
Facebook Shares Hit $28.26 Per Share, That’s a $70+ Billion Valuation - ssclafani
http://techcrunch.com/2011/01/14/facebook-shares-hit-28-26-per-share-thats-a-70-billion-valuation/
======
mynameishere
Try advertising on facebook. Seriously. Try it. Go into that exercise with
some adwords/adsense experience. You'll be calling your broker on the day of
their IPO asking for some shares to short.

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imkevingao
Goldman Sachs did it... so they must be right..

There are many reasons Goldman Sachs did the deal. If Facebook goes public and
chooses GS as the financial institution to do the paperwork, that's one
reason.

In addition, if they believe speculation will drive Facebook stocks up after
the IPO, then it's a good investment. Overall at 70billion valuation, Facebook
has a P/E of 170 ~ ish. So earning 1 million dollar will drive the valuation
of Facebook to 170 million. Let's try to use some common sense in this. Either
Facebook start to monetize like crazy, like earn 10 billion profit next year,
10x of what it was this year, or the valuation has a problem?

~~~
bl4k
You can't really treat Facebook stock in that way, for two reasons:

a) They aren't putting in financial performance to impress investors. They are
growing the company.

b) Treat it more like a resources stock were they have large mining leases and
rights, have started exploration but are 2-3 years away from actually mining
anything.

~~~
imkevingao
that's how the dot com boom happened in the turn of the century. Everybody
thought the tech companies were like mining resources and silicon valley young
stars were all getting rich as if they found the next petroleum site... except
when it came to harvest profit, they couldn't meet the ultra high
expectations... and the bubble goes "pop"

There are lots speculation that says Facebook is a bubble, I honestly think it
has a lot more potentials as well, and it could potentially meet its
expectations, but I don't think Mark Zuckerberg is exactly the right guy to
meet the $50b or $70b expectation that investors believe.... I mean the guy is
a legend and he continues to build amazing stuff for the world, but when it
comes down to monetization, it's not __cool __, but maybe he'll find a cool
way to make Facebook money.

~~~
bl4k
Ye I think that is the difference. Most resources stocks have risk built into
the price (from nationalization through to a drop in minerals demand) but
Facebook hasn't done much wrong in the past 5-6 years.

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dstein
_By reading this email, the recipient acknowledges and agrees that all of the
information contained herein is confidential_

Was this unintentional humour? It's implied that by reading this "super
secret" email that the valuation is meant to be secret, which of course it's
not. It's no secret at all anymore that Facebook hired Goldman Sachs to pump
and (eventually) dump it's shares.

~~~
noahc
E-mail confidentiality statements are used more as scare tactics or to impress
people. They have no or little legal standing.

[http://www.snewsnet.com/snews/gt_upload/Fitness07_lawreview....](http://www.snewsnet.com/snews/gt_upload/Fitness07_lawreview.pdf)

~~~
cookiecaper
Interesting article, though its assumption that since an IT administrator
could look at your email it cannot be considered privileged is a bit
worrisome. It basically means nothing done electronically can be counted as
privileged.

Why are phone conversations privileged? If the phone company was so inclined,
it could (and has) hook up a listening device and listen to whatever they
wanted, just like an IT administrator could hook up his email program to point
to your mailbox (or packet sniff or use some other method).

Fortunately, from the skimming I did, it doesn't look like there's case law on
the matter, just an assumption that emails can't qualify as privileged. Note
that most IT administrators could get any private keys you use at work by
logging into your machine and copying them off and he could get your passwords
by hooking up a keylogger. By the standard promulgated in the article, a
defendant could then be forced to offer any passphrase for anything. We know
that at least isn't considered the rule yet, let's hope it never becomes such.

~~~
electromagnetic
If your email is from your company, you don't own it and there's no
expectation of privacy as you're working as a representative of that company.

It's well established that what I do _outside_ of work can get me fired if
it's deemed inappropriately representing the company. So I don't get why
there's an expectation of privacy when I'm doing something with work property,
even if it's an email. I'll get fired if I'm inappropriately using the vehicle
my work gives me, why wouldn't I get fired if I'm inappropriately using an
email address my work gives me?

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bhickey
I was most surprised at this statement:

    
    
        Thank you to those who participated in this week’s SecondMarket auction
        for Facebook shares. The auction was successful and fully cleared
        at a per share price of $28.26. Next week, the floor price will
        be $26.25 and we will require a minimum sale of 25,000 shares. In 
        observance of the national MLK, Jr. holiday, please find the 
        adjusted auction timeline for next week below.
    

I've never used Second Market, so hopefully someone can explain things:

* How the heck is are they organizing their auctions? If someone wants to dump FB shares at $25.47, what's the problem?

* Why the minimum trade size of 25k shares? Is this driven by some sort of reporting requirement?

* They state that 2.7m shares have cleared their exchange. Should I conclude that the volume of shares on Second Market is 500k?

Something just doesn't seem to add up.

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xenophanes
So how do you short facebook?

~~~
jsm386
Perhaps Goldman would be kind enough to sell you some puts:
[http://blogs.wsj.com/deals/2011/01/14/struck-out-on-
facebook...](http://blogs.wsj.com/deals/2011/01/14/struck-out-on-facebook-
stock-maybe-goldman-will-sell-you-some-options/)

------
bane
It may as well be a trillion dollars for all the sense that valuation makes.

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dsulli
The big problem with Facebook is that their business isn't defensible in the
long term. There have been lots of other social networks come along in the
past (AOL, classmates, Friendster, Myspace). The prior ones are all in
shambles now, that people have moved on to a new place.

I don't see why another network can't come along in a year or two, and start
stealing away visitors from them.

Compare a few publicly traded companies in the range of 50 to 70 billion
dollars market cap (all seem to have a pretty strong 'durable competitive
advantage', as Warren Buffett notes):

Comcast (63B) - millions of subscribers for phone, internet, and cable
services, paying money every month for services.

Amex (55B) - receives a chunk of every payment that their millions of card
holders make. Card is accepted at stores and websites around the world.

3M (62B) - sell 20+ billion dollars of "diversified technology" products a
year.

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fleitz
That would put FB on par with McDonalds or around the 80th largest corp in
terms of market cap. That said, however overvalued I may feel it is, I don't
think its going to head in a downward direction for at least a year. At least
FB is a little more fun to hype than Gold.

~~~
sandee
> At least FB is a little more fun to hype than Gold.

There is no fun in hyping gold. That's simple because gold is not a hype

~~~
getsat
Gold has gone from $725 USD/ounce in the 2008 US economic crash to nearly
$1400 USD/ounce today. This is likely more due to the fact that the USD is
falling out of favour worldwide than hype, though.

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jdp23
sounds pretty bubble-icious to me ...

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cryptoz
> With 2. 5 billion or so shares outstanding, that’s a $70.65 billionish
> valuation.

Wow, that's a total failure of understanding significant figures. "2.5 billion
or so" is significant to one digit (assuming the "or so" refers to uncertainty
about the 5). Then he magically finds _four_ sig figs? Ridiculous.

------
btipling
You know it's easy to poke fun at this, but they are a gigantic fucking
website. They are in a position to be beat the giants at everything. Google:
search - Facebook can create a better search using the data it has about
people and beat them. Microsoft - software, Facebook can add it's social
aspect to software for phones, pcs, whatever in any way imaginable and beat
them.

Facebook is in the position to rule the world. To be what others have imagined
but could never have been, to tie it all together and make more money than
god.

I'm not saying they will, but underestimating the skill, the determination,
and the savvy of Facebook is probably likely. Of course there maybe some
bubble mentality in the people bidding, but perhaps these people are in luck
and it's not a bubble at all.

~~~
wippler
With the given strength of 500 or 600 software engineers they have, I don't
see how it is possible for them to diverge into every other vertical.

The most important thing for their valuation is the leverage they have (lots
and lots of data about every user).

~~~
waterlesscloud
If only they had some way to raise hundreds of millions in cash to hire more
engineers...

------
maxklein
If email were owned by a single company, would it be worth $70 billion in
valuation? I think it would be worth much more than that, and that's why
facebook is so valuable.

Facebook is undervalued at $70 Billion.

------
chailatte
People who think that Facebook is undervalued always brings up the 'But
they've yet started to monetize' reason. My question is, is it that easy to
'just' monetize? Because they would have to either

A.) Enter an existing revenue space occupied by entrenched players (likely
Google, Yahoo, Microsoft, Linkedin, Amazon, Ebay, Apple) and grab a big chunk
of market share large enough to validate the $50-70 Billion valuation. With
some of the competitors having cash warchest almost the half size of Facebook
itself.

B.) Create a brand new way/market to monetize. Has to be around $6-15
Billion/year revenue to justify valuation. Quickly, before they run out of
money/hype. In a maturing/saturating online space. (for comparison, Digital
Music is a $15 billion dollar market)

On top of that, they have to be mindful of the declining game ad spend,
declining monthly active game players, and the increasing costs from users
overseas that cannot be monetized.

I am sorry, I just don't see it.

~~~
ig1
Local advertising is a $100 billion/year market in the US. Facebook are better
positioned to take that market than anyone else.

Local leafleting has a reply rate of about 1-2% but costs 200-300x as much to
reach the same number of people, which means you only need a 0.005 response
rate on Facebook to get the same value. A decent Facebook ad campaign will
have a response rate around 0.08 - 0.1. That implies facebook advertising is
15-20x more effective than leafleting. Facebook ads might convert less well,
but I doubt they convert 10x less well.

Local adverts on Facebook make sense, it's just a case of making them easier
to use and selling local business on the idea.

~~~
nostromo
I just don't see it. I live in San Francisco and I need, say, a plumber. Do I:

1) Go to Google and type in "Plumber" (a search that is already localized to
SF and shows plumbers near me right away).

2) Go to Yelp (or another similar site) and do the same search to find more
review-based results.

3) Go to a social network...

Yes, there may be some cases where FB is better (for example, if I don't even
know that there is some local service I should check out) -- but those seem
pretty rare.

~~~
callmeed
But if you own a carpet cleaning service in San Francisco and want to reach a
lot of new customers, do you:

1) Buy some PPC ads via Google and maybe a few new customers will trickle in
via searches

2) Do a groupon, possibly getting a huge influx of business BUT at a 50%
discount and giving groupon half the proceeds

3) Pay for a Facebook "Flyer" targeted at San Francisco home-owners that have
a dog or cat, offering them a 20% discount ...

I think when you look at it from the POV of the business doing _outbound_
marketing, Facebook has more opportunities.

Of course, FB has to be careful not to turn the system into a huge coupon-book
and alienating users by the hundreds.

~~~
InclinedPlane
You do 1 because it's cheap and because it generates results.

If I search for "carpet cleaning in san francisco" on google I see 3 ads. I
suspect that those ads are responsible for a fair amount of business to those
companies, explaining why they pay google for the advertising.

The difference between ads on google and ads on a social network is that ads
that are _relevant_ to your search are actually often _desired_ and far more
likely to be used. If I'm searching for a carpet cleaner in san francisco then
ads of such kind are useful to me. In contrast, ads embedded in social
networking sites are distractions from the activities people engage on there.
If some carpet cleaning company pushes an ad on me because they've discovered
I live in the area and/or have pets I will more likely than not think "ugh,
who are these assholes?" or perhaps "maybe I should install ad block". When I
actually need a carpet cleaner I'm not likely to think "hey, I should use that
company that keeps annoying the crap out of me on facebook", instead I'm
likely to go to google, search, compare some reviews, and pick a company that
seems decent and inexpensive.

------
lawfulfalafel
I do agree with most people saying the valuation based upon their current
business model is idiotic, which is why I think the investors thinking bigger.
Maybe someday soon we will log into our banks with our facebook account.
Someday we will be able to make a request to the DMV using our facebook
account. Think about buying a laptop, and when you boot it up, it isn't
windows asking you to create credentials but facebook asking you to login.

If those investors aren't betting on game-changing stuff happening than I have
no clue how the hell they are justifying this move to themselves.

