Between the Lines

Larry Dignan, Andrew Nusca and Rachel King

Facebook: Worth $100 billion after IPO?

By Larry Dignan | November 28, 2011, 3:41pm PST

Summary: Facebook will be in a rich neighborhood after its IPO and potentially be worth more than Cisco, Disney and Amazon.

Facebook is reportedly planning an initial public offering in April or June 2012 with the goal of raising $10 billion.

The Wall Street Journal reported that Facebook is in discussions with the Securities and Exchange Commission about an IPO.

If successful, Facebook would raise about $10 billion and be valued at $100 billion. The company also has a prospectus ready to roll at any time.

It has been fairly obvious for a while that Facebook would go public in 2012. The biggest question is whether Facebook missed its window to maximize its funding.

To put Facebook’s $100 billion potential valuation in perspective consider the following:

Cisco is valued at $96.8 billion as of market close.
Intel is worth $119.46 billion.
Facebook would be worth about half of Google’s market cap of $190 billion. Microsoft’s market cap is $209 billion.
Disney is worth $61 billion.
Amazon is worth $88.3 billion.

In other words, Facebook will be in a rich neighborhood among tech companies.

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Topics

Facebook, IPO, Social Media, Financial Services, Finance, Larry Dignan

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic.

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RE: Facebook: Worth $100 billion after IPO?

kkchsieewh 29th Nov

http://cxi.di.gd

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RE: Facebook: Worth $100 billion after IPO?

kenosha77a 28th Nov

Just out of curiosity, how much is ZDNet's parent company worth?

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People who think that Facebook could possibly be worth $100 billion need to keep in mind this simple word: MySpace.

What MySpace demonstrates is that services like this are fads; they are subject to being deemed "not cool" very quickly, by forces that no one understands. If that happens, revenues could crater thatFast.

I'm sure the folks at Facebook are working very hard to make sure that the product remains the best of its kind, interesting, "sticky," and so on. But fashion is fashion, and there is often no rhyme or reason to it.

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RE: Facebook: Worth $100 billion after IPO?

kenosha77a 28th Nov

@Robert Hahn

Facebook is way too "entrenched" now in the world to be labeled a "fad". And, this service is too embedded in numerous web sites to suffer a similar "MySpace" fate, IMO.

Still, I retired from a manufacturing engineering position and I still find it hard to grasp that a service which does not produce or manufacture a physical product can be worth SO MUCH. Just my bias, I guess.

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RE: Facebook: Worth $100 billion after IPO?

Heenan73 28th Nov

If Wall Street thinks they're worth $100bn, that's fine by me ... though I have fond memories of AOL, which bought Time-Life in its prime, and was sold on by Time-Life for ... not much. Then there's Yahoo! MySpace ... and plenty of others.

So far, though well entrenched in the web it's true, FB is still a one-trick pony. And un-entrenching FB is simply a matter of tweaking software.

G+ hasn't beaten them, but by gum, it gave them the jitters ... who's next?

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Sarbanes Oxley & SEC

guihombre 28th Nov

It's worth recapping what Sarbanes Oxley is, and why venture capitalists and their sock puppets in government hate it so much.

Under Sarbanes Oxley, CEO's need to sign the accounts as TRUE and ACCURATE, so if accounts turn out to be fraudulent, CEO's can be prosecuted.

Under Sarbanes Oxley, any bonuses they milk from the company have to be paid back if those accounts turn out to be false.

Under Sarbanes Oxley, they have to keep records of how they derive their accounts, so they can't pretend to have made a mistake or to not know.

Venture capitalists hated this, because so many companies are sold, not on income or profit, but on smoke and mirrors. Yet if they have to report true and accurate accounts and take liability then the illusion collapses.

----
Wallstreet Ponzi men hate Sarbanes Oxley.

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Redirection

Robert Hahn 29th Nov

Oh, come on. Have you ever actually seen an IPO prospectus? There couldn't be more in the way of warnings and caveats. "The company may fall off a cliff. The entire management team might get killed in a plane crash. A competitor might arrive out of nowhere and put us out of business." The whole thing is full of stuff like that.

To hear you tell it, it's all smooth talk from silver-tongued devils mixed in with fraudulent accounting statements. And only The Wonderful Government -- the one that poured a half-billion dollars of taxpayer money into a company backed by political donors -- can save us.

Yeah, right.

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The New Internet Bubble

terry flores Updated - 28th Nov

Facebook and Groupon are part of the New Internet Bubble that will collapse in the next couple of years and take another trillion dollars of shareholder value down the toilet. What makes it different from the dot.com bubble is intriguing: During the 1995-2000 period, a lot of people were speculating on pure unknowns. Nobody really knew what the technology could do, what the customers were willing to pay for content (nothing), and how profits could be made.

The New Internet Bubble differs from all of that in one major aspect: now we know.
We know that most of these companies have secretive executive management, are highly vulnerable to insider deals, and have business plans based on fantasies. We know what many of the lies and deceptions are, but we are still pouring money into it despite knowing so much of it is a mirage.

Makes you wonder about the future of the human race ...

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I think that's blaming the victims

guihombre Updated - 28th Nov

"We know what many of the lies and deceptions are, but we are still pouring money into it despite knowing so much of it is a mirage. "

Although I basically agree with the premise of your comment , I think that you're blaming the victims. The valuations of these assets is fabricated by buying small stakes in them at inflated prices, similar to how mock auctions work. The aim isn't to get the best value for money from the deal, it's to create the perception of a high valuation for a future IPO in which you have an (often undisclosed) conflicting interest in. These are not easy to spot scams.

Businessweek said that Goldman Sachs was [inflating a new bubble?] (Google for source) when it invested $450 million in Facebook (which would give it a valuation of $50 billion).

I see from the Federal Reserve disclosure (see Bloomberg) that the Fed basically lent at huge multiples against worthless assets. I assume if I had $450 million of Facebook pre-IPO stock and was a Wallstreet bank, then the Fed would lend me (at 35x leverage, which seems to be the new level), $15 billion at very low interest.

So having inflated a bubble, I could then take $1 billion in fees, write off the $450 million I paid inflating the bubble and have $14 billion to invest in real businesses making real things of value, e.g. Apple stock. As long as the Fed gets its money back at the end, it will pretend it made sound investments.

It all seems like a big scam to me.

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RE: Facebook: Worth $100 billion after IPO?

DonRupertBitByte 28th Nov

@terry flores

Groupon isn't doing so hot now...

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RE: Facebook: Worth $100 billion after IPO?

JillKennedy 28th Nov

Facebook must be stopped - simple as that - for the good of world.

http://mankabros.com/blogs/onmedea/2011/09/01/facebook-must-be-stopped/

They just may do it to themselves (with constant changes like the last horrible redesign) and go the way of MySpace and soon to be LinkedIn - but I think they will amass enough cash to acquire other companies that will keep them going in other business lines long after "Facebook" is dead.

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RE: Facebook: Worth $100 billion after IPO?

7mgte 29th Nov

What exactly at Facebook is worth $100B? They are not a technology company. They have no product. They basically have no purpose. Sure, you can "friend" and "like," but what is that really worth.

Oh wait, its the "advertising." Yeah, right. Ask your friends haw many have been influenced by a "like" or a TV commercial or radio spot. Among my circle of friends (mostly engineers and technical types). Sure we sometime remember a funny commercial - except never can seem to remember the product being advertised.

Facebooks valuation is a confluence of Wall Streeters ready to do a pump and dump, advertisers who fantasize about "monatizing" all those friends on Facebook, and niave investors who couldn't tell if they were in a bubble or outside a bubble.

Facebook's fundamental problem now is that it has way too many "friends" and "likes" to make any data it has useful without spending millions of dollars on data mining to cull information that is already known.