The Skinny blog is written by Rick Smith, editor and co-founder of WRAL Tech Wire and business editor of WRAL.com.
RESEARCH TRIANGLE PARK, N.C. – When Facebook goes “live” on the Nasdaq today in what is expected to be a multi-billion dollar feeding frenzy, Scot Wingo will be casting his hook, hoping to land shares early.
“My plan is to buy at the open by placing an order through an electronic broker like etrade,” Wingo tells The Skinny.
“I wasn’t able to get in on the allotment, so I’m going to just jump in with the rest of the world day one.”
If any high-tech entrepreneur in the Triangle has the skinny on Facebook’s value and whether to invest in the world’s largest IPO today, it’s Scot Wingo, founder and chief executive officer at ChannelAdvisor. He not only follows Facebook closely as part of the e-commerce business world but also writes for the business news website SeekingAlpha and was among the lucky ones who scored Google shares early on.
But Wingo isn’t getting in for a quick profit. A “pop” in Facebook’s opening $38 price and already secured by so-called “allotments” with big investors is expected. Wingo does hope to get in early – and then hang on.
“A lot of these type of IPOs have a pop on day one of 50-100 percent,” Wingo says. “I’m sure Facebook will set records in this regard.”
However, based on his analysis of trends in ecommerce and Facebook’s impact on that space, Wingo plans for long-term returns.
“Let’s say it pops on day one to $70 – nearly 100 percent. Since i’m making a super-long bet, hopefully the stock will be worth 10-20 times in 10 years,” he explains.
“In that view, the $35 range today will turn into $350-$700. So even if I end up getting $70, that will not be a big difference in the return over that time frame.”
Wingo points out that just because he is “buying this IPO” he is not “endorsing it in any way or suggesting is it a good investment for anyone not willing to take substantial principal risk with the investment.” (Read Facebook’s own list of “risk factors” here.)
Making the Play
Why does Wingo believe Facebook is a good bet?
“Facebook has 900 million users – half of them use the service every day,” he says. “Never in the history of any online product has there been such adoption. When you think of how fast that has happened, relative to other ubiquitous technologies (cars, electricity, tv, computer, phone), they’ve reached this level in a crazy short time relatively.”
Wingo and ChannelAdvisor track Facebook with a blog and an index that examine the strategies of companies endorsing and utilizing Facebook. So Wingo isn’t just gambling on hype.
“Today, 85 percent of Facebooks’s advertising and the rest is from applications – specifically gaming right now, largely Zynga [“Angry Birds”] driven,” Wingo says.
“In the future, we believe each of these areas of revenue will grow dramatically as Facebook does things like enhance the mobile experience, and ramp up the applications. We also are very bullish that Facebook will add many new areas of revenue.”
Wingo then laid out his case:
“One in particular we are interested in is e-commerce. While there isn’t a clear model that works today, we strongly believe that Facebook or a application partner, like a Pinterest [another fast-growing social media site], will crack that code.
- What if you could go to Facebook for user reviews and filter those by your network?
- What if you saved more money by getting your Facebook friends together to group purchase
- What if retailers offer Facebook exclusive products and discounts?
- What if Pinterest made it easier to curate and purchase things for your wedding/special event?”
Supporting the Entrepreneurial Spirit
Wingo also likes the moxie that he sees in Facebook’s top guy Mark Zuckerberg.
“As an entrepreneur I have a deep respect for what Zuckerberg has created and his unwavering focus on building a great product,” he says. “That is going to take some patience to pay off and the stock will probably be highly volatile, but it’s a bet I’m personally willing to make.
“Long-term focused visionary founders like Steve Jobs, Sergey Brin and Larry Page [Google], Jeff Bezos [Amazon] have shown that is the best way to create super value over a long-term, 10 to 15 years.
“So like Google, my plan is to buy and hold for a very long time – so long that hopefully the IPO price going from $20-40 or whatever happens is a non-event.”