The frenzy surrounding Facebook’s IPO is reminiscent of the technology bubble of the late 1990s when investors blindly bought into the tech story ignoring fundamentals, analysts tell CNBC.
Mike Crofton, President & CEO of private bank Philadelphia Trust Company, told CNBC Asia’s “Squawk Box” on Friday that all the buzz surrounding the IPO gives him a feeling of déjà vu. “It'll be kind of like the technology craze we saw in 1998 -1999. We'll see how it trades a couple of weeks out. That's going to be the key.”
Facebook plans to raiseas much as $12 billion in its upcoming IPO, pricing shares between $28 and $35 apiece. That could value Mark Zukerberg’s eight-year-old website at a staggering $96 billion.
Francis Gaskins, President, IPODesktop.com said investors should be more critical of a company pricing its IPO at 91 times earnings for the year to March 2012.
“It seems like what they're doing is throwing a lot of things in the wild and hoping some things will hit. We don't know what's happening in the mobile area, their users have kind of plateaued and they're growing in areas that don't have disposable advertising income. This company feels a little bit like 1999, ” Gaskins told CNBC Asia’s “Squawk Box.”
However, other Internet stocks are expected to weather Facebook's IPO unscathed. “A lot of existing technology companies like Google, Microsoft, EMC, and Intel are still cheaply valued and will look even cheaper compared to Facebook,” said Crofton.
Shares of Facebook will start trading on the Nasdaq on May 18 under the ticker “FB.” The investor road show starts on Monday.