Bubble Bubble, Boil and Trouble: Is Facebook Stirring Tech Bubble?

Seems talk of another tech bubble occurring in the stock market has been making the rounds of numerous publications.

“Thanks to Goldman Sachs’ latest cash infusion of about $450 million with a commitment to raise another $1.5 billion, Facebook has become the lightning rod for debate over whether these new Internet hotshots possess the profit-generating muscles to justify Wall Street’s unforgiving expectations,” Reuters notes.

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Facebook is valued at $50 billion – a ridiculous amount of money for a website that not long ago operated at a loss. Twitter is worth less than Groupon because it does not have a solid monetization plan.

The question is will they be as popular for the distance – MySpace is laying off half its employees.

As MarketFinacial reports “the tech sector isn’t what it looked like during the dotcom bubble when outfits like pets.com were fetching gargantuan valuations while losing money hand over fist. Many of these companies are relatively well-established, have much growth ahead of them, are growing revenues rapidly, and most importantly – already profitable. However, if every mom and pop can now get their hands on shares, don’t you think there’s going to be a runup in advance of the IPO for the Next Fund?”

The investors that made money in the previous bubble, even those who lost it all back – will be looking to make some of that money again.

And as the Wall Street Journal reported “a new fund with a different twist. It’s aiming to loan money to stock-option holders of Facebook – and other high-flying Internet companies such as LinkedIn, Twitter and Zynga – so they can buy the stock and pay the lofty taxes that come with exercising the options.”

“For years, we’ve been reading about how “accredited investors” could invest in startups such as Facebook, Twitter, LinkedIn and others before they actually go public with an IPO. The logic is that such sophisticated investors are more suited to the risks and capital requirements that come with such investments, even if trading in the secondary market. Well, coming on the tail of the recent Goldman Sachs (GS) investment in Facebook which valued it at $50 Billion, we now have the first regulatory filing for a publicly traded fund which would invest in such companies, allowing routine retail investors to participate. So, yes, you’ll be able to invest in Facebook, Twitter, LinkedIn, and other hot private tech outfits as a routine retail investor – through this closed-end fund,” MarketFinancial reported.

Meanwhile Yahoo is also laying off employees, but Macy’s plans to hire 725 more online workers over the next two years.

“US watchdogs are investigating the secondary market for private company stocks, a largely unregulated investment arena that has seen the valuations of top technology companies such as Facebook, Zynga and Twitter soar,” the Financial Times noted.

But given Facebook late last year did “a 5-for-1 stock split, marking the third split in the company’s history. The privately held social networking company, founded in 2004, previously executed 4-for-1 stock splits in 2006 and 2007,” CNN reported. So those early employees have numbers.

“The truth here is that, just as with AOL back in the late 1990s, the dynamics of why people are flocking to social websites and how they’ll be used in the future are barely discernible right now. That’s the big unknown that threatens Facebook’s current valuation. Goldman Sachs and its allies may be ready to bet on the future of Facebook today, but to do so is pure speculation,” as eBizQ stated.

Where it will end has yet to be determined but there will be speculation and profits.

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