Yahoo! Lawsuit Could Dampen Investor Sentiment in Facebook IPO

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Trefis) -- By filing a patent infringement lawsuit against Facebook, Yahoo! ( YHOO) has made it clear that it has nothing to lose, especially as its core operating assets still fail to generate sufficient value for the company.

However, the more important question is how does this move will impact Facebook's IPO plans? While the patent battle is likely to stretch beyond 2012, we expect that the damage done to Facebook would be more in terms of dampening investor sentiment somewhat rather than slowing actual performance metrics.

See our complete analysis for Facebook here.

Given that Facebook is expected to price its IPO in mid-2012 possibly as early as April or May, the possibility of a decision being made on Yahoo's lawsuit within that time frame is next to impossible.

However, the fact that Facebook is in its SEC-mandated quiet period makes it extremely difficult for it to publicly counter Yahoo's allegations. This in turn can lead to cautiousness among investors on whether these patents can hamper Facebook's revenue stream significantly - or whether or not Facebook will face some sort of legal settlement. The big jolt, however, could come if Facebook itself delays its IPO plans because of the patent battle, which seems unlikely at this point.

The updated Trefis valuation for Facebook stands at roughly $74 billion .

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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