FB stock price.
MarketWatch columnist author John Shinal pointed out that the kinetic energy brought about by Zuckerberg’s apology has been exhausted, the wish for advance in FB stock price can only counts on its earnings report, but even Wall Street analysts have been not optimistic.
Over the past thirty days, there are six analysts have downgraded Facebook’s 2013 year earnings expectations and there is no one lifting his/her estimate. After these amendments, the Wall Street analysts averagely estimate the company’s earnings of 62 cents per share for the next year. For this year, two analysts cut their estimates, and no one raising their opinion. The average adjusted earnings eatimate for Facebook’s 2012 earnings is 48 cents per share.
FB stock price currently settles at $19.52, isdwon 56.6% from its historical high of $45 and 48.63% below its IPO price of $38.