woensdag 23 mei 2012

IPO of Facebook

IPO of Facebook

Any technological innovation follows a very specific growth path, Facebook being no exception. This growth path can be accurately plotted by taking the numbers provided by Facebook. In Facebook's case only the number of (active) Facebook users were given out regularly, last six years or so. On these figures an S-curve can be fitted, and thus a accurate future development of the number of users can be predicted [1]. 




On the basis of these figures, all made publicly available by Facebook, a maximum number of Facebook users can be accurately assessed. This number will be approximately 1Billion (1 x 10^9).  Today, the number of Facebook users is 900 Million, and is therefore likely to grow only another 10 percent in the next couple of years. 

In this light, and given the fact that the per user revenue in 2011 is about 4.34$, the next years a revenue of about 4.34 billion $ can be expected. This may generate about 1.4 Billion $ profit, provided the (considerable) 2011 profit margin of 30% remains [2]. 

This reflects a fair company value of about 20 billion, one fifth of the company value appraised at the IPO. 

So it is my prediction that the Facebook shares will drop to about one fifth of the IPO price of 38$, being still a fair price. 

Anyone claiming that their paid introduction price was too high, and they were falsely informed, well they should remain silent, the figures presented herein above were publicly available long before the IPO.  To Facebook I can only give my deepest respect, that they were able to collect such a high price for their in my view highly over rated stock. 


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