Re: Possible Facebook IPO: History reapeating itself?
 

I can't believe the number of people saying that the stock market is undervalued at this point due to the recent tech boom fiasco. Take a look at the S&P's current P/E ratio after normalyzing earnings then consider if you want to keep that conclusion.

Re: Possible Facebook IPO: History reapeating itself?
 

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It reminds me of stories about old timers in the 1950's who kept shorting any slight market downturn b.c. the depression permanently imprinted itself in their heads, and thereby could never make any money even while the times were booming.



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Exactly what I think. I've never seen so many doomsayers and permabears before, from just hearing some of the talk, you would think we were in a depression.

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When people are saying "Wow these valuations are getting really high and there's a ton of money being thrown around" you'd think we're in a depression? That actually sounds like the exact opposite of a depression to me.

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what I'm saying is that people are quite negative and skeptical of the general economy. Rarely do you hear anything positive even though things like internet marketing and the job market for college grads are booming. Everyone talks about housing and the middle class getting destroyed. I also hear a lot of talk from some friends in financial services about how their clients want to short every time the market goes down. That sort of thing never happened in the 90s. If you want a real laugh, you should go to elitetrader, a third of the threads there are people calling market tops everyday!

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Internet marketing is not something I'd really care about when we're talking about important economic factors. Internet advertising is going to be a long tailed business, a lot of the people that were making a ton on it a year ago are making nothing now. Just because anyone can make a blogspot blog and an adsense account doens't mean anything is booming. The middle class getting destroyed gets more attention than internet marketing for very good reason.

Re: Possible Facebook IPO: History reapeating itself?
 

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Facebook has been the apple of Silicon Valley’s eye and Zuckerberg has resisted offers over $1 billion in the past. According to rumors they’re doing about $500 million in annualized revenue, but I don’t think they’re making a lot of profits, if any (someone correct me if I'm wrong, this is just based on old news and the fact that they recently did another round of funding).


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The difference here is that if you are right, FaceBook has a hell of a lot of revenue and it's growing hella fast. I can't think of any internet startup that ever had that much revenue during the bubble other than Amazon, and Amazon's revenue was of questionable value (no margins).

Remember, the bubble got out of control when zero revenue companies were being valued at huge amounts because they were leaders in their "segment" and someday they'd figure out a business model and how to make money. Now it just seems like some companies have figured out business models and have revenues and possibly profits to show for it.

If Facebook does $1B in revenue in 2 years with 20% pretax margins (and strong future growth prospects), that's $200M. That's easily worth many billions.

We may later decide that Facebook et. al from this period were overvalued because it turns out their growth prospects weren't as shiny, or their business models not as profitable, as projected. But I doubt we'll ever regard this era as overvalued as 1998-99.

Think back to the railroads. In the middle 1800s they were the dotcoms, investors lost millions in trying to fund trains to anywhere. Eventually after enough failures the survivors became solid businesses as rational investment expectations, taught by the lessons of the first wave, took hold.

Re: Possible Facebook IPO: History reapeating itself?
 

OP I dont know why you would think one company valued at 2-3x revenues might be the start of another bubble.

The tech bubble had literally 100's of companies with little or no revenues financed with all VC money. Because nobody really understood the nature of the internet at the time, valuations were nearly impossible to make with any acuracy. Inv banks just bought into the idea, along with the public, that any company with a .com attached to it would be able to reach millions of more consumers and eventually be profitable. The "I dont want to miss this one (irrational exuberance)" mentality only added fuel to fire.

I think your comparing apples to Licoln Town cars.

Post deleted by Mat Sklansky
 

Re: Possible Facebook IPO: History reapeating itself?
 

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OP I dont know why you would think one company valued at 2-3x revenues might be the start of another bubble.

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Because revenues aren't inherently worth anything. If they're cashflow negative with 500 mil in revenue who the hell cares? Obviously if you think they'll figure out how to produce cash that's woth buying, but that's the sort of optimistic jumpt hat was made often in the late 90's. I'm not saying it will happen again, it's just a thought that I think warrents discussion.

Re: Possible Facebook IPO: History reapeating itself?
 

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OP I dont know why you would think one company valued at 2-3x revenues might be the start of another bubble.

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Because revenues aren't inherently worth anything. If they're cashflow negative with 500 mil in revenue who the hell cares?

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I'm curious how it's even possible to spend $500M operating facebook.

eastbay

Re: Possible Facebook IPO: History reapeating itself?
 

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OP I dont know why you would think one company valued at 2-3x revenues might be the start of another bubble.

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Because revenues aren't inherently worth anything. If they're cashflow negative with 500 mil in revenue who the hell cares?

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I'm curious how it's even possible to spend $500M operating facebook.

eastbay

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I don't have a clue. My guess is that the 500 mil is an annualized number based on last month's revenue and projected growth, if there's even any truth to it at all.

Re: Possible Facebook IPO: History reapeating itself?
 

Does the fact that certain companies are public while others not at certain times have any impact on anything?

Re: Possible Facebook IPO: History reapeating itself?
 

If they are doing $500 million in revenue I can assure you they are making a lot of profit. I've seen talks done by their developers and their systems are really well engineered. You're not going to be seeing a lot of wasted resources in that area. If they were spending over $150 million a year on infrastructure I'd be surprised(I'd be surprised at $100 million to be honest, even $50 seems high. They also aren't massive by headcount scales.