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