Before the Farcebook IPO, I wrote on my blog that Facebook was heading for a ridiculous valuation when it was launched on the stockmarket. That wasn’t because I think it’s a bad company – pretty clearly a company that makes a billion dollars in profits after only a few years of life is a remarkable creation. I have only respect for Mark Zuckerberg, its creator.
But it’s not Zuckerberg who gets to choose the company’s valuation. It’s the banks he retains to manage the transaction. I wrote that the firm was being ‘vastly and obviously overvalued at the levels currently being discussed.’
Unfortunately, I’m being proved right at sickening speed. The firm had its IPO (Initial Public Offering) on 18 May – that is, the date when its shares first began to trade on the market. Since the IPO date, the firm has lost 47% of its value, in comparison with the intraday high of $45 per share. Friday’s close was $23.70. Continue reading