Facebook IPO Fever.....

The topic that is very hot around the world today is Facebook IPO filing, with 100 billion dollar valuation.

I ask this question my self,

• Why should I invest on this stock?
• Is it really Facebook worth for 100 billion, valuation?

This company is well managed, interesting product, huge customer base and good revenue for past year.With 843 million users and 48 % of users logging in daily, easily it will have 400 million visitors daily.With 10 cents income per customers, it can easily earn 4 million dollars daily. The numbers look very attractive for any investors to buy the share.

The revenue of the Facebook completely depends upon the user’s interest to login to the system. 

Why any user should login to Facebook at first place? 

The driving factor for the end users to login to this website is very fragile. I login since all my friends’ login to the website. No compelling reasons, no atmost benefit for me because of my login.

It is like a FAD. Marketing company were utilizing this FAD

How far the people will be interested in Facebook? what is the risk of losing them ?

It is unlike Google (take users where they want in web world), Apple (outstanding product lines) & Microsoft (from Operating systems to different product line) where they provide something that people or business required for their day to day activities. This will keep users coming back to them. They have some sustained product line, on which they can build upon.

Facebook don’t have a sustained product line. I receive e-mail from Facebook asking me to login. Most of us would have received if we don’t login the Facebook for a week.Facebook is something that is not a necessity, it is something that is always a good to have. The risk for an investor is when this FAD on Facebook will end.

History had shown the impact of these fads on AOL, Yahoo, MySpace etc…

Already Facebook is over valued around 100 times the current earnings. Most of the times all compare Facebook with Google for it's income potential.

The growth of the Google stocks with an IPO price of 85$ is 700% (Current price is 595$) over 8 years. The market value of Google is 24 billion dollars at IPO and today it is valued at 154 billion dollars.

With this equation if you want to get the same return considering 22$ IPO price for Facebook, the market cap of the company has to grow to 700 billion dollars to reach a price of 154$ per share.

GE the biggest conglomerate in the world is valued at 200 billion today. So the Face book has to outgrow the GE. Hope that will happen !!!

All said one should not forget, Facebook is already having 3 billion dollars in bank and with IPO it will have around  another 10 billion dollars in bank. With 13 billion dollars at it’s kitty they may venture into another business (as Google entered into mobile market). That business may be a sustainable business model. This calculation makes the company a very valuable target.It all depends upon what Facbook do with this 13 billion .

With these facts, I would say currently the Facebook stock is not as attractive as it is claimed for retail investors. If Facebook can provide a better business model projection, then the retail investors can validate this stock for a reasonable price. For naïve retail investors, this stock and the income potential is like a mirage. Please control the emotion before jumping into.Please do your home work.

For Institutional investors, they are well informed about this situation, they will utilise this IPO to make some money.So there will be a rush from institutional investors.

Please be aware in stock market, "some one has to lose money for some one to gain money"

Retail investors control your emotion and do your home work before jumping into.