The Facebook Pump and Dump
Someone is aggressively hyping Facebook to the financial community. Investors are being told the social network's value will double in 12 months — and quadruple over 18 months — to $100 billion. It sounds like someone has shares to unload.
CNBC today quoted a source claiming Facebook will be worth $100 billion by the time it goes public in Q1 2012, twice what Goldman Sachs valued the company at in January 2011 and four times the valuation placed on Facebook by Elevation Partners this past June. That inflation is far ahead of the user growth in Facebook's network over the same period. But CNBC is hardly alone in quoting it; the Wall Street Journal reported hearing the exact same $100 billion valuation from an anonymous source just last month.
At the time, there was very plausible speculation that the hype was coming from wealthy Facebook investors eager to pump up the shares they hoped to sell on private markets. No information has emerged since to disprove that hypothesis, nor is there any reason to think Facebook corporate insiders would want to set expectations so high so early. There is a silver lining: If Facebook has really peaked, as some investors seem to believe, maybe the next bubble will be over before it really gets started.