http://online.wsj.com/article/SB10001424052970204879004577110780078310366.html?mod=WSJ_hp_LEFTTopStories
http://money.msn.com/investment-advice/latest-4.aspx?post=0a25d312-9521-45d9-8d8d-e3d8fdf4cca0
The Facebook IPO story is moving faster than I expected. I should not be surprised. The company is seeking to raise $5 Billion to $10 Billion in its raise. I actually think it is reasonable; given the company’s revenue of $3.71 Billion last year. Despite disappointment from analysts who have complained the company’s 2011 revenue actuals is lower than hoped for, I still think it is a respectable number.
The site is becoming more and more popular. The company sells both advertising and fee based services. The company is being managed by grownups. I still think a $5B raise on an IPO is reasonable but not for a valuation of $75B to $100B. The multiple is outrageous. How in the world did they calculate the valuation? I know most analysts will point to a comparable; meaning the last company that received an outrageous valuation. Setting corporate valuation is both math and art.
As has been pointed out to me, the analysts are now pushing for a valuation of $75 Billion to $100 Billion. Now that is just plain nuts. The $100 Billion valuation appears to have been based on Google’s IPO. However, Google launched at a different time when the Internet was recovering from the crash and there were no other competitors and no stories about Madoff. In other words, investors were less intelligent and more naive than they are today.
I was hoping Zukerberg would have better control of his bankers but I fear these are the same types of yahoos who managed Groupon’s IPO. Come to think of it I think Goldman Sachs I sin the mix.
Does this have the same chance of being another Groupon? I hope not.
Unlike Groupon, Facebook has a brand name. When Groupon’s IPO was launched the company had very little history behind it and frankly its expenses were out of control. There was so much more wrong with Groupon.
Of course the bad news is that Facebook’s expenses are now growing faster than its revenue. However, that is not new or bad for a company that is transitioning.
My fear for Facebook is that the bankers will position it so that the company’s valuation will be absolutely outrageous; resulting in another Groupon-type of IPO.
I like Zuckerberg’s attitude towards the business side of Facebook. It is a healthy approach to staying centered in the midst of an IPO tornado.
I need to think about this more.