Mr. IPO: Facebook could be a dangerous bet

6:00 AM could, dangerous, Facebook No Comments

Jay Ritter, University of Florida professor, discusses whether Facebook's IPO is overpriced and what kind of returns investors could expect from the upcoming stock.

When a world-renowned expert on initial public offerings has reservations about the upcoming Facebook IPO, it’s worth sitting up and taking notice.

Jay Ritter, Cordell Professor of Finance at the College of Business Administration at the University of Florida, appeared on CNBC Thursday morning to discuss his views on Friday’s much-anticipated stock offering from the social network.

“My concern with Facebook is that at the valuation that public market investors are going to be buying in at there’s very little upside potential left,” he told CNBC.

But, he added, it doesn’t necessarily follow that Facebook is overvalued.

“The bullish case for Facebook is, as Google has demonstrated, targeted search can be an extremely profitable business, and Facebook has that franchise with social networks and it’s a very defensible business model,” Ritter said.