Investors question Facebook's $50-billion valuation, fear a bubble, poll says
Call it the $50-billion question: How much is Facebook worth?
No matter how many friends Facebook is making on Wall Street, plenty of investors don't think it's worth $50 billion. In fact, that recent valuation for the world's most popular social networking service is inflating concern of a bubble in the technology sector, according to a Bloomberg Global Poll, a quarterly survey of 1,000 Bloomberg customers who are investors, traders or analysts.
Sixty-nine percent of investors surveyed said Facebook was overvalued after Goldman Sachs invested $450 million and Russian investment firm Digital Sky Technologies invested $50 million in a deal that pegged the Palo Alto, Calif., company's value at $50 billion.
Ten percent of investors surveyed said the valuation was on the money, and 4% said Facebook was worth even more.
Even analysts who are bullish on Facebook say the company has provided too little financial information and does not have a long enough track record to determine a valuation. Facebook, which has more than 600 million users, is valued at about 25 times its 2010 revenue.
Many investors who have been clamoring for Facebook shares are nervous about missing out on the next Google. They might regret passing -- at least initially -- on Google, which had a blockbuster initial public offering in August 2004. Facebook shares have been a hot commodity on private market exchanges.
The Bloomberg poll may be one of the first signals of unease among investors about the soaring valuations of privately held Internet companies with more than half of the respondents saying Facebook's rapidly ascending valuation could point to a bubble in the market.
LinkedIn, the social networking site for professionals, said Thursday that it planned to raise as much as $175 million in an initial public offering. The company is valued at $2.5 billion on online marketing trading exchange SharesPost. You can find its prospectus here.
Facebook had revenue of $1.2 billion in the first nine months of 2010, according to information Goldman Sachs provided to prospective investors. Goldman Sachs originally had offered Facebook shares to its U.S. clients, but it called that off because of concerns that the offering would violate U.S. securities laws.
Investors’ excitement about Facebook seems to have cooled a bit in recent days. According to TechCrunch’s Michael Arrington, Facebook shares were trading at $28.26 a week ago, giving the company an implied valuation of $70 billion. In this week’s auction on online private exchange SecondMarket, the share price dipped 7% to $26.25, giving it an implied valuation of $65.5 billion.
The Bloomberg poll, conducted by Selzer & Co., has a margin of error of plus or minus 3.1 percentage points.
-- Jessica Guynn
Photo: Facebook CEO Mark Zuckerberg. Credit: Eric Risberg / Associated Press