I did not buy Facebook because I have never understood it.
I bought Google in its early days because I figured out the business model, and that it was simply a ubiquitous newspaper with a gargantuan circulation that would make billions by selling ads around its content.
Facebook and its hype never made any sense. At $100 billion, its price-earnings ratio would be stratospheric, or 66.6 times' compared to Google's 19.44, Apple's 12.74 or the average big tech, at 22 times'.
But here's another angle that bothered me.
Facebook said it was used by one-seventh of humanity; 901 million active users, enough to lure every advertiser on the planet around its content.
How was "active" defined by the company, and did anybody audit this 901 million figure? I questioned both and here's what I found.
I first opened a Facebook page in 2005 as an experiment. I canceled it a few years later, then reopened it because a colleague urged me to do so. Never used it more than a handful of times per year.
I canceled the Facebook page again after my email address at Google was hacked. I didn't want the hacker to start communicating with people who had posted stuff on my page, or start using my name. I reopened it a few weeks later with a new email and minimal information and no photo of myself. Again it has been used about as frequently as I visit outer Mongolia.
After the IPO, I decided to check and make sure that the hacker wasn't using my old page.
I looked my name up on the Facebook registry and found dozens of Diane Francis listings, people who live in other cities or countries.
But I also found 33 Diane Francis listings, without a photo, that were "mine." When I clicked on them, they referred to my locale and provided a link to click on to send me a message. So I did 33 times and got dozens of messages sent to me by me.
My question is how did this happen and how commonplace is this? Are there lots of other "active users" who are inactive and robo-listed and counted multiple times even though they are the same person?
So I contacted Facebook by email six days ago. No response.
How could a technologically advanced company allow 33 Facebook listings happen instead of just one? Are these numbers audited somehow? Is this just a one-off in my case?
But there are other serious issues raised by this fiasco.
Morgan Stanley and Facebook priced this IPO at an unjustifiable price earnings ratio, compared to other tech companies, even after two red flags were raised. This was after an earnings warning and one of the world's biggest advertisers, General Motors, said it was dropping Facebook as an advertising vehicle.
Despite all that, Morgan Stanley along the way pushed the new issue from 337 million shares to 421 million shares and the price range leaped from $28 to $35 to $38.
The fallout from this is disastrous for markets and Facebook itself.
Critics have been blunt in their criticism. Former General Electric mogul, Jack Welch tweeted yesterday: "MS [Morgan Stanley] put out too much stock and re pricing was piggish [sic]...They are to blame for the Facebook debacle."
Others blame the company or NASDAQ for a 30-minute trading glitch that drove many investors away. But there's plenty of blame to go around, including those investors who paid an exorbitant price for a business model they probably didn't even understand.
But I finally figured out Facebook, its business model and made a firm investment decision. I won't be buying Facebook any year soon.
This article originally appeared in the Financial Post.
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