$US38 share price values Facebook at US$104b
Each member worth about $115
Facebook has decided it is worth US$104b, valuing each of the shares that will go on sale early Friday US time at US$38.
The price means the company expects to raise US$18.4 billion or so, a lazy billion or so behind the biggest first-day fund-raiser of all time, Visa. It also means, if we round Facebook's member numbers down to an even 900 million, that the $104b valuation makes each member worth about $115.
Financial analysts expect the share price to rise on listing day, as demand for a piece of the company meant the $38 price exceeded initial expectations of $28 to $35. The nature of the initial public offering process means most shares were pre-sold to institutional investors, a situation which meant lesser investors were unable to get their hands on shares and will instead pay a premium to acquire the stock on the open market.
Just where the stock heads in the medium to long term is anyone's guess. Some analysts point to strong margins - last year's profit was $1b on revenue of $3.7b – as a sign of likely future growth. Others point to difficulties monetising users, especially when they access Facebook in the cramped environs of mobile devices. Nay-sayers also suggest Google made more money per user, faster.
Others point out that with $18b of cash sloshing around, Facebook will have all the money it could ever need to acquire companies or build technologies that will help accelerate its monetisation efforts.
The float is a big technology event unto itself, as US stock exchanges have reportedly tuned their systems for an expected deluge of trades. The Los Angeles Times reports the New York Stock Exchange has dedicated a server to the event and that NASDAQ has set up a dummy ticker for the company to test trades*.
For what it is worth, the big numbers generated by the float are, however, a drop in the ocean compared to those involved in the European sovereign debt crisis, as European Union members are in hock to a collective €8.2 trillion, according to the Guardian. Greece's debt, which is proving so burdensome to the planet, was estimated at €355.617b in 2011.
*A quick search of the NASDAQ site found links to “fb.nasdaqomx.com” which in turn linked to pages in Facebook's newsroom. One of those, at http://fb.nasdaqomx.com/Culture/Hacker-Culture-9d.aspx, yielded the rather curious screen grab below, which purports to be published in both the past and the future. Perhaps that's why investors are so excited.
On a PE ratio this values Facebook at 107x earnings. Which for a company that has admitted it has serious difficulty turning users into revenue is simply insane.
For a comparison, Apple trades about 13x and Google about 19x. How anyone can think Facebook is worth it is beyond me.
Yet the shares will probably end the day at least 50% higher due to demand of the stupid. One WSJ poll had them expected to end at > $200. Where they'll be trading in 12 months time is anyone's guess.
A very good comment: FB is a Ponzi scheme
From what I've seen so far, it's a bit like the dot con boom is back: it will only run for as long as it finds new victims, sorry, users/advertisers to sign up:
It seems to agree with my own feelings about the value of FB: it's "make your money new before it falls apart" style marketing, and again the investors are led to hold the can afterwards.
Anyone who thinks FB is worth $1,000,000 should...
have all their money placed in a big mulcher and used for compost, as they clearly have no idea how to handle it themselves.
It seems it's not enough to have the Web 2.0. Now we need the .com bubble 2.0