
A Goldman Unit Is Said to Have Rejected Facebook  - px
http://finance.yahoo.com/news/A-Goldman-Unit-Is-Said-to-nytimes-3234310186.html?x=0&sec=topStories&pos=3&asset=&ccode=
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klochner
My biggest takeaways:

    
    
      - a goldman unit with a fiduciary duty to clients passed on the deal
      - a goldman unit without any such duty is doing the deal
      - goldman will make money on the deal at almost any valuation (with the ipo)
      - clients need another 20% appreciation to make money (break even at $60B)

~~~
eftpotrm
As soon as I heard this GS buy-in to Facebook, what came to mind?

Pump and Dump.

We can all see that Facebook's earnings don't justify a $50b valuation any
time soon, so to buy in at that valuation looks like a very brave long-term
investment. Yet GS have got huge publicity from the deal and, as long as they
can sell a good number of their shares, they make money regardless - they win,
their investors carry the can.

This whole deal is no better than the spam stock tips I used to get every
morning from some unknown address.

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cletus
I thought this was going to be a puff piece before I opened it but the most
interesting thing--and perhaps this is posted elsewhere and I merely missed it
--is it has basic Facebook financials.

$2 billion revenue for $400 million profit gives a P/E ratio of 125. That is
simply _nuts_.

Now I fully realize that the stockmarket is driven on the expectation of
future value rather than the simpler view of the ability to produce income,
which is why "growth" companies trade _much_ higher than their P/Es but 125?
That's like the height of the dot.com era pricing.

Remember at 600 million users, if you exclude those who are illiterate, have
no access to computers or the internet, are infirm or simply too young,
there's only so much bigger Facebook can actually get (given ~6 billion people
on Earth you'd exclude at least half of them).

The counterargument to that is that Facebook has only scratched the surface of
monetizing those users and I guess that might be true but I'm also of the
opinion that there isn't as much room to monetize as some seem to think.

The usual MO for a VC-backed company is to go all out to build scale. They'll
burn through millions of dollars to do it without concern for how to generate
money. Why? Because once you have scale many things become easier, even
possible.

Facebook _has_ scale and can only generate $400 million in profit a year and
only a 20% profit margin? That's less than impressive.

~~~
nostrademons
I said the same thing about Amazon in 1999 ("they won't even turn a _profit_
until 2003? How the hell does Wall Street think they're worth $40B when they
lose money on each sale?") and ended up with egg on my face for it.

FaceBook's a bit too risky an investment for me now, but I can see how someone
who really believed social networking will fundamentally change society and
FaceBook is the horse to bet on would go for it.

~~~
klochner
If you bought amazon at the top in 1999, it took 10 years before you broke
even on the investment.

Not really what I'd call egg on your face.

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grandalf
Does anyone remember the story yesterday about the phone that is YouTube only?

Facebook has a massive number of users who check it every day. Humans are
social creatures, and looking at pictures of friends, etc., is like cocaine.

The net is moving toward non-neutrality. The biggest impact of this on the
typical end user won't be pain from (say) the inability to watch Vimeo videos
on their phone, it will eventually be the inability to access key
infrastructure services (like Facebook) without sitting through interruption
ads.

There won't be any need to worry about privacy b/c Facebook will be able to
sell advertisers the right to hijack your computer or phone for 30-60 seconds
multiple times each day.

If there's only one social network available on your phone, then you can't
just use a different one if the commercials get too annoying. The same applies
to search engines... imagine: "While we complete your search, see this message
from Johnson and Johnson".

Once this transformation (which now even Google is unabashedly in favor of)
happens, major "internet utility" companies will have legitimate _Trillion_
dollar valuations.

The only reason Goldman partners aren't buying is b/c they have safer, higher
Yield alternatives.

~~~
rimantas
I am already tired by "monetize everything with ads" mentality, and the moment
your scenario comes true I won't be using FB anymore.

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chopsueyar
"The S.E.C. had nothing substantial to say on the matter at the time"

