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

Facebook's 2010 revenues could reportedly fall between $1 billion and $1.1 billion -- an estimate Mark Zuckerberg feels is "not so far off in either direction."
(Image credit: Corbis)

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?"

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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."

"A silicon bubble shows signs of reinflating"

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