Sunday, January 9, 2011

Focus On Tech,Part 2:What Facebook Is Really Worth

Given a recent surge of investor interest in Facebook,Wall Street is discussing just how much this company is really worth.The more thoughtful retail investors are watching to see if Facebook would be a good prospect for them,should it ever go public.Nick Beim of venture capital firm Matrix Partners thinks the 50 billion dollar price tag that Goldman Sachs put on Facebook is an extraordinary valuation for a 7-year old company with 2 billion in revenue.
At the same time,Facebook does have extraordinary growth.It is increasingly a large source of traffic to Google and many other web sites.
Goldman Sachs' 450 million dollar investment in Facebook is an attempt by them to play the private finance market in many ways.The Securities and Exchange Commission may get involved in overseeing this market,but they have a lot more important things on their plate at the moment,Mr.Beim points out.
Ryan Jacob of Jacob Asset Management,who participated in the original Internet boom time,says it's very difficult to know what the margin structure of private companies such as Facebook is.It's a murkier picture.A lot of the information about these firms is hearsay and very speculative.
A valuation is just a snapshot,Mr.Jacob feels,so it's really hard to say what Facebook is actually worth at any given moment.Valuations can change from day to day.The 50 billion valuation that Goldman Sachs put on Facebook was probably valid at that point in time,but may not be accurate now.
A fund that Goldman Sachs set up for private investors to get in on Facebook with has been filled up in short order.Many believe that Facebook will have its initial public offering as early as this year,when retail investors would get a chance to add Facebook to their holdings.That will be a huge event,if it indeed occurs,based on Facebook's vast reputation alone.
Goldman Sachs(GS)

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