Posts filed under “IPOs”
“In the short run the market is a voting machine, and in the long run it is a weighing machine.”
-Benjamin Graham, regarded as the father of security analysis
With the FB IPO imminent, investor frenzy continues to grow. Given all of this interest, the stock may be a short term trading winner. Over the long haul, the IPO valuation does not leave a lot of room for investors.
That sentiment is reflected in the well known Graham quote — as far as emotional in the minute voting goes, the stock could see a hefty pop from the IPO price of $32. Consider this about the frenzy: Private investors who bought in during the last round paid 25% more than the IPO price.
That doesn’t mean this won’t bounce on the IPO. I cannot predict the madness of the multitudes, but a 30, 40, even 50% pop on the opening is not unthinkable.
There are a universe of fund managers I expect will have to own this. Despite the simple fact that at the IPO price of $32, FB stock will be 6 times as expensive as Google (GOOG), and 8 times what Apple (AAPL) shares cost.
“Despite all the excitement, investors would do well to skip the deal. Facebook’s shares will be richly priced, both in absolute terms and relative to the stocks of established growth companies Google (GOOG) and Apple (AAPL), as Barron’s argued in February when Facebook filed for its IPO (“At Long Last Facebook,” Feb. 6).
If the deal is priced at $35, Facebook will be valued at around 70 times projected 2012 earnings of 50 cents a share and 18 times estimated revenue of $5 billion.
In contrast, Google, at $610, trades for less than 15 times 2012 profit estimates and under six times revenue. At $570, Apple shares have a 2012 P/E of just 12 and the company’s sales have been growing more rapidly than Facebook’s despite a revenue base that is 40 times larger. The effective P/Es on Google and Apple are even lower when factoring in their huge cash hoards. Facebook also will have plenty of cash—an estimated $9 billion—after its IPO.”
I wonder: Who is doing all the clamoring for this stock: Mon & Pop oon main street, or finance pros (term used loosely) who want a piece of FB?
We will find out soon enough . . .
Mad About Facebook!
Barron’s May 12, 2012
Less than meets the eye at Facebook Barry Ritholtz, Washington Post February 11, 2012 > Facebook is valued at “plenty” By Wall Street’s tech cognoscenti, Take 1 billion friends Times 5 dollars, then Times IPO multiple: 20! — Limericks Économiques > Last week, I made a surprising discovery about Facebook: It has far fewer “active”…Read More
No, not really. I am as much of a Yelp fan as I am a Facebook fan — which is to say, not much at all. As a writer, I find the write-for-free-we’re-going-public approach of Yelp/Huff Po/Seeking Alpha utterly reprehensible. As a gourmand — and a fat bastard — I prefer the Zagat model. There…Read More
> My Washington Post Sunday Business column is out. This morning, we look at how overvalued the $100 billion dollar Facebook IPO is. The print version had the full headline What’s Facebook worth? Much less than advertised — in the online edition, it was Less than meets the eye at Facebook. Its based on my…Read More
When the Twitter handle @GSElevator first launched, I followed it for a while, but soon thereafter unfollowed. Some of it was funny — very funny — but it read less like overheard true conversations, and more like what someone imagined would be overheard in a Goldie elevator. I hadn’t thought about it until a reader…Read More
I have been arguing that $100B is rather rich for Facebook. Perusing the S1, and discussing this with Bloomberg’s Dave Wilson has further confirmed this. Why? It has to do with what they consider a daily or monthly “user.” Indeed, this is extremely significant, because the excitement about Facebook’s reach and user base is driving…Read More
In case you were unaware, IPOs are terrible investments — at least most of the time. The lottery ticket dreams keeps hope alive that this next one is going to be a giant winner. Hopes are pinned on the giant Facebook IPO, coming out at an expected 100 X earnings and 30 X revenue. Its…Read More