VALUATION GURU: I Would Be Very Surprised If Facebook Shares Were Overpriced

aswath damodaranAswath Damodaran, NYU

Photo: Bloomberg Television

Everyone’s got an opinion about what Facebook is worth.But one of the most respected opinions comes from Aswath Damodaran, the legendary NYU finance professor who literally wrote the book on investment valuation.

So, what does he think?

Basically, Damodaran doesn’t expected too many fireworks.

Here’s an excerpt from his blog:

I don’t think that there has ever been an IPO where investment bankers have had more information (from private share market prices to institutional investor feedback) to work with, when pricing the stock, than this one. I would be very surprised, if the stock were overpriced; the bankers and the company have too much too lose. I would be equally surprised if the stock were dramatically under priced; a pop of 50% or even 25% would reflect very badly on the bankers’ pricing skills. In short, this is shaping up to be a Goldilocks IPO, at least in the initial hours: a pop of about 10-15% (just right for both the bankers and the company). The question is how long the pop will last. This company is too big and too public to stage manage in the weeks after the IPO. If the pop fades quickly, perhaps even by the end of trading tomorrow, I think it is a very bad sign for the momentum game in all social media stocks.

Damodaran made headlines ago when he dumped Apple after holding the stock for 15 years.  Apple’s share price is down 13 per cent since he announced his sale.

Read more at Damodaran’s Musing on Markets blog.

SEE ALSO: Damodaran Explains How To Invest In Corrupt Companies >

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