Time to short Facebook

With signs that Facebook may be near saturation point, Matthew Partridge proposes shorting it. Plus, he updates on his trades to date.

When social-media group Facebook first went public at $38 a share, many people thought it too expensive. Those doubts looked sensible when the company lost nearly half of its value within a few weeks of trading. Yet since then the naysayers have been proved dramatically wrong anyone who bought Facebook at its lowest point of just above $17 would have multiplied their money near-tenfold in less than five years. Even if you had invested at the list price you would have made more than 36% a year on your investment. Now its CEO and founder, Mark Zuckerberg, is being semi-seriously touted as a presidential candidate.

However, Facebook's best days may be behind it. Recently the company has been accused of everything from facilitating terror to affecting the outcome of the 2016 presidential election. While much of this is overdone, governments around the world are now treating Facebook as a serious publisher, and as a result, are demanding proper oversight. Facebook has already promised that in the near future all political advertisers will have to comply with US regulations on such broadcasts. And while some new rules may be harmless, or merely inconvenient, others strike at the heart of Facebook's business model. One big bone of contention is the way it allows advertisers to target users based on their preferences which is, of course, Facebook's main draw for advertisers. Any restrictions on the use of user data could seriously impact the bottom line.

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri