I’ll spare the not-so innocent on this one. Yesterday afternoon I received a rather lengthy break down of the Facebook IPO from a fairly large regional bank’s assuringly salt & pepper haired Chief Investment Officer. The email basically recapped everything you already know, unless you’re living under a rock; the pricing snafu, a tick by tick recount of the shares’ movements, etc. And then he goes onto assess the possibilities of success like other maybe misunderstood tech companies in the past:
At its offering price, FB was valued at a price-earnings multiple of more than 100 times. Very few companies are able to sustain such a lofty valuation for very long, as investors expectations for parabolic growth eventually become too hard to achieve. Yet Facebook is a very unique company. Only eight years old, it has come to dominate its rapidly-growing industry in a way that very few companies have ever done. Growth opportunities abound if the company can execute on its strategy.
Facebook may yet turn out to be a fantastic long-term investment. Many game-changing technology companies, including America Online and Google, finished their first day of trading with modest gains, only to see their shares soar in the coming year.
AOL?!?!?! AOL’s market cap went from $226 billion in 2001 to about $20 billion in 2006.
If you’re buying Facebook because you think it’s the going to be the next AOL, based on the *not advice* email newsletter from this guy, please let me do you a favor right now; Don’t.
(this is also not investment advice or a solicitation to chase the dream of hyperbolic stock returns)