Market Overview

How to Trade Goldman Sachs and GSV Capital Ahead of Today's Big Facebook Announcement

There has been a ton of hype for what has been deemed an “awesome” new feature coming to Facebook this week. Whatever that feature is, the world won't have to wait much longer: the social networking giant is scheduled to make an announcement at 1:00 p.m. EDT today.

The latest rumor suggests that Facebook may unveil an in-browser video chat feature that's powered by Skype, the video conferencing software that Microsoft (NASDAQ: MSFT) acquired last May for $8.5 billion. If the rumor proves to be true, this news would not only be huge for Facebook but also provide Microsoft with a much-needed win – the company's first win in a long, long time (excluding video games, the one area where Microsoft has excelled).

Facebook, which is closing in on 700 million users, has been making investors drool with its highly anticipated IPO. Facebook is so desirable to investors that they rushed to buy up shares of LinkedIn (NYSE: LNKD), a site that's largely known as the business version of Facebook. Twitter is also getting a lot of attention, no doubt because of its own success in social media, but also because investors are looking to cash in on Facebook's competitors.

Just last week, GSV Capital (NASDAQ: GSVC) made headlines and enjoyed a spike in its share price after announcing that it had acquired 225,000 shares of Facebook. By buying into GSV Capital, investors could indirectly buy a piece of Facebook before the company's IPO.

Goldman Sachs (NYSE: GS), meanwhile, has a $400 million stake in Facebook; its clients have another $1.5 billion invested in the firm. While that is a small fraction of the shares owned by Facebook's staff and other key investors, Goldman Sachs' investment is particularly important because Goldman is expected to be a key player in taking the company public.

ACTION ITEMS:

Bullish:

If you think that Skype will be a part of today's announcement, count on Microsoft to reap some long-term benefits of the deal.

  • Skype or not, if Facebook's announcement involves video, Comcast (NASDAQ: CMCSA), Time Warner Cable (NYSE: TWC), AT&T (NYSE: T) and other broadband Internet service providers will greatly benefit. By bringing additional video capabilities to Facebook, broadband usage will go up among total users (the number of broadband users will be more likely to increase) and among individual users (individuals will use their broadband connections more frequently).
  • Apple (NASDAQ: AAPL) may not hold the monopoly on video conferencing, but it does make the products (iPhones, iPods, iPads, MacBooks, etc.) with the most beloved webcams. Which devices do you think people will reach for if new video features are added to Facebook?
  • Similarly, Dell (NASDAQ: DELL) and Hewlett-Packard (NYSE: HPQ) could see a slight benefit in the long-term. But Apple is the key manufacturer here.

Bearish:

Considering the level of hype for today's announcement, there is the possibility that Facebook will disappoint its users – and, consequently, its current and future investors. If that's the case, you might want to take a look at:

  • LinkedIn: The company may not be as hot today as it was during its IPO, but it is still one of the most popular (and most important) social networking sites in the world.
  • Google (NASDAQ: GOOG): In terms of market potential, Facebook is one of Google's biggest adversaries. A new video offering on Facebook could spell doom for YouTube. But if that video offering fizzles (or proves to be nothing more than a false rumor), YouTube – and thus Google – should continue to rise.
  • The same could be said for Netflix (NASDAQ: NFLX), one of the leaders in streaming video.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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