The roadshow ahead of the largest technology IPO in history officially gets underway today in New York. Facebook executives will meet with investment banks, large money management firms and private investors to generate money and drum up hype leading to their expected initial public offering on May 18th. The social media king —which will list under ticker symbol (FB)— is targeting a share price range from $28 to $35 a piece, giving the company an implied valuation between $77 billion to $96 billion.
The question facing investors large and small is whether the high valuation will pay off after the hype settles down.
Last month Facebook filed their first public quarterly earnings report, showing a dip in sales and profit. Total revenues came in light at $1.06 billion for the first-quarter versus $1.3 billion in Q4. For IPO watchers like Francis Gaskins of IPODesktop.com, these numbers are a flashing warning sign.
"What a lot of people don't realize is they missed their (earnings) estimates," he states, also pointing out that 2011's total revenue of $3.7 billion was significantly weaker than the $4.3 billion estimate.
"There's no growth there right now based on the numbers. They're basically trying to reinvent themselves, saying 'trust me' they can monetize their 901 million users," says Gaskins. "But they don't really have a track record of success with their new endeavors."
Gaskins believes eventually the earnings numbers, and maybe more knee-jerk acquisitions, will catch up. But that's not until after the roadshow, the IPO, and a couple of weeks of obsessively tracking FB's share price. He describes investor appetite right now as "almost religious," and that's exactly what Facebook is trying to capitalize on. The company wants their "over-enthusiatic users" to buy, hold, and never sell.
"And then you have the other people who are skeptical, hardcore analysts that want to see a little proof before they buy the projections," he explains. "So there's a real push-pull."
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