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Doug Kass: Facebook Feels Like AOL Time Warner

Almost everyone on the Street talks about the future potential of Facebook and how high shares will be 10 years from now. But not Doug Kass. He worries the Facebook IPO smacks of the same hubris as the AOL acquisition of Time Warner.

“This whole deal reminds me of late 1999 and early 2000,” says Kass who is president of Seabreeze Partners and a CNBC Contributor.

At the time, AOL and Time Warner captured the imagination of Wall Street with a planned merger valued at $124 billion; it was expected to create a digital powerhouse that none could rival.

However, the performance never even came close to realizing what the Street thought was its potential -- and 10 years later the companies went separate ways.

The merger is largely considered one of the biggest failures in the history of Corporate America and now marks the top of the Internet Bubble.

“AOL was thought to be the future, and that’s what they’re now saying about Facebook,” says Kass. “And like AOL, the Facebook talk is all superlatives."

Kass seems to believe that talk of what could be - or what should be - won't cut it for much longer. "Nobody is talking specifics," he says, but soon enough they will be.

When you look at the metrics that matter, "Facebook has decelerating revenue growth,” he says.

Both Kass and trader Josh Brown think multiple compression comes next. “You don’t see it on day 1 but you do see it over time,” says Brown.

Seems like both pros expect the premium to come out of the stock.

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* Doug Kass is also a contributor to the Street.com, Jim Cramer’s Real Money Pro web site

Posted by CNBC's Lee Brodie



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