Courtesy of Janet Tavakoli
This is a penny-ante trade to make the point that I think Facebook is a baloney sandwich (each of the 100 contracts represents 100 shares). I haven’t delved into Facebook, but the reported information is enough to know this is Emotion in Motion. Expect more pumping, but the only value this currently has is based on hot air: $3.7 B in revenues of which 85% came from advertising, and $1 billion in net income. GM didn’t see the return on its advertising. The game is to bring inflated shares to market and hope FB can acquire viable companies with its inflated valuation while it tries to come up with a plan for FB. It’s a game of hot air and brinkmanship.
Facebook Shares Close Under $30 As Option Trading Begins – DowJones – May 29, 2012
Among the investors betting against Facebook Tuesday was Janet Tavakoli, head of Chicago advisory Tavakoli Structured Finance. Tavakoli was skeptical about the company's management, so she ended up buying a relatively meager 100 options contracts with a $25 strike price for Sept. 22, after Facebook insiders' first wave of lockups expire.
"I thought, given that the puts are available, let me make the point that I think this is full of hot air," she said, pointing to Facebook's mobile missteps and inflated valuation relative to earnings.
Facebook shares plumb new depths, valuation questioned – Reuters – May 29, 2012
Janet Tavakoli, president of Tavakoli Structured Finance Inc in Chicago, said she bought puts expiring in September with a strike price of $25, at a cost of $210 per contract, — with each contract representing 100 shares.
"The valuation is a complete bluff. There is still a long way to go down from here," she said. "There will be insiders selling their shares on August 20, when the first lockout period is over. There will be a lot of shares that will hit the market and more in coming months."
Books by Janet: Credit Derivatives & Synthetic Structures: A Guide to Instruments and Applications, 2nd Edition
E-book (Kindle only): The New Robber Barons
