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BW Businessworld

Pop Goes Facebook?

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On 18 may, the most anticipated IPO in recent history — Facebook — will trade on public markets. As we went to press, Mark Zuckerberg marked the listing of Facebook with a ceremonial bell ringing at his company headquarters 90 minutes before the start of trading. Most market experts have already put the company's value at $100 billion plus, making multi-millionaires out of almost all of Facebook's employees. Aswhath Damodaran, the NYU Stern School of Business finance guru who wrote the book on valuation, thinks the stock is probably priced correctly.

There should be a ‘pop' of 10-25 per cent above the bid price range in initial trading, says Damodaran on his blog; if it goes much higher, then investment bankers' reputation will take a big hit for under-pricing Facebook shares. What most investors will watch out for is how quickly — and if — the ‘pop' fades. Not too long ago, Damodaran announced that he was selling his shares in Apple; the stock has fallen by over 10 per cent since. He should know.

(This story was published in Businessworld Issue Dated 28-05-2012)