So the highly anticipated Facebook IPO is getting closer and seems like Facebook is looking at $77-$96 billion dollar valuation. Yea that is Billion with a B! Facebook has seen a rapid growth and currently has more than 900 million users, but can the growth continue? An even more important question is can the revenue continue to grow? Its latest quarterly revenue fell by 6% over the previous quarter, although a 45% growth YOY. Yet another important issue is that the dual classes of shares, Mark Zukerberg will control over 57% of the voting shares after the offering. He can pretty much do as he pleases and there is nothing investors can do, which is “ok” if the stock gains but investors are left stranded when things go wrong. For example, if Mark decides to spend a billion dollars on a photo sharing app that has not earned a penny there is nothing anyone can do. Although, some fund managers believe Facebook will be worth over $200 billion in four years, I don’t see a value anywhere close to that. At this stage I wouldn’t consider Facebook a serious investment and wouldn’t allocate a significant portion of my investments. Depending on what the IPO price will be, currently estimated between $28-$35, I might get a few shares for my “just in case fund.” If you are interested in knowing more here is Facebook’s IPO Roadshow.
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