Facebook at 99 Times Profit Exceeds 99% of S&P 500 Index

By Lee Spears and Sarah Frier
Bloomberg
May. 04, 2012

Sounds like a sweet deal! /sarcasm - ChrisFacebook Inc. (FB) is betting its growth prospects will persuade investors to pay 99 times earnings for its initial public offering, a higher multiple than 99 percent of companies in the Standard & Poor’s 500 Index.

The world’s most popular social-networking site will seek a market value of as much as $96 billion, offering shares at $28 to $35 each, a regulatory filing showed yesterday. The Menlo Park, California-based company will begin meeting investors next week and is scheduled to price the offering on May 17, data compiled by Bloomberg show.

The high end of the proposed valuation would make Facebook more costly than every member of the S&P 500 relative to earnings except for Amazon.com Inc., Leucadia National Corp. and Equity Residential, data show. While 27-year-old Chief Executive Officer Mark Zuckerberg has amassed more than 900 million users since starting Facebook in 2004, his challenge is to stem slowing sales growth amid increasing competition from Google Inc. (GOOG) and Twitter Inc.

“It’s really, really expensive,” said Bob Rice, managing partner at Tangent Capital Partners LLC, on Bloomberg Television. “It’s very hard for me to get my arms around a valuation of 80, 90 billion dollars for a company that did a couple of hundred million dollars of profit in the quarter.”

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