fa(r)cebook FRENZY
The frenzied expectation of Facebook's public offering on Friday can only
be compared to the irrational exuberance ahead of the burst of the hi-tech
bubble ten years ago. Zuckerberg's amateurish concept and infantile knowledge of
economy & markets are mainly responsible for the daily hype about the future
price of the Facebook share. He started his 'expectations' at $20 per share,
which would have put a stock value of FB to $74 billion. In the past 3 weeks
this fantasy has evolved into a share price of $29-34, making FB worth $104
billion, on paper.
Based on its economic viability, the ability to raise earnings and achieve
profits by the limited means FB can provide, Zuckerberg's delusions - and those
of the herd of sheep racing towards the abyss - the purchase of shares will turn
into a financial disaster of historical proportions.
From its business plan and proposals, FB could raise between $300 - 500
million in advertisement revenues. Other contractual links provide $250 - 300
million more. But to justify a $100 billion capitalization, FB would need to
earn $8.5 - 10 billion per year. Unless FB starts charging its users a
substantial monthly fee ($12-16 per user), the high-flying plans will quickly
implode, with possible legal consequences for Zuckerberg: fraudsters of less
magnitude than his scheme have received 15-30 years in prison.
Where is the realistic value of the FB share as of today? Experts estimate
$4.50 -$5.25 per share, still putting the company's value based on the number of
shares offered to around $15 billion.
Who should invest in Facebook? Anyone who can afford to decimate his
'investment' by 70% in the first 12 months, and needs the write-off for tax
reasons.
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