02-01-2012, 04:40 PM
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Choice is an Illusion
Industry Role:
Join Date: Feb 2005
Location: Land of Obama
Posts: 42,635
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Facebook?s IPO Shares May Be Five Times as Expensive as Google
Where is that "Facebook Bubble" people keep warning us about???
Quote:
Feb. 1 (Bloomberg) -- Facebook Inc. may offer shares at more than five times the valuation of Google Inc. as the world?s largest social-networking company attempts the biggest Internet initial public offering on record.
The company is seeking to raise $5 billion, according to a regulatory filing today. The sale may value Facebook at as much as $100 billion, two people with knowledge of the matter said last week. That implies a valuation of 26.9 times sales last year, compared with about 5 times for search-engine operator Google as of today?s close.
?The $100 billion valuation that?s being tossed around just puts it at a level we?ve never seen,? said Jeffrey Sica, chief investment officer of Morristown, New Jersey-based Sica Wealth Management LLC, which oversees $1 billion. ?They have to be able to show that not only do they deserve to be at that level, but they have multiple channels to create new revenue.?
Facebook co-founder Mark Zuckerberg is asking investors to pay more than double the valuation of Google?s 2004 IPO even as competition from Google+ and Twitter Inc. increases. The Menlo Park, California-based company wrested the lead in U.S. online display ads from Yahoo! Inc. in 2011, taking a 16.3 percent share, according to researcher EMarketer Inc.
Sales at Facebook, which became the dominant social- networking site in 2008 by leapfrogging pioneer MySpace Inc., surged 88 percent to $3.71 billion in 2011. Net income in that period jumped 65 percent to $1 billion. Facebook?s revenue may rise to $6.5 billion to $6.9 billion this year, EMarketer estimates show.
The site, which has amassed more than 800 million users, makes money by selling ads to companies that want to reach that growing base. Industrywide, spending in the U.S. online display ad market may surge 20 percent this year, according to EMarketer.
To capture those ad dollars, Facebook will have to find ways to continue to engage users. U.S. visitors to Facebook in December spent an average of 7 hours on the service, a 32 percent increase from a year earlier, according to Reston, Virginia-based researcher ComScore. Visitors spent about 4.5 hours on Google?s sites and even less on Yahoo?s.
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