The Facebook fiasco just rolls on, a combination of inept management and underwriting based on unaudited numbers about so-called "active users" equivalent to the population of India.
This week, employees dumped the stock sending it to around $19, down from its US$38 a share issue price in May.
On May 25, I questioned and debunked Facebook's "active users" number of 900 million in a column and on August 2, the company admitted that their unaudited numbers are wrong and misleading. In my piece, "Why Facebook's hype never made sense to me", I asked "what's 'active' and are these figures audited?"
I based my skepticism on the fact that I found 33 listings with my name on them. I clicked on each to send an email and most of these messages were sent back to the only Facebook page that I personally opened. So 32 "user" listings were bogus. I also point out that I was not "active" either and rarely looked at my Facebook page.
I tried to call the company without success to find out why there were 32 Facebook pages for me that I never opened, whether they monitored this, had mechanisms in place to prevent this and whether they audited the 900-million "active user" number they touted in their IPO?
No answer but various investor websites picked up on my information and found more.
On August 2, 2012 -- nearly three months after claiming 900 million users -- Facebook admitted there are as many as 80 million fake or bogus accounts in a report filed by it, with the U.S. Securities and Exchange Commission. Facebook's report said over eight per cent of the user profiles are bogus and in two categories: misclassified accounts and undesirable accounts.
But how did they arrive at that number and had they cleaned up their "users" list?
This week I found that my 33 Diane Francis accounts were still there. Even worse, an acquaintance told me she had set up Facebook pages for her two dogs and another said that her pages were proliferating without explanation.
So the eight per cent number is no comfort to me, nor should it be to the public market. This is obviously no way to run a business taking advertising dollars, much less a public company taking shareholders' money.
Frankly, all social media sites like Facebook need what newspapers have had for years to stop shenanigans: An Audit Bureau of Circulation. Without such a mechanism, it's little wonder why General Motors stopped advertising on Facebook just before the IPO.
Now the stock has collapsed and there will be more pain, especially since Zuckerberg demonstrated this week that he needs to take lessons on running a public company.
On August 17, the Wall Street Journalwrote: "Mr. Zuckerberg [at a meeting] went on to tell employees that the press doesn't know the company's future plans, and if they did, they would have the same faith in Facebook's ability to fulfill its lofty stock-market valuation. He said that investments the company has made over the last six to 12 months will soon bear fruit, the people said."
In essence, Zuckerberg is saying that the press doesn't know about fantastic future plans that will make a material difference in the stock price. This means that the public and his shareholders don't either.
CEOs and other insiders do not keep important facts from the press but are obliged to provide complete and immediate disclosure of material facts, pro or con, to the investing public and markets. This is not optional. This is required.
Zuckerberg must immediately disclose these great plans that are going to make the stock go up. And, while he's at it, should announce a full and immediate audit of the company's vaunted "active user" number.
Without expertise at the top, the Facebook train wreck will continue full steam ahead as even more lock-up agreements end and employees dump hundreds of millions of shares in coming weeks.
The first tranche was unlocked this week and the stock fell to $19.
Zuckerberg may be a technological whiz kid, but he has yet to demonstrate that he can run a public company.
*This column originally appeared in the National Post