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Wedge Partners Senior Analyst Martin Pyykkonen and Granite Investment Advisors CIO Scott Schermerhorn debate whether the Facebook IPO is a good invest...
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Time -- -- in what could be a low blow certainly ahead of Friday's highly anticipated FaceBook IPO General Motors announcing plans to pull its paid advertisements from the social networking giant so as America's largest auto maker reevaluate.
Its marketing strategy how does this impact.
Facebook's value.
Sets it up for a bull bear debate preference for the timing here but -- -- -- several parties granite investor the investment advisors chief investment officer and Martin -- Conan.
He's wedge partners senior analyst now let's let's get to this will be -- -- bear markets -- -- will we begin with Scott.
As the bear what do you dislike about this company so much.
Well as we look at three things -- investing at a company want is the actual company.
Two is the management and finally as the price and frankly with FaceBook is the price we don't like.
That's really the issue however you look at it.
It's gonna be trading at roughly a hundred times earnings 25 times revenues such and there's a lot of good news priced -- -- seniors have to be careful -- All right -- in what's your take on this especially GM's news that's -- be a bad bloat just days before there's so much publicized IPO.
-- it certainly is you know I think there's going to be mixed reactions from a lot of average ours is you know right.
Cover -- -- that went public eight years ago was -- before and that a lot of similarities here and basically what FaceBook has to do.
As the company is execute and go are closer to their ever -- -- they -- this could young company I think management strong that a lot of bench depth.
But they have to get closer and show the effectiveness.
Of their advertising especially targeting but GM is obviously not seeing that right now could be -- negotiating.
Ploy but -- that's what -- -- focus on.
On possibly but let -- method to Scott's point the pricing -- look with the group bond priced at twenty dollars is as an IPO.
It's close to half that at the moment so how important is pressing do you think this new band this new price band of what is at 34 dollars now PDA -- -- 38 is fair and or will it -- some investors off.
Well you know the math I've done on the valuation suggests that FaceBook going out at that price is about three times the valuation of Google.
-- when you look at Google eight years ago on the -- public there were over three times the valuation of Yahoo!.
So it's kind of you know the new company the new growth vehicle.
Being priced into that I don't there's a lot of upside frankly I think Scott's point as you know -- taken on valuation.
Depending where you come -- on this.
I would not be promoting -- as you know going to the moon from here.
Google did do that it went from 85 and before you know it it was.
Two or 300 I don't see that kind of upside on FaceBook but I do see stability -- -- -- higher growth income.
Bottom line that they have now than Google did and it's time that that is one thing that's notably better for FaceBook.
All right Scott respond to respond to that much and says he says he sees stability he sees a higher growth up prospects.
You would disagree I would imagine.
No -- -- see stability and I see higher growth but here's something that Martin mentioned I think is critical.
They have to figure how to get closer to their customers and really what -- talking about to have to figure how to get more advertising dollars from -- -- more revenue.
And I think part of the real balancing act here is going to be how to do that without alienating.
Their customers and you know as a judge look I'd look at me I'm not a technologically savvy person percent but here's -- have two children.
And the more and more advertising comes in the FaceBook and more and more they want information.
As -- what people are reading.
The kids are some kids -- no getting turned off by this and I think -- there's a real risk as a balancing act let's be pretty tricky there.
The shark may be jumped or not but.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Either real support cost -- -- is a much lower price you know -- we just I have a hard time paying a hundred times earnings for anything.
OK -- To me it would be really more deceleration on their top line growth you know you saw that in the first quarter this year numbers that they.
Filed in their amendment that's somewhat seasonal but as you -- -- over the next two to three quarters of that revenue growth which would mean they're not selling advertising to that point.
A materially decelerated that would be a reason to be more negative.
All right the very simple contest I must say sculpt a -- -- -- -- think.
By -- gentlemen thank you very much because -- -- -- guys thank thanks -- I -- I thank you.
