GLG to participate in Facebook IPO, says it is undervalued at $100bn

Manager GLG says it will participate in the IPO of social network company Facebook, adding that the estimated $100bn market capitalisation value underestimates the revenue and profit opportunities of the business model.

Philip Pearson, co-manager of the GLG Technology Equity fund, said: “We will be looking to participate in the IPO and already effectively have a stake through our holding in Mail.ru, a publicly listed Russian social network whose stake in Facebook is worth around 1/3rd of its market cap.”

“The debate about the value of Facebook tends to focus on short term user trends, revenues and earnings but fails to spot the key attraction. That is the fact that, to an advertiser, the price you pay “per eyeball” on Facebook (or just as importantly on display ads where you are logged in to your Facebook account ) is roughly 1/10th the price you pay for that eyeball on TV ads. This appears to be way too low when you consider how much more you know about the Facebook user than you know about the demographic watching a TV show. As this price gap collapses, we should see dramatic growth in Facebook’s revenue and much of this will drop through to the bottom line. When you model that through, even at $100bn Facebook looks significantly under-valued.”

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