5 ms·

Groupon and Facebook valuations: A new paradigm or return to insanity?

• pedalpete 16y ago
  Though there may be a bubble in the private market, we'll have to wait to see if that creates another bubble in the public market. I believe Dave McClure said something along the lines of an extra few million inflating the early investor market doesn't have the same damaging effect as billions of dollars inflating the public market. The author points the finger at Yahoo! a few times, but doesn't mention the prices that the stock was trading at or grew from. Yahoo when public in 1996 at $24.50/share, which was a $1Billion market cap. They peaked in Jan 2000 at $500.13 (split-adjusted). So it was the public market that boosted the frenzy of P/E. Of course, Yahoo! has continued to drop since then, but they were also unable to keep pace with the market, and the stock price accurately reflects that. So far, Facebook has done an amazing job of defining their market and should be commended. They've also got strong revenues and are continuing to grow strongly. Shouldn't the P/E of a company who is on rocketship growth but not yet in the outer atmosphere reflect the position of growth? Established companies should have a lower P/E as they are unlikely to show as significant growth.