On: Twitter is raising new cash at 250 million valuati...

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Perhaps I'm missing something important here, but how are these companies (Facebook, Twitter, et al) being valued? I know there is "potential" value here, but who comes up with the actual numbers?

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Everybody guesses and whoever guesses too high by the largest error, gets his bid accepted.

http://en.wikipedia.org/wiki/Winner's_curse

[fallentimes → endtwist]

Poorly.

With many assumptions and the ignoring of many variables combined with one (or more) of these business valuation methods:

http://en.wikipedia.org/wiki/Valuation_(finance)