I just read a great article by Duff McDonald of Fortune Magazine on 5 Reasons Why He’s Not Buying Facebook. McDonald does an excellent job of breaking down the reasons for why he would not invest in Facebook. He gives detailed reasons for why he thinks that an investment in Facebook might be fool’s gold. If you had the opportunity, would you invest in Facebook?
McDonald’s argument is hypothetical of course because investing in Facebook is limited to high net worth sophisticated investors. A private investment in Facebook would require a few million dollars at a minimum.The company is currently valued at a remarkable $50 billion dollars. I have no idea if that number is correct or not as only Zuckerberg would know for sure what Facebook’s true value is.
Goldman Sachs appears to have put the $50 billion dollar price tag on Facebook. Goldman recently invested $450 million dollars in the Facebook empire. It’s tough to go against Goldman because if it’s one thing that Goldman knows it’s how to make money investing.
I think that Facebook will eventually become a publicly traded company if Zuckerberg wants to cash out big time like Larry Page and Sergey Brin of Google. I suspect though that by the time the stock gets to the public market that Facebook’s best days will be long behind it.
Social networks are here today and gone tomorrow. Facebook is hot right now but tomorrow some new upstart will rule the industry. Just ask Rupert Murdoch of News Corp. about his MySpace purchase. If Facebook were a publicly traded company, I would buy its shares for a trade but I wouldn’t want to hold them as a long-term investment.
Would you invest in Facebook’s shares if you could?
The article can be found here.
Couldn’t agree more with your statements. Once facebook has put its peak behind it, they’ll have investors looking to cash out by taking it public. The values people put on companies like facebook are always difficult for me to understand.. that and I am not a big fan/user of it in the first place, so I wouldn’t personally invest in it.
Facebook is overvalued. It’s a fade 5 years from now it will be something else.
However, I wouldn’t mind investing in Tumblr
I agree! My personal investment strategy is not let any individual stock represent more than 5% of my portfolio. Also, this kind of stock has additional intrinsic risk because of kind of company it is.
I would also only hold Facebook for the short term. There will be something better in a few years. Many of my friends are weaning off Facebook even as we speak. Facebook keeps changing its privacy policy and user interface and I don’t like that. I’m not using it much anymore.
Like Buffett always says, invest in what you know. I don’t really know Facebook, but I do know they make money through advertising. I find that a tough business, and don’t know much…so I stay away!
Might be a good momentum play, but nothing long term. Have to give Zuckerberg credit for making this such a monster, but I agree the best days are behind them. I have friends who were Facebook addicts, writing on walls, sending each other gifts, and checking in constantly. Now they barely log in. We are fickle creatures, aren’t we?
Yes, we are Buck. People are always looking for the next new thing. After awhile we become bored with the same ol’ same ol’
Nope, if it ever IPOs it will be dramatically overvalued and as with many tech companies the long-term prospects are iffy.