Tuesday, February 22, 2011
Insights and Opinions: Valuations like it's 1999?
Story by Megan Lisa Jones
For today's Insights and Opinions section, Megan Jones, an investment banker, talks about the surge in technology company valuations, and whether there is, or isn't, a bubble forming:
Zynga is reported to be raising $500 million at a $10 billion valuation. Twitter recently raised $200 million at a $3.75 billion valuation, and turned down a rumored offer of $5 billion from Facebook. Facebook is valued at $50 billion. Demand Media's market cap is close to $2 billion. Groupon turned down a reputed offer of $6 billion. LinkedIn, Pandora, and on, and on.
Most of the above financings are being done by sophisticated investors – either through direct investments with the company or in million dollar blocks on the new secondary exchanges (also limited to certain types of accredited or institutional investors). They are also potentially company to company transactions in an M&A concept; in that case the deal is usually heavily weighted to stock and not cash offers. The number of shares and companies is limited. Demand Media, being the only public company listed above, is the exception.
But as these companies start going public will these "high" valuations have a larger impact? Are we facing a new bubble?
The short answer is probably. But let's delve deeper. (More...)
Read the rest of Megan's article, Valuations like it's 1999?.