Is Facebook overvalued?
"Frenzied trading" of the company's privately held shares is fueling speculation about an imminent IPO and the real value of the social media network
A frenzy of buying and selling in privately held Facebook stock has attracted scrutiny from the Securities and Exchange Commission, prompting speculation that the social networking giant may soon be forced to go public. While some recent stock purchases are placing the company's worth as high as $56 billion (Google, by comparison, is valued at $192 billion), certain analysts contend that it's already overpriced. Who's right?
It's a bad time to buy: The recent activity in private Facebook shares is a "tell tale sign of overvaluation," says Jason Bishara at the financial advisors social network site linkedFA. In the past few weeks, I've repeatedly been approached to buy private Facebook stock before the company goes public. It seems "extremely savvy investors" are trying to break up their large amount of shares and sell them to less savvy individuals. "No sophisticated investor would sell today, unless they believed the company was already overvalued." New investors should be "very cautious" about buying.
"Investing in Facebook now? Buyer beware: Is buying Facebook private stock a scam?"
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Facebook will only grow in value: If you figure 20 percent of all page views will be on Facebook by 2015, you can conservatively estimate that the company will get 20 percent of money spent on internet advertising, says Wedbush analyst Lou Kerner on Bloomberg TV. That's $22 billion alone, not counting money it could generate from its own advertising network and credit. That could make for $32 billion in revenue and a $200 billion valuation in 2015. "Facebook appears to be well on its way to ubiquity."
The tech market is too volatile to evaluate accurately right now: The Silicon Valley bubble is showing "signs of reinflating" say Jenna Wortham and Evelyn M. Rusli in The New York Times. And, while "no one really knows if there is a bubble until after one pops," the "high" enthusiasm for these privately held Facebook shares is one of "many signs of froth."
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
Cautious optimism surrounds plans for the world's first nuclear fusion power plant
Talking Point Some in the industry feel that the plant will face many challenges
By Justin Klawans, The Week US Published
-
2024: the year of Black country artists
In the Spotlight Beyoncé debuted 'Cowboy Carter' at the top of the country charts, shining a spotlight on artists like Shaboozey
By Theara Coleman, The Week US Published
-
Explore new worlds this winter at these 6 enlightening museum exhibitions
The Week Recommends Discover the estrados of Spain and the connection between art and chess in various African countries
By Catherine Garcia, The Week US Published