Facebook a smart long-term bet for investors, regardless of
its exact IPO pricing.Facebook to file for its IPO this week, one of the big
questions is what its valuation will be. Will it hit the magic $100 billion?
But if
Facebook went public today, chances are that it would
get a valuation of around $85 billion. We know this because there is a pretty
good proxy.
Facebook shares trade on provate markets like
Sharespost and
SecondMarket. In fact, there is an auction going on right now on
Sharespost for
a block of Facebook shares which ends on February 2 (the same day the filing is
expected to hit). The last contract was yesterday at $35.50, which gives
Facebook an implied valuation of $83.5 billion. The last auction on Sharespost
closed at a “clearing price” of $34 on January 20, which gave it an implied
valuation of $80 billion.
Sharespost is an illiquid market with limited supply, so
this is a very loose proxy. But it sets an important benchmark. Another
benchmark to look at is other social networking stocks that are already trading
publicly, most importantly
Zynga and LinkedIn. Both fell after their IPOs, but
have been rallying so far this year ahead of earnings. (
Zynga is finally above
its $10 IPO price). Who knows where they will be in April or May, but a bull
market for those stocks will mean a higher valuation for Facebook at its IPO.
If they tank again, then
Facebook’s valuation could also come under pressure.
If $85 billion sounds familiar, that is because that is
where
Facebook was trading on the private markets almost a year ago. Valuations
kept going up after that, helping LinkedIn and other Internet companies go
public. Then all the IPOs sank, and now they are climbing back.
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