Facebook status: down, but far from out

Reasons to be upbeat.

The fever pitch of speculation building up to Facebook’s IPO less than a week ago has been replaced by doomsayers revelling in the 11 per cent price slump since Friday’s launch. Should Mark Zuckerberg and the rest of Facebook’s newly minted billionaire founders, and almost 1,000 paper millionaire employees, be concerned by the drop since listing? No, there are several reasons to be upbeat.

The doomsayers have loved the downward stock slide. Stories of the NASDAQ’s technology wobbles and Morgan Stanley having to keep the stock price up soon after its listing are what you’d expect. People love the fact that the bigger they are, the harder they fall.

But there are several reasons for Facebook’s stockholders to take heart.

Firstly, let’s not forget Facebook’s $38 listing price was well above its initial expectations. Only weeks before the May 18 IPO, it was forecast to sell 337.4 million shares for between $28 and $35 per share, raising between $9 bn and $12 bn.

Five days before the list date, it raised the total number of shares to 421.2 m and ended up listing at this much higher level – netting $16bn and giving it a market capitalisation of about $104bn at listing.

To put this into context, Google offered 19m shares in its 2004 IPO, listing at $85 per share. It raised $1.67bn on market capitalisation of US$23 bn.

This gave Google the war chest it needed to launch a vast slew of mergers and acquisitions in the following years, including the high-profile purchase of YouTube in 2007.

Facebook’s IPO has raised 10 times Google’s amount from the sale, with market capitalisation three times Google’s – giving a serious steroid boost to its M&A budget. Facebook’s pre-IPO purchase of Instagram will be the first of many, helping the world’s most well-known social networking site, cement its market-leading position.

Interesting research from boutique researcher WealthInsight, The Facebook Elite, suggests that even if Facebook’s IPO may be overpriced, it does not mean that the company is not highly valuable.

Facebook’s earnings were $972m for the 12 months up until March 2012. Off revenue of $4.0bn, this represents a high profit margin of 24 per cent, putting it in line with the likes of Apple (30 per cent) and Google (27 per cent).

Facebook also makes more money from advertising than any other website and accounts for 28 per cent of display ads seen online. As more and more advertising moves online, Facebook’s revenues will almost certainly increase. Facebook had 901 million monthly active users (MAUs) and an average of 526 million daily active users as of 31 March 2012, an increase of 33 per cent and 41 per cent, respectively, compared to March, 2011. At the same time, Facebook’s 60 per cent penetration rate of internet users in the US and 45 per cent penetration rate of the world’s 2 billion internet users, together suggest that Facebook’s user base still has significant room for growth.

Facebook’s stock price will continue to attract attention, and will no doubt suffer periodic dips. Google suffered a big drop in late 2008, but now sells for more than $600. Facebook’s stocks may have dipped, but they are likely to rise far further.

Nicholas Moody is the editor of Private Banker International at VRL Financial News. He has written more about Facebook's recent venture here.

Photograph: Getty Images
Photo: Getty
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Tail docking is described as “barbaric” – so why did the SNP vote to bring it back?

The decision by the SNP to permit the docking of puppies' tails seems bizarre - until you consider the party's divided loyalties.

As Holyrood votes go, it probably doesn't get more emotive than the decision to lift the ban on tail docking - a procedure carried out on three-day-old puppies which involves crushing cartilage, nerves and bone without anaesthetic, and which campaigners have called "barbaric".

The reasoning is that these "working" dogs, flushing out animals to be shot on Scotland's vast hunting estates, can injure their long tails. The British Veterinary Association disagrees, saying the procedure inflicts significant pain and deprives dogs of a "vital form of canine expression". 

So why has the Scottish National Party, with its left-wing rhethoric and substantial block of left-leaning newer members, voted through such a deeply controversial proposal?

One clue is to be found in 2014-15 - not the independence referendum, but the push for land reform which followed it. The extraordinary concentration of land ownership in Scotland - around 430 families or companies own half of the private land - became a touchstone issue for independence campaigners. After September 2014, many transferred their enthusiasm to this issue, demanding a new bill that would kickstart land reform after a decade in the long grass.

This presented a real problem for the SNP. In its longheld tactic of appealing to both left and right, rich and poor, the land issue showed up the cracks. While the new First Minister made rash promises of "radical" reform in November 2015, her cabinet nevertheless included Fergus Ewing, a centre-right politician with links to the landed estates and rural lobby. 
 
Pictures of Ewing clad in tweed alongside gamekeepers at a PR stunt caused some of the party's new membership a twinge of unease. Unedifying rows over fracking, which highlighted Ewing's relationship with the Duke of Buccleuch, did not help. While much was made of the SNP's 56 MPs opposing fox hunting at Westminster, Ewing opposed a Scottish ban more than a decade before
  
Before the SNP made its unprecedented break into the Labour strongholds of the west of Scotland and central belt, the party's support was concentrated in the largely rural east. Perthshire, Banff and Buchan, Moray are places where people voted Tory in the past - and indeed, turned blue once more this June. Not that such a swing can be said to have come entirely from SNP voters. Nevertheless, it does highlights another side of SNP membership that is often forgotten about. "It's said that there are two SNPs," said Professor Ailsa Henderson, professor of political science at the University of Edinburgh. "An SNP voter in Govan is perceived to have a very different profile than another in Perthshire". 
 
This project to appeal to all Scotland - particularly noticeable during Alex Salmond's leadership - produces strange paradoxes, and this tail docking issue is just the latest. The rural lobby is strong, from gamekeepers' associations to hunting proponents to the powerful Countryside Alliance. The current government's proposal to reintroduce the practice didn't come out of the blue. As Green MSP Mark Ruskell explains, the lobbying began with the SNP's victory at Holyrood in 2007. The previous Labour-led "rainbow" parliament, with its seven green MSPs and six socialists, had introduced the Animal Welfare (Scotland) Act, banning the practice of docking as well as fox hunting. 
 
"The gamekeepers were furious," Ruskell said, "And the first thing they did was to lobby the new Scottish government". Ten years later, their wish was granted. "The evidence was rejected by professional bodies, but they still went ahead. It's been spectacularly misjudged," added Ruskell. The power of lobby groups at Holyrood has repeatedly been raised as a concern by campaigners and parliamentarians alike, with last year's Lobbying Act cricitised as being far too weak to ensure real transparency. Pressure from gamekeepers and shooting groups, Ruskell said, influenced the whole way the evidence was put together. One report was simply a survey of self-selecting shooting estates, describing the frequency of tail injuries. 
 
For its part the Scottish government defended the move by pointing out that the rules will still be more restrictive than in other parts of the UK. Only a vet can make the decision to shorten tails - "no more than the end third" - and it will apply only to spaniels and hunt point retrievers. "We have seen enough evidence that some working dogs are suffering tail injuries to make the case for the law being changed", said a government spokesperson. "Scotland is a nation of animal lovers and we take the welfare of our pets, animals and livestock very seriously." 
 
Reaction from SNP members online has been fairly damning, with some talking of leaving the party - though others have defended the decision. The next big showdowns in Holyrood on animal welfare are likely to be just as emotive: the use of electric shock collars on dogs, and the prosecution of wildlife crime (or, how to deal with the fact that poisoned, bludgeoned birds of prey keep turning up on grouse shooting estates). The latter in particular will test, once again, the direction of a party split between appeasing a land management lobby, and meeting the high expectations of its newer members. 
 

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