Analysts Pore Over Facebook IPO

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With Facebook’s big day looming, Web watchers are dissecting the company’s IPO plans, its bold financial projections, and the risks that investors will assume.

“Facebook is betting its growth prospects will persuade investors to pay 99 times earnings for its initial public offering, a higher multiple than 99 percent of companies in the Standard & Poor’s 500 Index,” Bloomberg points out.

Indeed, Facebook will seek a market value of as much as $96 billion, offering shares at $28 to $35 each, according to a new regulatory filing.

“It’s really, really expensive,” Bob Rice, managing partner at Tangent Capital Partners LLC, said on Bloomberg Television this week. “It’s very hard for me to get my arms around a valuation of 80, 90 billion dollars for a company that did a couple of hundred million dollars of profit in the quarter.”

Still, “the frenzy surrounding the Facebook public offering is reminiscent of the dot-com boom of the late 1990s, when investors clamored to get a piece of the next hot Internet company,” notes The New York Times’ Dealbook blog.

Meanwhile, included in its regulatory filing, this week, Facebook also noted the future threat of patent lawsuits from Yahoo over hardware in Facebook’s Open Compute Project.

“Facebook has already been fighting Yahoo over patents, and had to spend more than a half-billion dollars to pick up patents from Microsoft in defense,” TechCrunch reminds us. “Facebook notes that it received a letter from Yahoo warning that technology used in Facebook’s Open Compute Project hardware may violate 16 Yahoo patents.

Likely a bigger concern, however, “While [CEO Mark Zuckerberg] has amassed more than 900 million users since starting Facebook in 2004, his challenge is to stem slowing sales growth amid increasing competition from Google and Twitter,” Bloomberg writes.

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1 comment on "Analysts Pore Over Facebook IPO ".

1. Craig Mcdaniel from Sweepstakes Today LLC
   

   commented on: May 4, 2012 at 2:05 p.m.
   $96 Billion? I don’t think so and here is why. The real key in this evaluation is the demographics and geographic of the members especially in the USA market. I have seen, based on a number of published sweepstakes by major sponsors that Facebook’s click through / entry numbers for 4 major USA sweepstakes were lower than my own website SweepstakesToday.com. This came from the ad agency who worked with both. Sweepstakes, contest and giveaways are featured in 20 to 30 percent of all new advertisement. If Facebook has such a problem competing with second largest online sweepstakes publisher in America then what will happen when the competition gets even bigger and smarter? I just don’t see a year from now how Facebook’s supposed $96 billion evaluation will still be even close to this value if the advertisers and sponsors do not get the return they expect. Facebook looks more like Yahoo in 1999 when they were what, over $100.00 a share? I simply say to dig deeper into their numbers. Start with how much money do they make when one Facebook member sends a email message another Facebook member. I don’t see any profit in it. Am I wrong?

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