The Facebook float and what it means for us

Does anyone remember Google? When Google floated it had hardly anyway of making money. However it acquired DoubleClick and is now one of the internet darlings with a share price that has gone from $80 to $600 with huge revenues and a service everyday.

There will be many how can recall feeling the same about Google as Facebook today and they will not want to miss out on the float this time as Facebook will undoubtedly work its proverbial’s off to generate revenue. Now FB may not be able to match Google, after all if we look at where Google is today, its in a much better position with a range of properties on the web and great revenue and it continues to deliver value and a service that millions around he globe use – from search to gmail to maps.

 

FB could be worth a punt, yes, there is a sky high valuation, but if it has a chance of growing its revenues to match that initial valuation it could make a long term investment. One other share to consider in its high P/E or valuation is Amazon which exists on thin margins and has always had a rather inflated share price, but one, which certainly since the dot-com bust has gone from strength to strength.

As a retail investor in FB, scrambling to get into the float – you’ll have to make do with what-ever price is on the day. But due to the demand from “user investors” that price is likely to go nuts by the end of the day. After that, well if I could predict that….I’d be on a Caribbean island…

So please don’t rule out FB based on initial value – there could be potential, but investors who like to invest on fundamentals may find them somewhat lacking.