It's been more than a decade since the IPO craze created by the first wave of Internet companies. That Pets.com era was followed by a nasty crash and the going has been slower ever since. Now, venture capitalist Fred Wilson thinks that the IPO is coming back, and that some of the deals might even be good for individual investors.
How do I reconcile these conflicting thoughts, that the web sector has gotten overheated and that the coming Internet IPOs might in fact be good buys? Well, to be honest, I haven't completely reconciled those thoughts. First of all, we don't know how these deals will be priced. Will Facebook shares be offered to the public at $75bn, $100bn, even higher? We just don't know. And how will Groupon, Demand Media, LinkedIn, Skype, and other offerings be priced? Don't know yet.
But it is very possible that some or all of these deals will be good buys even in the face of an overheated valuation environment. The public Internet names, most of which went public eight to ten years ago (or more), are mostly carrying full but not crazy valuations. If this new crop is priced off of those comps, then they could be worth buying and owning. And, as John [Batelle] points out in his post, if these companies contiue to grow rapidly and throw off ever larger amounts of cash, then they could easily be worth well north of what they are worth today.
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