Facebook is expected to file a $5 billion initial public equity offering implying an estimated company valuation of $75 to $100 billion. According to Facebook, the site has 800 million registered users and over half of these users log-on to Facebook at least once per day. In addition, 80% of these users are from outside of the U.S.
Clearly, Facebook has a global reach and an active audience, however can Facebook live up to its valuation expectations? Does “users” = “buyers”? Do markets believe that Facebook should be valued in the range of these other U.S. companies?:
|Company||Market Cap ($bn)|
|Int’l Business Mach.||222|
|Proctor & Gamble||182|
|Johnson & Johnson||178|
|Wells Fargo & Co.||161|
|Merck & Co.||119|
I am skeptical of Facebook’s ability to grow into the aggressive valuations that the sell-side analysts are forecasting. It is hard to understand how Facebook can command anywhere near the valuations of these companies listed above.
When I take a look at other tech-company comparables such as LinkedIn and some of the rosey assumptions made by Wall Street I continue to be uncomfortable with jumping in on an over-heated Facebook IPO.
What are your thoughts on Facebook’s offering? Is buying the IPO shares a wise investment or just jumping on the band-wagon of another over-valued “Hot Wall-St. IPO”?
No related posts.