On: 37signals valuation tops $100 billion after bold VC investment (2009)

[outside1234]

its not nonsensical. there is truth in pointing out that a VC valuation does not equate to a true valuation - either in the upside or downside.

[csomar → outside1234]

Facebook generates $8bn of revenue per year. I guess those who valued Facebook at $6bn at that time were quite wise.

You can't say anything about the current investors. Only the future will tell if it's a wise investment.

[coldtea → csomar]

I could generate $8bn of revenue by selling $100 bills for $10.

Profit now, that's another thing.

[auctiontheory → csomar]

Valuation is a very complex topic, but in "classical" finance, it has more to do with earnings than revenue.

[mkramlich → csomar]

> I guess those who valued Facebook at $6bn at that time were quite wise.

strictly speaking: or fools that got lucky

[kansface → outside1234]

What mysterious property is a "true valuation" and how does one measure it?

[coldtea → kansface]

It's a property based on the premise that not just any made up number is equally good as a valuation...

The very definition of "valuation" points to the underlying "true" part -- valuation means an attempt to guess at the value of something.

It might not be possible to have a perfect guess (because nobody has all the data or knows all the future events that might affect it), but it's very possible to know a valuation if BS and critisize it.

Would you buy a Denny's dinner in rural Nebraska for 1 billion dollars?

[edhebert → kansface]

By asking a Scotsman.

[coldtea → edhebert]

And yet, if one avoids this supposed "fallacy", the logical conclusion would be that no group has any definite properties, and everything is interchangeable.

So, yes, there actually are things that "no true scotchman" would do (else there's no reason to invoke a group named "scotchmen" at all).

[kansface → coldtea]

Sure, but the restrictions are 1. be from Scotland 2. be human

In the case of OP, valuation is simply what the market will pay to own the stock of a company. Sometimes it coincides with what any individual will pay, sometimes not. There is no sort of magical intrinsic value to a company. All we are really doing is arguing over the definition of valuation.