Monday, March 28, 2011

Warren Buffett advises to invest in social networks

The billionaire U.S. investor Warren Buffett has warned investors to bet on social networks like Twitter, Facebook or Quora, holding that their valuation is excessive. "Most [of companies] are overvalued," said Mr. Buffett. "It is extremely difficult to properly assess the social networks. Some will be big winners, which will compensate for the failure of others." Many of these companies are not yet publicly traded and shares traded on the secondary market, poorly regulated, where investors buy the securities of OTC.

Based on these OTC exchanges, Facebook would be worth today $ 50 billion (35.5 billion euros), Twitter and $ 3.7 billion (2.6 billion euros). Very cautious vis-à-vis new technology companies, Warren Buffett prefers to invest in the industry generally. It is not the only observer to warn investors about the danger of a speculative bubble.

Several leaders of investment funds cited by The New York Times said they were "stunned" by the amount of money that is invested in start-up for several months. The spectrum of the explosion of a speculative bubble, like the 1990s, however, must be tempered by the fact that these firms are less likely to go public today than a decade ago.

Most of them show significant revenues, even if they are not commensurate with their development officers, which was not the case in the 1990s. Other industry experts, however, believe that the recent valuation of Facebook or Groupon indicate a speculative boom. Barry Diller, IAC's founder, has estimated that during SXSW recovery in multi-billion dollar business whose revenues were not guaranteed in the long term was "mathematically delusional." The site of coupons Groupon, who wishes to enter the stock market valuation of $ 25 billion (17.8 billion euros), has seen its sales tumble in February.

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