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The PE works out to be so high because there is a growth expectation from Facebook's one billion users. All that it says is that the market believes the chances

The PE works out to be so high because there is a growth expectation from Facebook's one billion users. All that it says is that the market believes the chances that Facebook will be able to grow revenue, and in the future, profit, is very high. Just to pick a nit. To date Facebook's P/E is high because Facebook said so. Facebook's value has never been set by an open market until about 3 or 4 hours ago. Its P/E isn't mean to be an indicator of value, its shows the markets expectations of growth. And I think a lot of people are interested to see if the "market"'s expectations are inline with their own - and to that end P/E is great.

emmett 14y ago
No, Facebook's P/E has been high because people having been willing to buy the stock at a high price. Facebook can't dictate what price other people are willing to pay. It's always been set by the market, from day 1.
- mikeryan 14y ago
  I disagree - though I concede its a semantic argument (and I wasn't referring to its private sales - which is valid), but the $38 price was dictated by FB and propped up (artificially) by MS it was not market set. I think that's reinforced by the drop we've seen today when the underwriters aren't there to prop the price up.
  - Drbble 14y ago
    And what's the P/E at the $33 price? OK then.
rory096 14y ago
>Just to pick a nit. To date Facebook's P/E is high because Facebook said so. Facebook's value has never been set by an open market until about 3 or 4 hours ago. Not an open market, no, but a market nonetheless. Anytime a company takes a funding round, whether from a single incubator or a dozen VCs, the transaction implicitly prices the company pursuant to growth expectations. (And that's not even mentioning Facebook's heavy trading in SecondMarket.) Just because a market is restricted and low-volume doesn't mean it doesn't exist; any time a transaction occurs, you'll find a market behind it.

emmett 14y ago

No, Facebook's P/E has been high because people having been willing to buy the stock at a high price. Facebook can't dictate what price other people are willing to pay. It's always been set by the market, from day 1.

mikeryan 14y ago
I disagree - though I concede its a semantic argument (and I wasn't referring to its private sales - which is valid), but the $38 price was dictated by FB and propped up (artificially) by MS it was not market set. I think that's reinforced by the drop we've seen today when the underwriters aren't there to prop the price up.
- Drbble 14y ago
  And what's the P/E at the $33 price? OK then.

rory096 14y ago

>Just to pick a nit. To date Facebook's P/E is high because Facebook said so. Facebook's value has never been set by an open market until about 3 or 4 hours ago. Not an open market, no, but a market nonetheless. Anytime a company takes a funding round, whether from a single incubator or a dozen VCs, the transaction implicitly prices the company pursuant to growth expectations. (And that's not even mentioning Facebook's heavy trading in SecondMarket.) Just because a market is restricted and low-volume doesn't mean it doesn't exist; any time a transaction occurs, you'll find a market behind it.