“We like Facebook for the long term. It will chart its own future course for at least the next 18 to 24 months,” he said. “What that also means is you don't have to chase a red-hot, super-hyped IPO offering.”
Wolff thinks it will be very difficult for the company to grow as fast as the size (currently projected at $100 billion) and price of its offering. Even at the low end of Facebook’s current IPO range of $34 to $38, it would trade at 16 times this year’s projected revenues. In comparison,Google is trading at about 5.5 to 6 times annual revenues.
Investors are paying a high premium for Facebook shares, and they’ll soon want to know if they should have.
For Wolff, the answer depends on Facebook’s ability to scale up — and fast.
“They need to have four other Zynga’s in place, generating vast revenue with high margin for them within about 12 months in order to justify even the middle of the range we’re talking about today,” added Wolff.
Facebook shares are due to list on the Nasdaq on Friday.
—By CNBC’s Jennifer Leigh Parker
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Neither Max Wolff nor his firm GreenCrest Capital own Facebook shares, and have no plans to purchase at the time of IPO.
Follow Jennifer Leigh Parker on Twitter @jparker741.