Facebook over-valued at $US50b, investors claim in survey

Social networking giant Facebook is overvalued at $US50 billion, global investors have said, according to a new Bloomberg poll that casts doubt over the site’s value and raises fears that a new bubble may be forming in Silicon Valley.

The results of the survey also come as Facebook’s shares on secondary market SharesPost have jumped over 40% during the past month, indicating a value of $US82 billion, beating out Amazon.

The Bloomberg poll, which was conducted by Selzer & Co, questioned 1,000 Bloomberg customers who are either investors, traders or analysts. A massive 69% of them said Facebook is overvalued, following a round of funding from Goldman Sachs worth $US450 million that sent the social networks’ value over $US50 billion.

The survey found that only 19% of respondents said Facebook’s value is appropriate, and only 4% said it would be worth more.

The doubt over Facebook’s valuation comes as the company prepares to float on the American stock exchange, saying that it intends to start filing financial reports from next April.

The survey also found that over 50% of respondents said the valuation is the beginning of a dangerous “new bubble”, while only 17% said it would be the start of a boom.

Those within the United States are more bullish about the company, while foreign investors seem to be more wary. According to the poll 72% of foreign respondents said the company was overvalued, but within the United States that number falls to 63%.

Among European investors, 56% say Facebook’s latest investment is a signal that a bubble is forming, with about 25% of Asian respondents seeing the investment as the start of a boom.

One respondent, Luigi La Ferla, who co-founded LTP Trade in Britain, said that Facebook “is a manifestation of the rational excesses that only the financial markets are capable of when confronted with something without precedents”.

Various investors have warned that Facebook’s valuation is reminiscent of what happened during the 1990s tech crash, when a range of internet businesses were overvalued and subsequently plummeted after listing.

“There’s too little financial information and track history to value the company like this,” La Ferla said. ‘Besides, you do not want to buy any of Goldman’s proprietary positions that they’re willing to sell.”

The issue of Facebook’s valuation has come to light just as its shares on secondary market SharesPost have jumped above Amazon. The online retailer’s shares dropped by 9.5% late last week, sending its value down to $US75.2 billion while Facebook jumped above $US82 billion.

Secondary markets such as SharesPost enable investors to buy or sell shares in privately held companies. They have been a source to judge the value of tech start-ups, including Facebook and Twitter, for several years.

According to Bloomberg, Facebook’s revenue was $US1.2 billion during the first three quarters of last year, up from $US777 million in the year before. It recorded a profit or $US335 million in the first three quarters of last year.