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Not All Facebook Coattail Plays Are the Same

Rick Aristotle Munarriz
February 6, 2012

Investors and speculators are already profiting from the Facebook IPO, even if we're still at least a couple of months away from the social networking giant's actual market debut.

What gives?

Well, buyers have been rushing into many of the publicly traded companies that are in one way or another related to Facebook. Some of the moves make sense. Most of the moves do not.

In an attempt to separate the companies that are worthy of riding Facebook's coattails from those that will be eventually shaken off, let's go over five of the related stocks that have moved the most since news broke of a Facebook filing six trading days ago.

  1/26/12 2/3/12 Gain
Zynga (Nasdaq: ZNGA  ) $9.52 $13.39 41%
Renren (NYSE: RENN  ) $4.16 $5.22 25%
Quepasa (AMEX: QPSA  ) $3.68 $4.64 26%
LinkedIn (NYSE: LNKD  ) $72.39 $80.37 11%
Firsthand Tech (Nasdaq: SVVC  ) $15.65 $27.60 76%

Source: Yahoo! Finance

Thanking their lucky Zuckerbergs
Zynga is one of the few Facebook jumpers that make sense. The runaway leader in social gaming was a marginally busted IPO before The Wall Street Journal reported that Facebook was going public before the market close on Jan. 26, trading for a little less than its IPO price of $10 back in December.

To Zynga's credit, it didn't shoot 41% higher overnight. It did move nicely higher, but its two biggest days were Thursday and Friday of last week, after Facebook's filing became public.

Many investors were surprised to find Zynga accounting for 12% of its total revenue -- and most of its non-display advertising revenue. However, resourceful analysts and investors took things one step further. They reverse-engineered Zynga's contribution to Facebook to realize that the social gaming company behind FarmVille and Words with Friends actually generated robust revenue in its fourth quarter. Zynga itself doesn't report until Valentine's Day, but Cupid found a match. It's quite possible that the shares may have moved ahead too much, but at least there was a relevant and intelligent association.

Renren and Quepasa were real head-scratchers. Renren runs China's most popular social networking website. Quepasa operates a Spanish-language social site that's actually in a state of decline. Why should either company benefit because Facebook goes public?

Renren is growing at a steady clip, but China's restrictive government is likely to tighten the clamps on chatty social sites. Quepasa experienced a 32% decline in monthly active users to its Spanish-language website in its most recent quarter. Quepasa is looking better with its recent myYearbook acquisition, but it's still an odd company to jump on Facebook's bandwagon.

LinkedIn's move isn't as pronounced as that of the other companies on this list, though its double-digit percentage gain over the past six trading days is clearly no