Something's Fishy About Facebook's $100 Billion IPO Rumor

Is the company undervalued or overvalued?

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Last week, it seemed like Facebook's ever-increasing market valuation finally hit a ceiling. According to a well-sourced Reuters report, early-stage investors and Facebook employees were trying to unload $1 billion of Facebook shares at a valuation of $70 billion—but they couldn't find any takers (privately, the investors were worried that Facebook's profits couldn't keep up with its ballooning market valuation). Today, however, sources "who have seen Facebook's recent financial information" leaked some very impressive numbers about the company: It's on track to haul $2 billion in earnings this year (before taxes, depreciation and amortization) building up to an expected $100 billion initial public offering. So what's going on here? Is Facebook undervalued or overvalued?

If the company IPOs at $100 billion, those secondary market investors who turned down the opportunity at $70 billion will be kicking themselves. At the same time, it could've been a controlled leak. Nicholas Carlson at Business Insider sort of dances around that idea. "We wonder if these figures being back in the news today has anything to with the reports last week that Facebook insiders are reportedly trying to move more than $1 billion Facebook stock at a $70 billion valuation, but can't find any buyers." Meanwhile, Gawker's Ryan Tate speculates out loud, suggesting that the early-investors and employees could be leaking information to get a better deal: "it might just be those same pessimists who are helping to hype the privately-traded stock now, in order to jack the price up. That's classic bubble behavior."

Jackie Cohen at All Facebook, on the other hand, takes the leak at face value: "These numbers might inspire lead investor Goldman Sachs to pressure Facebook to IPO... Certainly this month’s coming offering in the U.S. by Facebook’s Chinese competitor Renren could up the stakes."

This article is from the archive of our partner The Wire.