Facebook de-friends the sharemarket

Facebook might be worth $78 billion, but Mark Zuckerberg is content to wait for his huge pay-day, writes The Motley Fool

The figures at Facebook are simply staggering. The company has more than 750 million active users, half of which log onto Facebook daily.

Having only recently focused on its mobile presence, Facebook already sports 250 million unique mobile users that it insists are twice as active as non-mobile users. Perhaps most impressive, 70% of all Facebook users are located outside of the United States, truly speaking to its global dominance.

Then again, its valuation is almost equally as staggering.

$78 billion reasons to like

Trading very sparsely on secondary markets like SharesPost, Facebook boasts an implied valuation of $77.7 billion, which is actually down from $86 billion earlier in the year.

Through the first half of 2011, according to Reuters, Facebook’s revenue doubled to $1.6 billion and net income neared $500 million.

While this implies an estimated full-year price-to-sales ratio of 24 (which is down considerably from the year-ago period), this figure is still brutally high. By comparison, (ASX: CRZ) trades at around 7 times sales, and Seek (ASX: SEK) trades around 6 times sales.

Still, sharemarket traders and investors alike are sitting on the edge of their seats in anticipation of Facebook’s inevitable IPO. The only problem, though, is it appears they’ll need to wait just a bit longer.

Delayed payday

According to a recent report released by the Financial Times, Facebook plans to delay its IPO until late 2012 so that its employees can focus less on their big payday and more on developing the site even further.

One aspect Facebook CEO Mark Zuckerberg was very clear about was that this delay had nothing to do with current volatile sharemarket conditions. However, we’re not convinced.

We think current market volatility could have a lot to do with the decision to delay the Facebook IPO. Alarmingly, 63% of all U.S. IPOs in 2011 are now underwater from their listing price. If we were Facebook, we’d probably wait to file for an IPO as well with IPO pessimism peaking.

This also means that private equity investors and public entities with sizable investments in Facebook — Goldman Sachs and Microsoft — will have to wait even longer before they find out if their gambles pay off.


Either way you look at it, Facebook took the market’s friend request and promptly hit the ignore tab.

It has instead chosen to list itself on its own terms and hopefully during less volatile times.

We’re uncertain as of yet as to whether this delay will be a boon to Facebook’s valuation when it does eventually list, but its rapidly rising sales may give it enough time to bring its valuation metrics down from the stratosphere and into a more investor-friendly range.

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