Yesterday, in an auction held by SecondMarket (an alternative marketplace for shares in privately held companies) the share price of Facebook exceeded $28 … up from $22.75 on December 15th. Facebook is now approaching the value of Amazon, is worth three and a half times Yahoo and is worth double Royal Bank of Scotland (who manage over £1.3 trillion in assets)!
To say that this is getting out of hand would be an understatement. Clearly interest in the shares has grown dramatically thanks to Goldman Sachs and their SPV investment for their customers, however the business is now worth 140 times even the most generous estimate of profits in 2010. Google, soon to have a majority share of the global smartphone market, have a PE ratio of just 25.
The Daily Telegraph is also reporting that Bono invested in £130 million into Facebook last year. If true (it seems like an awful lot of money, even for him), his stake is now worth >£500 million. At this rate it will be a $100 billion company by the end of January. Craziness.
It seems people are willing to invest in Facebook at whatever cost. That appears to point to hysteria to me, and therefore a bubble. The key here is whether Facebook can continue to grow its *active* users and monetise them. Personally I don’t think it can as most people get quickly bored of the site. Facebook and Goldman claim the site now has 600 million active users, however the stats appear to say this is merely registered users … which is always going to be a multiple of the active number.
Time will tell, Facebook’s bubble could spectacularly burst making a lot of people look like fools … or maybe it has some ideas up its sleeve to keep its upwards momentum. In the meantime, many initial founders and investors have taken $billions off the table, cashing in some of their chips. Perhaps not everyone is as confident about the future as they pretend to be!