Craziness: Facebook $100 Billion IPO

Jun 13, 2011
J. Webster
Comments Off on Craziness: Facebook $100 Billion IPO

I just don’t understand how Facebook can be worth that much money. It seems absurd that a social networking site can generate the advertising money to warrant an IPO of $100 billion. People don’t go on Facebook to buy stuff. But what do I know. I thought Mark Zuckerberg should have sold the site to Yahoo when he had the chance for $1 billion. Facebook’s earnings last year were around $600 million, and are supposed to only increase, but I just don’t think Facebook can grow their earnings over time. I see them dropping off, as Facebook loses it’s appeal.

The $100 billion market cap for a company like Facebook, where you go to chat, exchange pictures and share, more often than not, pretty trivial and useless information, seems crazy. If you look at the market cap of Apple as a comparison, $300 billion, how is Facebook worth 3 times less than Apple who sells the most coveted products in the world – real products.

An even better comparison is Cisco Systems, who would have a market cap less than Facebook if their IPO valuation hits the $100 billion target. Don’t seem right that the company that build the back end of the internet is worth less than what is really just a layer on top of the internet. The only way Facebook seems worthy of such a lofty IPO is if they supplant Google somehow. Meaning, that users start using Facebook as a place to search and buy goods and services rather than a place to chat and share stuff. Which I don’t think is going to happen in a million years.

Want another example? See Amazon.com’s stock, sitting at around $190 a share, it puts the company’s market cap at $85 billion. Yes, Amazon would have a smaller market cap than Facebook if they reach a $100 billion IPO. To me, that just doesn’t make sense.

Then again, how in the world is a company like LinkedIn worthy of a valuation of $10 billion? I guess that’s why everyone is saying there’s a new bubble in internet and tech related stocks.

Facebook’s hand is being forced somewhat, in terms of the IPO, as the Securities and Exchange Commission requires that some companies like Facebook must disclose financial information if they have more than 500 private investors. There will be no place to hide anymore when they have to disclose and report each quarter how much they’re making. Certainly should be interesting.

In the end you have to hand it to Mark Zuckerberg, who could have sold out for a million dollars but instead went for not $1 billion but for the $100 billion. Sure, it’s not all his money, but he does get a few billion.

What do you think? Would you buy Facebook’s stock on the IPO?

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