FriendFinder Networks Inc. (FFN) serves as an example of the importance of carrying out fundamental analysis.
The stock traded at 10 at the time of its IPO on 5/11/11. Now it is trading at 0.59. Why such a drop? FFN has a total debt of 526 million as of its 2010 10-K. Its net income for 2010 was (43, 153,000).
This stock was a perfect short candidate at the time of its IPO due to its debt burden and its lack of profitability.
Notice how the stock popped 38% from .54 to .75 on high volume on 12/23/2011, only to then drop back to .59 by the end of the day. Is it a good time to get in?
I would say not, just because this company's financial statements suggest no reason why one would want to invest in FFN. There are definitely better companies with more solid fundamentals that give one exposure to the internet social networking space.
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