Facebook Overvaluation Explained By Damodaran

Facebook Inc (NASDAQ:FB) on IPO day was a sight to see. The disaster of the company’s offering was both spectacular and disastrous. Everybody has read a hundred times the problems that led to the stock’s blip that day and its subsequent fall but many less have much to say about how the massive overvaluation happened in the first place. For the last month, the firm’s stock had been called overvalued in the press many more times than it had been called a fair buy. How did investors miss the coming disaster?

Many have in the days since the IPO suggested that...