Facebook’s Market Value Questioned

January 31, 2011 Updated: October 1, 2015

Facebook Inc., after a recent Bloomberg Global Poll, was considered overvalued at $50 billion, which is the assumed valuation at which recent investors had paid for stakes in the company. (Leon Neal/AFP/Getty Images)
Facebook Inc., after a recent Bloomberg Global Poll, was considered overvalued at $50 billion, which is the assumed valuation at which recent investors had paid for stakes in the company. (Leon Neal/AFP/Getty Images)
A recent Bloomberg Global Poll of its customers revealed that the leading social networking platform Facebook Inc. is considered overvalued at $50 billion, which is the assumed valuation at which recent investors had paid for stakes in the company.

Selzer and Co. Inc., a financial research house, conducted the survey by asking 1,000 Bloomberg users who are either investors, traders, or analysts and the majority of them—69 percent—felt that Facebook is overvalued. Goldman Sachs Group Inc.’s investment, which raised funds worth $450 million, assumed a valuation of $50 billion for the social network.

The remainder of the survey indicated that 19 percent believed that the Facebook’s value is suitable and less than 5 percent considered its value to be worth more.

As Facebook approaches its initial public offering, there is speculation and controversy in the market regarding the company’s financial reports becoming public.

The scrutiny has prompted criticism and weariness from investors and discussion about the Facebook valuation forming the "beginning of a dangerous new bubble," critics say.

According to one of the Bloomberg respondents, Luigi La Ferla of LTP Trade Ltd., "More than a bubble, Facebook is a manifestation of the rational excesses that only the financial markets are capable of when confronted with something without precedents and more importantly unexpected." He added, "There’s too little financial information and track history to value the company like this."

Since the Bloomberg report, Facebook now sits as the world’s second most valuable Internet company. At one stage it trailed behind Amazon and Google. The Palo Alto, Calif.-based Facebook surpassed Yahoo! In October as the third most visited website on the Internet.

Facebook's social network has exceeded 500 million members and is behind only Google and Microsoft as the world's most visited website, according to ComScore, a market research firm.