Facebook Could Spawn Thousands of Milionaires

Hugh Pickens writes "Retuers reports that the world's No. 1 online social network is preparing for a blockbuster initial public offering that could create thousands of millionaires as Facebook employees past and present begin hatching plans on how to spend their anticipated new wealth. 'There's been discussions of sort of bucket list ideas that people are putting together of things they always wanted to do and now we'll be able to do it,' says one former employee who expects his shares to be worth $50 million and is planning to book a trip to space with Virgin Galactic that would cost $200,000 or more. 'It's been a childhood dream.' Another group of Facebook workers has begun laying the groundwork for its own jungle expedition to excavate a relatively untouched site of Mayan ruins in Mexico that sounds like Raiders of the Lost Ark. But for many of Facebook's staffers, the IPO will provide the means to pay off school loans and buy a house or new car and many homeowners and real-estate agents are eagerly anticipating a surge of new buyers that could push prime real estate to new heights. 'If a Facebook guy buys a house and wants to remodel it, maybe the contractor will buy another car,' says Buff Giurlani. 'Maybe the realtor will put a car in. There's a trickle-down effect.'"

Comments

Bull

[Spad]

That's not a "trickle-down effect", it's just economics. If *I* buy house and want to remodel it, then I might get someone to do it, who will - shock, horror - be paid for it and they might then spend that money on something. That's how our economy works.

The idea that because these people will have lots of (potential) money in the form of Facebook shares means that they're going to spark some kind of economic boom is ludicrous; sure, some of them might go on spending sprees, others will probably invest it, others will keep all their shares in the hope the prices will go higher, but on average it won't make any significant difference to the economy as a whole.

No bubble here.

[Colin Smith]

Noo. Up up and away. Yes the company is worth 100 billion, more. Just step right up and get your share certificates, hot from the press.

Nooo bubbles here. Social 1.0 isn't a fad or a bubble at all. Bet your grandchildren on it.

P. T. Barnum would be proud.

Note: Facebook is valued at a P/E of ~125. 12 is about average.

Re:No bubble here.

[MalleusEBHC]

Note: Facebook is valued at a P/E of ~125. 12 is about average.

That's the average for an established company. IPOs and other companies with strong growth potentials often have much higher P/E ratios. For example, Google's P/E was well over 100 when they went public, and now it is down to 21 as they are a much more mature company. That said, distinguishing between companies with strong growth potential and irrational exuberance is extremely difficult. I think Facebook falls in the latter camp, although certainly not with enough confidence to put my money where my mouth is.

Re:No bubble here.

[Half-pint HAL]

That's the average for an established company. IPOs and other companies with strong growth potentials often have much higher P/E ratios.

The problem with that statement is it assumes all IPOs are "new" companies. Facebook is (in my book) mature. They've reached saturation, they've driven their main competitors out of the market, and they have an established revenue stream (which isn't particularly impressive).