Want a piece of Facebook? The social networking behemoth has finally announced that it is going public聽鈥� on 18 May聽鈥� and its proposed share price values the company at between $77聽billion and $96聽billion. 鈥淓conophysicists鈥�, however, say the company will be subject to a stock price bubble and is vastly overvalued.
Peter Cauwels and Didier Sornette, , say that financial institutions do not publish the methods they use for valuing social networking companies. So Cauwels and Sornette developed their own model, which they have made publicly available ().
The model suggests that even with the most optimistic growth forecasts, Facebook鈥檚 fundamental value is no more than $30聽billion. Cauwels says that the company鈥檚 unique status as the biggest social networking start-up gives it extra potential, worth perhaps another $30聽billion. 鈥淚nvestors should be aware that everything they pay above $30聽billion is just an option on future potential and everything above $60聽billion is bubble money,鈥� he says.
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Much of the excitement is based on Facebook鈥檚 meteoric rise聽鈥� the company has gained new users at an exponential rate since its launch in 2004. But Sornette and Cauwels say there are signs that its growth is slowing, and that the next generation is starting to think that Facebook is boring. 鈥淚t鈥檚 something their parents are using,鈥� says Cauwels.
