In that regard, as many regular readers know, I’ve spent most of my career leasing and financing equipment for all types of businesses across the U.S. And although leasing in particular is known for creative solutions to user’s individual financial situations, every transaction significantly depends on the financial state of the equipment user. Consequently, it’s critical that lessors learn all they can about potential lessees to accurately assess the risks in any transaction.
Therefore, for the sake of illustration, I thought I’d note what lessors would likely do to assess facebook as a new customer having an equipment need. And in that regard, the first question usually asked about any prospective lessee would be; what does the business do?
As I understand facebook’s operation, its only business is providing a website serving as a social network for users to communicate with “friends,” post information and pictures, and for various types of groups to meet on-line and interact with others having similar interests. And as far as revenue goes, their only source of income is derived from selling ad space on their site.
Now, I grant you they’ve done an incredible job building their business, becoming a household name in a relatively short period of time. However, strictly from a lender’s perspective, if their only revenue source is income from ads, and ads depend on continuing viewership of visitors to their site, I think lenders would have concerns as to what would happen if viewership fell off for any reason.
Therefore, as a result of the preceding analysis, I really have to wonder if there’s enough substance to facebook’s business to merit a stock offering of the size and share price as theirs was. Or perhaps, was there a considerable amount of promotion and hype inflating both?
And while I haven’t the answer to the preceding question, in any case, as far as the promoters go and the underwriters as well, they’re involved in extremely risky businesses themselves and certainly should understand there are no guarantees regarding most things they do. Even individual investors with any experience at all know that as well.
Thus, I don’t understand the premise for law suits. Because if there’s some kind of reimbursement awarded here due to a flaw in the stock-sale system at NASDAQ , with that kind of money at stake for investors, I think they should have done their homework in advance, seen the problem and stopped the process til it was fixed .
What’s more is, if this kind of remedy’s allowed where incompetence and laziness are rewarded regardless, that says to me that it’s no longer a free enterprise system, but more like a governmental operation where others are made to pay for incompetent’s mistakes.
That’s it for today folks.
Adios
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