About $5 billion worth of shares will be sold, though the deal values the entire enterprise at between $75 billion and $100 billion. Only a little more than two dozen U.S. companies have a market cap that size. Remember, all stock trades are ultimately a matter of valuation, and valuation is always a matter of perspective.
Perspective almost always needs to be checked, and that is certainly so with the level of hype that is surrounding this IPO.
To be worth $100 billion in market cap, at 19.6 times earnings, Facebook needs to have $5.1 billion in earnings. At its current net earnings margin of 26.9%, that implies top-line revenue of $19.3 billion, which is 421.3% above 2011 levels. This means Facebook has to double revenue and earnings in 2012 (Not Likely), then double it again in 2013 (Again, Not Likely), then start to have 30% annual growth. If it does that -- which would be an incredible business feat -- it would be worth the top end of its IPO price range.
However, FB trend is clear, its growth is waning. Facebook's business generates revenue of $3.7 billion and nets 26.9%, or $1 billion. The company grew 77.8% from 2007 to 2008. In the next three years, it grew 185%, 154% and 89%, respectively.
Unless I see a method to insure future growth and value, ultimately I dont see FB as a viable long term solution for my portfolio.