Did Facebook Go Public Too Late?

The performance of Facebook's

stock since its IPO has dominated market discussion over the past few months. Now trading under $20, the social networking giant has lost over 50% of its market cap since its debut on the Nasdaq. With no clear plan for how the company hopes to tackle mobile, some investors may be wondering if Facebook went public too early. However, from a trading perspective, Facebook may have come to the market too late. Long before it was trading on the Nasdaq, outsiders could get access to shares of Facebook through SecondMarket -- an online exchange allowing investors to purchase shares of companies which have not officially debuted on the public market. So, although Facebook has been public for only a few months, it has really been trading for years. If one creates a chart of Facebook's trading range over the past two years (combining its time on SecondMarket with its time on the Nasdaq) a familiar pattern emerges. The chart below compares Facebook over the past two years (top) with Netflix

(bottom). Facebook, like Netflix before it, largely traded as a momentum stock: slowly building up and moving higher before ultimately plummeting. Long-term holders may want to stay away from momentum trades, but swing traders can use momentum stocks to profit: going long during the run higher, then shorting the name in the wake of the blow-off top. Unfortunately, it appears that Facebook's IPO day was the height of its blow-off top -- leaving little room for traders to play it successfully either long or short.