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back to article Facebook fever prices social network at $70bn

Doomsayers who believe the Internet is looking like a bubble again will be out in force, following GSV Capital’s decision to tip $US6.6 million into Facebook. The dollar value is trivially small, but GVC is only buying 225,000 shares, putting a notional valuation of $US70bn on the social network site. Even that number is …

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  1. Anonymous Coward
    Pint

    This is just getting stupid now

    So a purchase of less than 0.01% in a company is enough to linearly extrapolate that it's value has increased by ~$20bn this year? Come on now, I'm sure those little things called reality and common sense are around here somewhere.

    I expect that the boy Zuckerberg or anyone else with a substantial share holding could quite easily give away a few million dollars of pocket change to investment firms to fund them buying some shares at ridiculous prices and still make a ludicrous profit on their existing shares. As it's a private company and therefore outside of the usual SEC regulation, the potential for manipulation makes this sort of speculation laughable.

    The scary part is that when/if they do actually float it, the markets will probably have turned these sorts of stunts into a self-fulfilling prophecy, unless the house of cards has already come crashing down by then. Wouldn't want to be holding those shares when the shit starts hitting the fan.

    I'm off to trade 0.0000001% ownership of my company for a pint. I guess that'll make it worth about £3.5bn won't it?

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    1. Marvin the Martian
      Reply Icon

      Now you're just constructing conspiracies.

      The difference is it's not you or your mate valueing your company, it's an outsider with real money valueing FB. And paying a price lower than what others regularly trade it for.

      If this sort of manipulation was done -- not that easily, as anybody vaguely involved (see Winklevoss and others) smell big bucks and will immediately (sometimes loudly) blackmail or sue.

      Even without oversight by the (sleepy) SEC, any private company can be happily sued for fraudulent business practices: they are selling shares that would be falsely priced.

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      1. Anonymous Coward
        Reply Icon
        Anonymous Coward

        re: Now you're just constructing conspiracies

        "The difference is it's not you or your mate valueing your company, it's an outsider with real money valueing FB. And paying a price lower than what others regularly trade it for"

        Er, okay, so exactly how many degrees of separation need to be put between company owner and buyer before you deem it to be a 'real' trade? Not sure if you realise but GSV Capital is a Silicon Valley based investment firm so it's almost a certainty that there are going to be connections between them at some level - it really isn't that big a place.

        Share prices are determined by what the market is willing to pay. By definition, if someone is willing to pay a particular amount then that is what it is worth. Nothing fraudulent about that. Right now the movement of the shares appears to be being tightly controlled which has resulted in a positive feedback loop being created - if someone buys shares, someone else has sold them for more than they paid, therefore the company value increases and all of the existing shareholders now have a new minimum price that they will accept. If the flood of new capital into this little ecosystem stops at any point, eventually people still holding the shares are going to start wondering exactly what benefit they are getting from having their life savings in ownership of a company that doesn't really generate much income relative to its value. It will just take a few people getting nervous before the cycle reverses and a lot of people lose a lot of money.

        Things are never that clean-cut and if you genuinely believe that with the amount of money involved here, the group of individuals who are able to trade these shares at the moment being very small and very influential and a possible IPO on the horizon (that will provide a profitable escape plan for all of the early investors) that the share values aren't distorted, I applaud your happy-go-lucky outlook on life and suggest that you buy some shares at market rate as soon as you are able to.

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      2. noboard
        Reply Icon
        Stop

        errrpppp

        "The difference is it's not you or your mate valueing your company, it's an outsider with real money valueing FB. And paying a price lower than what others regularly trade it for"

        Errrm real money doesn't enter into it, they've bought x amount of facebook shares with the fake money someone used to buy their x amount of shares in another outfit. Rinse and repeat until someone needs the real money and watch the economy collapse.

        Has Facebook genuinely started making money yet?

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  2. FozzyBear
    Devil

    Blow bubbles?

    I think this is more like frothing at the mouth of the investment firms out there looking for a quick and easy profit

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  3. Fred Flintstone Gold badge

    One born every minute..

    .. enough said. Given the following I suspect buying any US asset may be a game of chance: http://www.bbc.co.uk/news/world-13906274 ..

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  4. Anonymous Coward
    Thumb Down

    Who gains?

    Let's see. Someone pays $6m and the company's worth suddenly becomes $70,000m.

    Wouldn't it be in the self-interest in company insiders to initiate this themselves?

    Perhaps the SEC should look more closely into what's going on here.

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  5. Skymonrie
    Mushroom

    This is insane

    I know "users = value" in the modern world but, honestly how do such ridiculous sums as this get worked out? Facebook must be providing advertisers with some seriously personal information for each user to be worth about $105; congratulations to the founders are in order I guess.

    I wonder what would happen if a black-hat cracking group got in and typed the simple line

    rm -rf /

    Iraq cost America 3 trillion dollars and a lot of people died. Would whole towns start exploding in this case...? I sincerely doubt it

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  6. John K
    WTF?

    At this rate...

    FB will be able to bale out Greece with petty cash. Either that or it'll end in tears from some investors. You know what they say, if you can see the band wagon coming, you've already missed it.

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  7. h4rm0ny

    Does this valuation...

    ...have any actual verifiable relationship to how much Facebook makes? I find it hard to believe that Facebook actually makes *that* much money from advertising.

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    1. Philip Lewis
      Reply Icon
      Happy

      Advertising?

      Does facebook have advertising?

      I have never seen so much as one add. Maybe FF+ABP has effectively shielded me from this :)

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  8. John Smith 19 Gold badge
    Facepalm

    Some might call it "Ramping up the price"

    As for "remain private indefinitely" this is complete BS.

    Depending how this is played the last investor in sets the market price (or at least that's what FB would *hope* would happen). So far $70Bn. Is $100Bn possible? Who knows.

    Then the IPO happens and all the big share holders sell out (or rather cash in ) and Zuckerberg et all become billionaires (or in some cases *multi* billionaires).

    Leaving the new owners to work out what the company is *really* worth. IE its actual net *profit* and dividends.

    We know FB is popular and collects *lots* of personal information about people.

    But how much *money* does it make from this?

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  9. Tom 7

    This is not a bubble

    its a geyser!

    And a lot of people are going to get scalded by it falling back out of the sky.

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  10. Anonymous Coward
    Facepalm

    More accurate valuation?

    I recon 'at best' technology companies are worth 10-15x they average annual profits over the next 5 years - not 10-15x their total profits.

    So if they were expected to make 100m, 200m, 300m, 400m and 500m in the 5 years - that's 1.5bn / 5 = 300m average - so their value TODAY is probably more like 3-4.5Bn.

    Any longer than 5 years and who knows?

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  11. Anonymous Coward
    Anonymous Coward

    The problem with bubbles.

    Is that everyone thinks they're smart enough to get out just before it bursts.

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  12. Naughtyhorse

    POP!

    And it'd brown trousers time.

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  13. Pete 43
    Big Brother

    Pump and dump?

    Well really

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  14. Wang N Staines

    Goldman Sachs

    Hmmmm

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