As rumours continue to grow that Facebook will seek to issue an IPO in the next few months, with the aim of reaching of market capital of $100 billion, its hard not be remember the heady days of the dot com boom when such outrageous valuations were banded around.
Yes, Facebook does have 700 million users (including non active ones), and yes it has brought out some interesting and innovative features, but lets not forget that its just a website. A hugely popular one but none the less just a site. It primary asset is its brand, and as anyone will tell you brands value can disappear overnight.
Facebook has made hard work out of easily stuff, Mark Zuckerberg, the CEO and one of the founders, has seen his reputation tarnished by continued acquisitions that he operates in a less than honest way, from the first days of Facebook all the way up to its current form today, the site lacks transparency. While many will be accepting of that for a website, its not clear how would be investors or the SEC would view it.
Facebook has already had run ins with he FTC regarding dishonest privacy practices, and now there is rising concern over the use of the medium as an advertising platform. Social networks allow people to communicate, and when outside advertisers start dropping in ads into those social conversations, things can quickly spiral out of control.
So for all those that are looking to take a long position on Facebook when it floats, beware, your returns may not necessarily be what you've promised.