Facebook is expected to announce their IPO registration today and it's rumored they will be seeking a valuation of $100 billion. Now no rational investor thinks Facebook is worth $100 billion but there are so many people who are irrational and uneducated in business to purchase the stock I'm quite certain they will meet expectation. To put in perspective how ridiculous $100 billion price tag is Google’s entire market value is $188 billion and we all know how important they are. So how can Facebook even possibly think they're worth more than of Google when they only bring in a tenth of the revenue the search engine giant does?
Any other company probably would have to answer that question when it came time to sell stock to the public but not Facebook, because this company is different. Uneducated wannabe investors will clamor to purchase stock in the social network site regardless of the price because quite frankly it’s the In thing to do.
The risk is that while Facebook may pull off a $100 billion valuation, it might have trouble going higher. Especially if at some point the irrational exuberance wears off and reality starts to set in.
The fault lies with private investors who have driven this company up so much in private markets that it’s been picked clean, leaving little upside for public investors. Something similar happened to Zynga, which had been so overpriced in private funding rounds that its IPO price was actually lower than what it fetched from T. Rowe Price, Fidelity, and others.
That sort of thing isn’t supposed to happen. But this is the brave new world of tech investing. With Facebook, and some of the other new tech companies, the smart money has already got in and got out long before the IPO ever happens.
So if you’re thinking of investing in Facebook please don't. In my opinion the stock will deflate in value over the coming years and by 2015 be worth less than 1/8 of its IPO value. Leave this for the suckers and move on to something that I see offers you some sort of possible upside.
This post was proofread by Grammarly