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Facebook’s IPO — Uncharted waters

Facebook is growing up. As soon as today or tomorrow, Facebook will become a public company with grown up things like quarterly earnings reports and analysts poring over its fiscal growth (or decline).

By now you know the numbers being tossed around. A US$5-billion IPO. A US$80-billion+ valuation. US$500-million in fees to be collected by securities firms for arranging the IPO. But all the details will be released really soon.

Many in the technology industry have been debating over whether or not we find ourselves in the middle of another dot-com bubble circa 1995-2000. When social gaming giant Zynga’s stock plummeted two days after going public, some said yes [2], we are in a bubble and it will pop soon. Then Zynga’s stock rebounded [3] and is currently trading at it’s highest point since its IPO. Without clarity the industry looks to Facebook for answers.

Many said the Zynga IPO was overhyped, but they managed to pull out of a nose dive to prove the critics wrong. It looks like Facebook took notes. The company’s plan to raise US$5-billion is more “conservative” than anticipated. Starting from a more conservative base means it could always be increased to satisfy investor demand later. Facebook’s IPO is the largest tech IPO since Google, which raised US$1.67-billion.

Speaking to Memeburn, Gartner technology analyst Michael Gartenberg [4] said that “we are currently in uncharted waters with social investments because of all the secondary markets. A lot of Facebook’s shares have been spoken for and some social companies have done better than others because of this.”

Gartenberg also believes the US$100-billion valuation is too high, “I am not willing to pay that for Facebook, but maybe someone is,” he said. “Ultimately Facebook is worth what the investors are willing to pay for it.”

He is quick to caution against hyped up expectations of what Facebook’s shares will be like. “We can’t really say much about this IPO to be honest until they file. We don’t know what the share prices will be and how much Wall Street will value the IPO, we just need to wait and see.”