"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.
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 …
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.
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.
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.
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.
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?
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.
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.
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.
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.
...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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