The Wall Street Journal and I are extremely skeptical of the upcoming Classmates.com IPO. In today's paper, The Journal writes that while the company is looking to raise up to $125 million, Wall Street is more focused on the future of other, more significant, privately-held social networking sites including Facebook, Friendster and LinkedIn.
Classmates.com looks like a cynical effort to cash in on the Street's desire for social networking stocks -- any social networking stocks! Several penny stocks purporting to have operations in the space are making the rounds on stock message boards and the newsletters of paid promoters. The companies appear to have no fundamental value but attract some attention because everyone is so excited about social networking. I won't mention any by name here because I don't want to give them any additional coverage.
It reminds me of the days when adding ".com" to a company's name would send the stock soaring, and it makes me think a bubble may be brewing.
Personally, I wouldn't buy into the hype. If investors still want to invest in social networking, it may be better to wait until there is a publicly-traded best-of-breed play. There is speculation that a Facebook IPO could be coming in the not so distant future. If the financials make sense then, by all means, investors may want to go for it. But for now, I would stay far away from social networking stocks.
Are we entering a social networking bubble?
Posted Sep 17th 2007 1:26PM by Zac Bissonnette
Filed under: Marketing and advertising, Initial public offerings
Will Rich Ross really have a positive impact on Disney's movie operations?
Consumers sick of recession, may spend extra on holidays
Corrections, seasonality and Santa Claus
Reader Comments (Page 1 of 1)
9-17-2007 @ 2:12PM
TraderMark said...
Gosh it feels like it
We have MySpace for the young-ins, now Facebook has hit the college and 25-45 demographic - LinkedIn for professionals, and some specific niche ones just for doctors and certain professionals. Really who has time for all this?
Talk about overkill.
As an aside, yet another tactical error by Yahoo not buying Facebook when they could of gotten it for 30% what it would fetch now.
http://fundmyfund.blogspot.com/