Facebook More Valuable Than Intel: Er, What?


On January 9, 2014, Facebook (NASDAQ:FB) stock closed out the trading session at $57.22 per share, which calculated out to roughly $140 billion in market capitalization. Meanwhile, Intel (NASDAQ:INTC) stock closed out the same January 9 session at $25.31 per share, which calculated out to a mere $125 billion in market capitalization. Sophisticated traders may attempt hedge their bets by initiating a program to short Facebook while buying up Intel positions.

Over the long-term, however, significantly overvalued Facebook shares do not bode well for the viability and returns of the aggregate technology economy. Conservative investors may consider avoiding commitments to both Facebook and Intel investments and waiting patiently on the sidelines. Ironically, this Web 2.0 economy appears to be the second coming of Alan Greenspan’s “irrational exuberance.” Be advised that Facebook and Intel fiscal quarters largely coincide with calendar years, which does somewhat facilitate apples-to-apples comparisons.

Do Not Short Facebook Stock

Traders initiating short positions in Facebook would borrow shares from other investors and immediately sell those shares for cash. At a later date, the short sellers will re-enter the market and buy-to-cover Facebook shares to make good upon the original stock loan. Short sellers would therefore turn profits, if Facebook stock were to have actually declined, after opening up the short position. Be advised that Facebook did make its May 18, 2012 IPO debut at $38.00. The majority of Facebook short sellers may have gotten routed over the past eighteen months.