THE FAILING SOCIAL MEDIA IPO’S…
Will Facebook prove different than many of the other recent social media IPO’s? Via Reuters:
“The chart below shows the extent to which companies like LinkedIn, Groupon and Pandora have struggled in the wake of their IPOs. Investors who wanted a piece of the social networking action and who bought at the IPO price have been sorely disappointed and some have begun to wonder whether the social networking phenomenon will end up generating as few successful and long-lived public businesses as the first wave of Internet IPOs back in the late 1990s. That dot.com boom ended in a dot.com bust, with a handful of survivors such as eBay and Amazon generating – over time – significant profits for a handful of investors but resulting in large losses for many more speculators betting on the trend rather than the company.”
Facebook is valued 100 Billion and has 845 million users world wide.
That means, every user they currently have (active or not) is valued at 118 $.
Are you a Facebook user and do you think your activity on Facebook is worth 118$ for somebody else?
http://www.digitopoly.org/2012/02/07/how-many-customers-does-facebook-have/
Facebook is only worth such princely sums if internet gambling is fully legalized. If the Republican passed law against internet gambling is repealed, Facebook and Google stand to make trillions.
This would have been such an exciting IPO if it were valued at the $10 billion range and had gone public when its growth was in the accelerating phase of user additions rather than the slowing phase of user additions.
At this point to justify a PE that will have to be north of 100 on a $100billion dollar market cap, they will have to find a way to monetize the user base and I suspect this is what they fear – the process of monetizing will so annoy the users they will just leave. It will be a boon to splinter social networks. Next AOL?
IIRC, this phenomenon isn’t limited to social media, but is a near certainty with most IPO’s in the last decade or so.
In other words, IPOs are a sucker’s game (at least in the short to medium term) for anyone who is not on the inside.
I did some quick googling and couldn’t find much evidence of that theory though…. Maybe I’m just biased though, because I got burnt pretty bad on a Tyco under sea cabling IPO fiasco back in the late 90’s. And I was actually on “the inside” for that one!
Anybody know of a good source to look at the performance IPO’s over the last 10-20 years or so?
Of course Facebook will be different….it’s bankrolled and developed by the CIA as a database on the population. Silly kids Facebook is for tricks
Define failure. Wall Street will get it’s pound of flesh. Isn’t that all that really matters in Amerika?