If all of the planets line up on May 18th Facebook will become an IPO.
With all IPO’s (Initial Public Offerings) there must be a valuation before the company can be sold to the public. Sometimes these valuations turn out be greatly underpriced. Other times the public pays too much.
The Facebook management team is on an extended dog and pony show trying to convince bankers and hedge fund managers to pay up to $100 billion dollars for the right to own a piece of the company.
There are some dissenters who feel that the method Facebook is using to value ads is placing too much worth on the revenue stream and it is not in line with existing competitors.
As an example Google which has a market cap of around $200 billion is valued at about 5.5 times its advertising revenue. If Facebook gets the $100 billion it seeks it will be valued at around 33 times its ad revenue.
Some big investors still remember the valuations that were given to dot.com companies the last time we had a technical revolution. They ask how Facebook possible can sustain a growth rate that will value the company that high.
Well if everything falls into place we will know on May 18th, and no matter which way the chips fall it should be quite a show.
Facebook will present traders with many good trading opportunities.
Trading Facebook or any market requires that you maintain a steady hand.
To learn firsthand how I would teach you to have the discipline to take advantage of the opportunity that Facebook will provide, speak to one of my financial consultants and sign up to work one-on-one with me here:
Keep those stops tight.
Todd “Bubba” Horwitz
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