
Facebook investors look for exits - atularora
http://www.reuters.com/article/2011/04/27/us-facebook-shares-idUSTRE73Q8L720110427
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DeepThoughts
Looks like somebody is trying to cash in their chips before the casino burns
down.

Facebook is so massively overvalued that the only thing smart people _can_ do
is consider this period being close to the high water mark and get ready to
get out while the getting is good. I don't think the swelling dot com bubble
will be anything like the one at the turn of the century, particularly in the
sense that I don't think many of these overvalued companies will actually
fold, but I think it's safe to say that how ever it turns out, some folks are
going to lose a warchest full of capital investment by the time this is done.

~~~
hendzen
I don't think facebook is overvalued. The bubble aspect of the current
situation is due to the increased allocation of capital into the tech industry
because of big successes such as Facebook, Groupon, LinkedIn, etc. The worry
is that this infusion of capital will result in 'bad' companies getting
funded.

Considering how many startups are being founded by MBAs these days (MBAs will
always follow the money), you have to wonder if they are all really creating
something worthy of their sky high valuations.

~~~
alooPotato
Curious to see if you know of any specific examples of recently founded
companies that are:

1) Founded by just MBA's 2) Raised a lot (relative I guess) of money 3) don't
pass your definition "creating something worth"

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ChuckMcM
I'm not surprised by this. One of the things about the non-bubble bubble is
that its driven by 'qualified' investors who, in theory, are better able to
evaluate such deals on their own.

That FB has apparently reached an equilibrium somewhere shy of 50% of Google's
valuation is a good thing for reigning in speculation.

But as a company that has seen a lot of second market type of motion, I have
to wonder if this makes an IPO a real non-deal. Perhaps Facebook might simply
shift from private to public without offering any (or only a token amount) of
equity since they will already have a big chunk of equity in the hands of non-
insider investors.

I agree with the quote that says the company is already priced for perfect
execution, if you buy in now its hard to believe your return would out perform
the market.

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staunch
1) If you believe FB will be worth $140+ billion in a few years, but you want
money now/have a fund coming due it might make sense to sell at $70 billion.

2) If you believe FB will be worth $140+ billion in a few years, and can
afford to wait it might make sense to buy at $70 billion.

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ballard
Facebook has more traffic than porn but has been less profitable than Java.
WTF?

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mhp
So if $1 billion in shares trade hands at x valuation, does that prove
Facebook is in fact worth >= $33 billion? I find it difficult to believe the
value of FB shares is anything other than what people are paying for it when a
whole billion dollars worth of shares trade hands.

We could argue the semantics of 'worth' again (
<http://news.ycombinator.com/item?id=1719975> ) and whether the long term
value is way off base to its current value, but the evidence is overwhelming
that FB is currently worth tens of billions of dollars.

~~~
lucasjung
By this logic, there was a point in time in Amsterdam when some tulip bulbs
were "worth" more than large houses. You are technically correct that facebook
is _currently_ worth tens of billions of dollars, but is that real, lasting
value or is it a transient inflation of price caused by lots of people
investing with very imperfect knowledge of the company and the market? An IPO
_might_ reveal the truth.

~~~
mhp
By that logic, only sustaining value for some period of x days would allow you
to say the value of something is y. That doesn't seem accurate to me. How many
days is x?

~~~
lucasjung
I don't think it's schedule-driven, I think it's event driven. In particular,
I think that there are two events that value must survive in order to be
demonstrated real:

1: End of severe information asymmetries (going from private to public--i.e.
an IPO--will typically do this).

2: A crisis of confidence. A crisis of confidence can temporarily depress the
market valuation of something with real value, but the fundamental underlying
strengths will drive the price will recover as the crisis abates; inflated
value will not recover in this manner after a crisis of confidence because the
crisis will have served to expose the fundamental underlying weakness.

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VladRussian
in at 50B valuation or less, several months later - out at 70B. With such a
good deal, it would be very unreasonable to wait for 100B, 200B or whatever,
if any, in the future. Especially if one thinks that initial swell of
valuation typical for the days right after IPO has already happened without
the actual IPO taking place.

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haily
I wonder how many shares of Facebook are available to be bought in any market.
If the shares are indirectly rationed by Facebook through their approval of
any shares being sold, wouldn't this create an artificial limited supply of
Facebook shares?

~~~
mhp
My guess is they have right of first refusal for any ex-employees selling
shares. So the ex-employees would have to sell to someone sanctioned by
Facebook, or the ex-employees could force Facebook to buy the shares back from
them if they found a willing buyer that Facebook didn't approve. With current
employees, Facebook probably has a lot more control over who they can sell to.
(It may be limited to people who already own shares)

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enjo
Google has something like a $170B market cap on the open market. Facebook at
$70B doesn't seem so insane in that context does it?

~~~
michaelchisari
Google had $30 billion in revenues in 2010. Facebook has an estimated $2
billion. 15x the revenue, but only 2.4x market cap.

Google also had a reported $8 billion in profits, and it's been suggested that
Facebook's profits are meager.

Google also operates in a segment of the industry that is much less fad-
driven.

~~~
prostoalex
Why do people get excited about profits of a company that never pays
dividends? Is it about preservation of capital? Or a hope to see a trickle
down effect of dividend payments at some point?

~~~
hendzen
The retained profits (much of which go to productive activities such as R&D)
add to the value of the company. Theoretically, the market should see this and
then revalue shares accordingly.

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chailatte
The savvy investors probably don't have enough confidence in Facebook to IPO.
Zuckerberg is still being sued by more than 2 parties in court. And time's
running out for trendy startups to IPO and steal as much of grandma and
grandpa's pension funds (what's left of it) before the stock market and the
dollar collapses. Although maybe if Obama was re-elected Mark would have a
chance to get those court cases thrown out.

~~~
derwiki
The last Obama related comment seems like an unnecessary jab and offtopic.

