Is the Facebook IPO the Start of Another Tech Bubble?

Wednesday, 1 Feb 2012 | 6:13 AM ET

The hype surrounding the Facebook IPO, including the "pretty rich" valuation for the social network, is similar to that seen at the height of the dotcom bubble of the late 1990s, an investor told CNBC Wednesday.

“It reminds me of the huge dotcom bubble and this does seem to be harking back to the days of craziness where valuations are really high. But Facebook is a darling; everybody loves it, all the kids are on it and that’s one of the reasons we’re looking at valuations like this,” Richard Harris, Chief Executive at Port Shelter Investment Management said.

The site, founded by Mark Zuckerberg while at Harvard University, is expected to file for a $5 billion IPO but no final share price will be set for a while, according to reports.

The valuation of the company between $75 billion and $100 billion would make it one of the largest initial public offerings in US history.

Harris added it was a “tough ask” to think the company had strong fundamentals in terms of valuations behind it.

“It produces a lot of interest, a lot of heat and life but really has no real products and where revenues are relatively thin it does seem a tough valuation,” he said.

The timing of the IPO was a smart move, in tune with the state of the market, according to Harris.

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“One can’t help thinking that the investors and bankers are saying 'well, let’s see if we can get something away now, prices aren’t too bad, the markets not too bad, let’s see if we can get something' but it does seem a pretty rich valuation,” Harris added.

Alison Deans, Senior Advisor at Varick Asset Management, said while the headline figure might be high the company was not necessarily expensive in comparison with other technology giants.

“It is the biggest player out there, it has such a strong share of the best demographic for advertising and sales purposes and it’s something that everyone thinks is kind of cool. People have been paying up for these types of businesses and when Google came out, people thought they were paying a lot then,” Deans said.


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  • Matt Hunter is the senior technology editor at CNBC.com.

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