Bear and Bull

The exponential rise in market capitalization of some technology stocks has been astonishing. Indeed, they ushered in a new era of equities, where in a little over 10 years they can go from relative obscurity to having valuations worth over 700 billion dollars and are now some of the most dominate companies in the world – and Facebook is a perfect example of this.

In 2008 Facebook was a basic platform for sharing photos of birthday parties and commenting on what you were doing at any particular moment. But by 2009 the company had overtaken MySpace, the dominant social media platform for the era. MySpace was then sold to consortium for $35, which is an amazing turn of fortunes when just four years earlier in 2005 it was acquired by News Corporation for a lofty $580 million.

Why is this relevant? If we fast forward to July 2018, Facebook shares were trading at an all-time high of $218 with the company valued around 700 billion US dollars. At the time it could do no wrong, both in terms of popularity from users and the stock market in general. But extreme price rises for tech stocks have seen equally quick price falls, and yesterday’s fall to $131 is the lowest point the shares have been in two years.

Certainly the swift turn around in fortunes has shocked investors, especially the many hedges funds that had Facebook in their top five long positions for 2018. There are many catalysts for this, but first the effect of GDPR should not be underestimated, and how individual data is used is now fully on both consumers and regulators agenda.  Also, when you look at the relevance of the platform compared to three years ago, certainly on an anecdotally basis the usage of the platform seems to have decreased. This might be because of the influx of advertisements on the timeline or because those aged 14-25 seem to be switching to other platforms designed for a younger audience, such as Snapchat.

Certainly its hyperbole to call the end of Facebook, but I feel it’s definitely losing the allure and dominance it once had, both from a user and investors perspective.

Jordan Hiscott, ayondo Chief Trader


The above-mentioned market views and content reflect only the opinion of the author, not that of ayondo. This service is for informational purposes only and does not constitute advice or investment advice.

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