Despite the widespread belief that Facebook's Friday initial public offering will be a resounding success, most of the articles in the business press urge caution.
I've seen nothing that will change my judgment from February 2nd ("I've already concluded that I won't be buying the stock when it becomes available"). If anything, the following developments have reinforced that conclusion.
Opinions that IPO price is too high: Forbes - "Facebook is set to price its historic IPO later this week at a reported valuation of over $100 billion....we believe the rumored IPO range is ahead of fundamentals which we value at $82 billion." Barron's - "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)."
Quarterly net income growth may be slowing (Forbes)
GM says Facebook ads don't pay off: Wall Street Journal - "General Motors Co. plans to stop advertising with Facebook Inc. after deciding that paid ads on the site have little impact on consumers' car purchases, according to a GM official."
Insiders are cashing out: Wall Street Journal - "some major stockholders sharply increased the number of shares they intend to sell as part of the IPO." Also, this: " The smart money is flying out of Facebook as the dumb money piles in."
Frankly, despite my valuation concerns, I hope that the IPO is spectacularly successful. A hot Facebook offering could trigger a rally that will lift all stocks, especially the techs in which I am heavily invested. Also, newly minted millionaires and billionaires will be tempted to spread their wealth around (to use the President's phrase, although it's not the method he envisioned). The "wealth effect" should redound to the benefit of everyone who lives in the Bay Area.
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