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9 Reasons Facebook (NASDAQ:FB) Will Crash


In Facebook's own words, it doesn't look good.

MINYANVILLE ORIGINAL In order not to feel helpless watching the Facebook (NASDAQ:FB) train wreck, we decided to seek guidance from the company's 10-Q. There turned out to be little consolation in the document. In short, it ain't pretty. You don't even need to read between the lines since the bad news is literally spelled out.

1. The stock investors hold, now at $20.72, is all there is. There will be no dividend. Since it's trading at about 30x next year's estimated earnings, it's hard to argue that it's undervalued. Both Apple and Google trade at approximately 12x expected earnings. From the 10-Q:

"[Y]ou may only receive a return on your investment in our Class A common stock if the trading price of our Class A common stock increases.

"We do not intend to pay dividends for the foreseeable future."

2. The lock up releases will flood the market with more stock. According to the filing, from August 15 to May 17, 2013, 2.020 billion shares will be released. For context, about 420 million shares are now trading. From the 10-Q:

"Substantial blocks of our total outstanding shares may be sold into the market when 'lock-up' or 'market standoff' periods end. If there are substantial sales of shares of our common stock, the price of our Class A common stock could decline."
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