Would Facebook stock make a good investment?
After the site’s biopic won a host of Golden Globes Sunday night – including the award for best picture of the year, given to The Social Network and its producers – it’s now officially impossible to get away from Facebook.
Yet despite its 500 million-plus worldwide users and recent splash into the entertainment pages, the most enduring news regarding Facebook may well centre around Goldman Sachs’ $450 million stake in the company, which it acquired earlier this month.
The Wall Streeter’s buy-in (teamed with another $50 million from a Russian firm) only gets it a reported one per cent of Facebook, but it’s already got the world’s investors frothing for a piece.
According to the Wall Street Journal, Goldman Sachs is working around a way to make a legal private offering of as much as $1.5 billion in Facebook shares to U.S. investors.
Foreign money managers have already made over $7 billion in orders for Facebook stock, or more than $4 for every $1 in shares being sold, sources told the WSJ.
Indeed, while everyone and their mother appears to want a piece of the social network – remember, this is the same company that turned down a $1 billion buyout bid from Yahoo! in 2006 only to be valued at $50 billion at the time of the Goldman purchase, just four years later – can it still continue to grow at the rate its shown?
We won’t pretend to suggest Facebook’s innovation isn’t tops in the tech world right now, but certainly saturation, or at least a plateau of some kind, must be in sight for the Palo Alto, Calif.-based website.
Earnings-wise, we don’t yet know what a slow-down in membership would mean since Facebook wasn’t even profitable until autumn of 2009. Supporters in the “Facebook is a runaway cash cow, you idiot” camp would suggest there’s plenty of the site’s user-base that hasn’t even contributed to its revenue yet. Detractors would say, “Yes, it’s popular now, and it may continue to be for some time. But look at AOL, look at MySpace, look at Lycos. Typically, these things don’t end well.”
In any case, it seems we may be headed to a world where you could soon add shares of the web’s most prominent social network to your portfolio.
If you could, would you invest in shares of Facebook?
By Jason Buckland, MSN Money
Posted by: Steve | Jan 18, 2022 9:48:24 PM
If I could do a Donald Trump (living by the greater fool principle) I'd do it in a heartbeat. But if I actually had to spend my own money, or hold them for anything more than say 10 minutes.... Probably a different answer.
Posted by: SSampson | Jan 19, 2022 5:30:03 AM
As the method of delivery of this IPO makes looking 'inside' Facebook impossible (to see the health of the company) - I would say that Sachs is just using things as a cash grab... Facebook generates its income primarily through data-mining. As more people become concerned with the privacy issues surrounding this, I don't see it as profitable indefinately.
I would also suggest that over time Governments will become involved with Internet privacy issues and require that Facebook not only make in mandatory that all Data access be explicitly 'off', but also that the data attached to those outside the US NOT be stored on servers located inside the US (concerns over private infromation being directly accessible by the US Gov.) Whether or not you agree with Gov access.... there are enough that are concerned to make the possibility real...
As with all social networks... privacy requirements will make free use eventually impossible... the question should be 'will people eventually be willing to pay?'... If not, the adverts will become the only source of income. This will significantly impact the profit potential in the long run. History has proven that hollow products like this eventually fail.... not 100%, but high enough to make it a bad investment.... Unless you are Goldman Sachs and plan to just flush out some quick cash...
Regardless.... many people will invest. And like a big Ponzi scheme... the ones at the end will lose.
I don't know why it isn't obvious?? I guess short term greed for stuff like this will lead us down the same road we are currenly recovering from
Posted by: SP | Jan 19, 2022 7:26:30 AM
The only poor people that Facebook will be exploiting will be it's investors so I wouldn't worry about it being a conspiracy by any of the Abrahamic religions, Judaism, Christianity, or Islam since they're all pretty much the same thing. But if it makes you feel good you can continue to promote your Buddhist cause (or whatever). I have $10 riding on MySpace buying Facebook and it's 12 billion members in 6 years.
Posted by: learn from past mistakes | Jan 20, 2022 2:29:09 PM
How many times have we seen offerings like this? The initial euphoric, 'Oh my god,you have to get in on this company' reaction. Followed a few years later by the ,'Where did it all start to go wrong' newscasts after the investors have once gain lost thier shirts. How quickly people forget...
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