back to article Facebook sells equity: Reportedly valued same as Tesco

Cash-loaded Goldman Sachs clients with more than $2m to wave around were told over the weekend that they would soon have the opportunity to invest in Facebook. According to a report in the New York Times, the brokerage plans to offer its clients up to $1.5bn in Facebook Inc equity. Goldman Sachs said in an email to would-be …

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WTF?

"got tagged with a valuation of $50bn"

It that sum bailout cash sloshing around in the pipes looking to get spend or what?

Basically, it probably means that my pension scheme is toast.

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Silver badge

Not quite

I think it's more likely to be "quantative easing", ie. freshly printed money that is driving this particular asset bubble but your point about pension cash being pissed up the wall on this kind of Ponzi scheme (what is the money for if not to pay earlier investors off?).

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Silver badge
WTF?

How much?!

Really it beggars belief that the value appears to be around $100 per signed-up user name. Just how are they going to earn a decent return on this money?

I despair that my future prosperity & pension is about to be pissed away by 'investors' once more.

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Proof if more proof were needed

Investors are complete idiots, just very rich complete idiots, often gambling with your money on a 'cant lose' basis - if they screw up you lose the money not them, if they get it right they scoop a massive commission from your profits....

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Anonymous Coward

And a Facebooker has about the same value

as one of Tesco's tins of beans in the red, white and blue livery

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Silver badge

Worth at least twice as much

as MySpace in 5 years...

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Boffin

Re: Worth at least twice as much...

That'll be twice zero, then ?

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WTF?

Dividends

Is Facebook actually making any money yet?

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Silver badge
Boffin

"Is Facebook actually making any money yet?"

FB are estimated to be making $2bn (yes, with a 'b') this year (source - Financial Times). That still makes a $50bn valuation way too high. Price to earnings (PE) ratio for companies can vary wildly, it's typically around 15, using this measure FB would be worth around $30bn. Companies expected to substantially increase their earnings usually have higher PE ratios up to the low twenties. A PE ratio of 25 or over as indicated by this deal would mean either investors are expecting an enormous increase in earnings growth, or (as seems more likely to me), it's a speculative bubble.

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Revenues not Profit

That $2 billion figure is for total revenues, not profit.

That said, the company apparently made $800 million in 2009, so earnings have more than doubled.

If Facebook is making serious money then why are they looking to raise half a billion through a shares sale?

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JDX
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It's the .com bubble all over again

Just this time rather than invest in ANY startup, it's focused on companies who have a bunch of users... but still regardless of the actual profitability of those users.

I wonder if FB _will_ get cast aside in favour of something new anytime soon like MySpace, or will maintain momentum as the market leader the way Google-search has.

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Anonymous Coward

Dot Com Crash 2.0...

Let the bubble inflating begin!

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WTF?

Boo

Does anyone remember Boo.com being valued at more than Rolls Royce or was it BA or BAE?

I find the valuation bizarre, not only because we've been there before (it was "different this time" last time too). Ah, the weightless economy...

Someone buying a slug of FB is not the same as all of it becoming available. We don't know the underpinning reason why Goldman (if it were) bought in but I don't imagine it was based on dividend stream projection.

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WTF?

Fools and their money ...

I think we know how the rest of that little proverb goes.

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Boffin

Valuations are not about real value...

They are about predicting what others will pay in the future - and when those stocks are released in 2013, current purchasers expect a profit from increased demand for the stock. hence the value is for the predicted purchase price of the stock, not the firm itself per se.

It's rather like investing in art - the physical value of the object is quite low; the price is based on what others will pay for it later on.

The difference, of course, is that a van Goch generally doesn't go tits up when it can't find a business model - but all the current investors are betting that won't happen until they have shed their stocks. Of course, someone will get burned if facebook fails, but everyone is hoping that won't happen... and until it does, the artifical inflation of stock values will continue.

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Monopoly

Facebook is not another dot com boom to bust. Its a monopoly like eBay. Currently its not throwing its weight around because its still in the growth phase.

Facebook will be around for decades to come because of its critical mass. They do not have to invent a better search engine or make a better product. Everybody's data is already there and migrating hundreds of millions of people away is just never going to happen.

Investing the money now is a good idea for a serious long term venture. They will start to earn real hard cash when they start charging for membership, probably a gold members club with a shiny badge next to your picture (social people like bling). It will be like when ebay raise fees and everybody gets upset but still uses eBay.

Seriously has there ever been an event where 100 million people have all changed their mind within a short space of time?

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Coat

well....

"has there ever been an event where 100 million people have all changed their mind within a short space of time?"

Does the length of time between Obama's election and the midterms count as 'short'?

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It comes close but not close enough

The president won with a 52% of the vote. Given the population of America is roughly 300 million that means if everybody voted (which they didn't) 156 million people would have voted for him.

Given that his current approval rating about 47% (given today's news) that's a drop in voters by (at best) 7.5 million (if everybody voted).

Whilst that is what I would have defined in economics as short, it doesn't meet my suggestion of 100 million people.

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Rot

If ebay raises their fees people will just move to the other auction sites that already exist.

If facebook tries to introduce fees it will empty of users as quickly as friends reunited did

Lets face it (sorry) facebook does NOTHING that you NEED, it is fun only because it costs NOTHING, when it costs something people will just go and find something else to do somewhere else. Facebook has ZERO real value.

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Pirate

Sounds like a futures scam to me.

Unnaturally inflate the share price by any means possible while quietly betting the farm on it being worth less in the future.

Icon: The Crimson Permanent Assurance

http://www.youtube.com/watch?v=KX61PUZ3xkI

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FAIL

Goldman at the trough

We already know that Goldman are happy to punt an offering which they expect to fall in value. Goldman get their percentage regardless.

We already know that dot com companies attempt to float when their bubbles are at their largest.

This feels a lot like AOL "buying" Time Warner. Internet service with no unique IP pretends to be a real company, and then gets shown up badly when the next free fad service comes along.

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DJ
WTF?

Overpriced

I wouldn't pay a penny over $40 billion for the whole company.

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Go

Facebook Credits : secret is out.

They can justify $100 per user because they are going to become the dominant micro payment provider (and who will miss PayPal?).

Once they have finished plastering the web with "Like" and "Share" buttons they are to add "Pay with Facebook Credits".

I can think of worse places to stick $2m.

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Gates Horns

This is legal?

Along with graft they must have changed the insider trading laws in the US to make this legal too.

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Alert

Russian? Mafia? So...

... that is how Russian mafia gains some legit face(book). I guess is better than through achieving arguably suspect hosting of major events (Eurovision Song Contest, Winter Olympics, Soccer World Cup etc.

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WTF?

Re: This is legal?

Bank promotes sale of 1% of Equity at stupid price.

Ask yourself whether, then as part of the deal, the Bank then awards itself the right to sell XX% at the same stupid price and then pocket the profit. There's probably a law against that.

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Badgers

I don't...

...pretend to understand business and finance. Does any of this mean that Facebook is about to be vastly overinflated, then explode, sink and disappear without trace, so we can all get back to something approaching normal?

A British public exclusively focused solely on idiotic TV talent shows has to be marginally better than one focused on idiotic TV talent shows and Facebook.

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cor
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