Lust for Another Bubble Leads to IPO Porn
The hottest fantasy in Silicon Valley involves a big, hot... tech bubble. Facebook and Yelp supposedly want one, so they can IPO in 2010; even Penthouse publisher FriendFinder Networks wants to go public, despite a sex harassment scandal.
Didn't we just finish one of these? Yes, yes we did. But the hangover from the 2008 popping of the real estate and financial services bubble just makes Valley investors ache for another explosion of dumb money. And with the recent surge in the stock market, the wishful thinking is palpable.
Facebook has restructured its stock to pave the way for a 2010 IPO. Yelp is believed to have turned down a half-billion-dollar takeover offer from Google so it could IPO.
And now adult personals company FriendFinder wants a $220 million IPO. This is a company with $433 million in debt and losses of $27 million in nine months thanks to the cash-bleeding magazine. It lost three HR directors in six months last year, two sources told us, amid a lawsuit alleging pervasive sexual harassment and other reported clashes with employees.
Yet FriendFinder is betting stock investors will be reckless enough to plow fresh money into the company. That's not much more audacious than Yelp, which turned down a reported $500 million offer from Google despite have four full years of unprofitability under its belt; top investors apparently thought the local reviews site was worth 50 percent more. Facebook, at least, is awash in hundreds of millions in revenue and positive cashflow, if not actual profits.
But even a viable company benefits from an irrational bidding war. Which is why Facebook's investors want an obscene tech bubble as much as the pornographers at FriendFinder.