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Facebook IPO: What to Watch

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    Peter Cohan & Associates President Peter Cohan on what to expect from the Facebook IPO.

  • Duration 4:37
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This transcript is automatically generated

As you -- the top of the segment.

Are right.

Well another thing that's gonna be well it could erupt that could be great we don't know but the anticipation is killing everybody FaceBook.

The frenzy is at a fever pitch right now.

We expect them to file for their initial public offering what those documents with the SEC -- any moment today could be later Ron.

But what should you be looking for for what could be the biggest IPO ever in US history Peter calling as president opponent associates.

And author of the book export now -- Peter let's talk about what we need to look for here in particular I think what's gonna be interesting -- -- wrong it's going to be.

The revenues story we have leaks back in 20092010.

Goldman Sachs -- all of -- -- -- that.

-- on the revenue side for FaceBook.

What are we expect to hear what we need to know on the revenue side here.

Well I think there's two aspects one of them is that the number that I've seen for 2011 was three point eight billion.

Which -- represents about a 126%.

Compound annual growth over the last two years.

And -- if that net income and which hasn't come out yet.

Is like when it is -- Google and -- about 900 million now the key issue I think with FaceBook is the revenue growth -- and I think it's been slowing down.

And when you do the math.

If you assume that they have the same net income as net and net margin is Google does.

Then the PE for that would be about eighty which is much much higher than apple and Google so to me it is a grossly overvalued company but those -- the numbers you have to look for.

26 times earnings I heard one analyst talk about the fact that that's -- looking at here for Google if you based on a hundred billion dollar valuation.

That's frankly just ridiculous and higher than Google that's what your point is as -- -- you agree.

What not management salaries were gonna get a sense.

Pay.

From not just Zuckerberg but also the CFO the CEO well I mean how important -- we need to look today we get this filing with the SEC on management salary compensation.

Well and my hunch is that that really is not going to be the big part of the compensation I mean the big part of conversations going to be -- Share of their stock they own in fact that's one of the things I'll be really curious to see is who -- how much stock.

A look at the package that they have to give Sheryl Sandburg to get her to come over -- who -- the biggest shareholder used to be excel partners -- biggest shareholder.

But thanks to this a secondary market shares post.

You know people can sell shares in this in the company was valued -- -- three billion dollars on shares post last week where.

People can be selling shares so somebody like excel which was the biggest shareholder may now be -- -- number two behind Mark Zuckerberg.

Let me ask you this -- enjoy the New York Times this morning with regards to the banks that are gonna be doing the offer.

Now we've we've heard multiple reports and plus that the Morgan Stanley was gonna get the coveted.

A left side of the report but JPMorgan I think was a bit of a surprise Goldman Sachs potentially coming in third here how important is that do you think to the bottom line.

Of these major financial companies that frankly a lot of us have in our portfolios.

Well I think -- in the case of Goldman Sachs.

They really blew it they had the post position in the really look because they had a lot of trouble with money raising -- -- didn't go too well in Europe.

There -- also.

Getting these post positions by the way by cutting their fees back from 7% which is the normal down to about 1%.

Because they think the bragging rights are going to be worth much more than that huge difference in fees that they're taking so in some sense.

You know if it helps Morgan Stanley to get the the not on more IPO's and maybe that's a good move but.

You know for that particular deal they're leaving a lot of money on the table to have that that post position.

Inches and not actually gonna get it not gonna get it back financially but you're saying -- bragging rights that makes sense as -- bragging right now -- before I let you go let me ask you this how many shares you think they're gonna offered there has been some.

-- some whispers that it -- actually gonna be a lower offering kind of what Groupon did a lower amount of shares offered to the markets you think that's possible.

I think that you know they're trying to have engineering very high first State's top maybe fifty or 60% maybe more.

So you know the more.

Demand it gets created time and the lower the amount of supply.

The higher that first day -- expect to see so that's probably what they're trying to do to have everybody saying -- that went up 50% or 60% or a 100%.

In one day so is in this fantastic you know bias but of course I think it's grossly overvalued.

You know the PE of eighty compared to these other ones that are much bigger and more profitable and growing faster it makes no sense.

It's not the only company that that our viewers can buy shares and that's that's a great point Peter Peter -- thank you Peter gonna CM.

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