Thanks for the cogent thoughts...here are a couple of counter points to play devil's advocate. As a data point, Yahoo Finance shows 80M shares short out of a 1.31B float when the stock is trading pretty close to previous lows.
top executives leaving, lets assume they all hold more than 1M shares each.
I agree, this is generally a bad thing in the short run. However, it seems kind of like the thing to do for these social-network companies. Also, if someone was just hanging onto their job for the IPO payout then it is probably best that they leave to open the position to someone with new energy that is still "hungry".
FB hasn't had one major inside buy yet.
The reality is that many of the holders make maybe 100K a year, but all of a sudden they had $1M in shares when this went public...Any smart person is going to sell at least 1/2 their shares and diversify their investment. Even 1/4 of total shares is still 350M shares, or 7 days worth of volume in a single clip.
Good point, but let's be honest. Even if future prospects are good, no smart employee with the majority of their wealth already in the company is going to buy more shares before they have a chance to sell what they already have.
The reality is, perhaps, that a portion of the 80M shares that are already shorted come from these employees you are talking about. If I were an engineer watching the price drop from $38 to $30 you can bet I would be leveraged to the hilt shorting as many shares as I had in options just to protect that position prior to their "unlocking". To the best of my knowledge, there is nothing preventing employees with "locked" options from shorting their own company and using their shares that are about to unlock to cover those shorts. That scenario is quite possible as these are not dumb people working there.
Also, we have to keep in mind that Zuckerberg promised not to sell any shares for at least one year. I believe he will keep to that word and I believe he is one of the major shareholders. :)
In the end, it's just really hard to value FB, but I'm pretty confident they are not a "fad". Besides teenagers gossiping, families legitimately use Facebook to stay in touch, high schools to organize reunions, companies and social causes to promote awareness, debate politics, etc. Like it or not, I believe Facebook is here to stay. I do like the idea of an e-commerce enabled Facebook where I can choose some items from a friend's wish list for their birthday. Niche companies looking to compete with Amazon may like that as well.
Maybe Facebook isn't like a chair, but more like a realtor. Homeowner's don't really want to pay the 6% commission to sell a house, but realtors pretty much control a key marketing platform (MLS).
It all boils down to Q3 earnings-report. Because of the secrecy of FB it is almost impossible to know what to expect. But looking from the data available these past 3 month, pretty much everything points to FB missing their estimates.