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Facebook trading at $75 Billion now
Posted on 1/27/11 at 12:22 pm
Posted on 1/27/11 at 12:22 pm
Just got off the phone with a guy in Silicon Valley who runs some funds that buy secondary pieces of venture deals. Facebook now up to $75B! Incredible.
No secondary trading really in Groupon yet.
Twitter pretty active.
No secondary trading really in Groupon yet.
Twitter pretty active.
4
Posted on 1/27/11 at 12:41 pm to Tiger JJ
I probably have a very poor idea of how worthwhile these seemingly entertainment based companies are to the world. I just can't fathom the longevity of companies that aren't based in real needs in a world with so much uncertainty. It just seems like it's only a matter of time before something trumps Facebook, APPL and others that don't have major longterm need based products.
Isn't there a major risk that these companies are gone in 10 years or at least in much more competitve atmospheres? APPL built its current capitol on products of the last 5 years, right?
Isn't there a major risk that these companies are gone in 10 years or at least in much more competitve atmospheres? APPL built its current capitol on products of the last 5 years, right?
This post was edited on 1/27/11 at 12:43 pm
Posted on 1/27/11 at 12:59 pm to C
quote:
I just can't fathom the longevity of companies that aren't based in real needs
How is advertising not a real need? Serious question.
Posted on 1/27/11 at 1:07 pm to foshizzle
quote:
How is advertising not a real need? Serious question.
It is. Facebook just seems like a fad to me. I just don't get much out of it I guess. What will keep people using facebook when a new fad comes around? I'm probably just ignorant.
Posted on 1/27/11 at 1:14 pm to C
quote:
I probably have a very poor idea of how worthwhile these seemingly entertainment based companies are to the world. I just can't fathom the longevity of companies that aren't based in real needs in a world with so much uncertainty. It just seems like it's only a matter of time before something trumps Facebook, APPL and others that don't have major longterm need based products.
Isn't there a major risk that these companies are gone in 10 years or at least in much more competitve atmospheres? APPL built its current capitol on products of the last 5 years, right?
I don't have any idea how to turn this into a valuation, but to me you have to look their 600 million person membership. There just has to be a lot of value in that. It's amazing to me.
Posted on 1/27/11 at 1:17 pm to C
quote:
It is. Facebook just seems like a fad to me. I just don't get much out of it I guess. What will keep people using facebook when a new fad comes around? I'm probably just ignorant
Myspace tends to agree...
Posted on 1/27/11 at 1:18 pm to C
quote:
What will keep people using facebook when a new fad comes around?
I dunno, but sometimes fads aren't fads. People are still using this newfangled internet thing when they could just pick up the phone and ask the operator to place a call.
Posted on 1/27/11 at 1:20 pm to foshizzle
I thought Facebook was going to die when people's moms got on there, but it just hasn't. It might not have a "cool" factor anymore, but it does seem to be used for pure utility at least.
Posted on 1/27/11 at 1:33 pm to Tiger JJ
quote:
I thought Facebook was going to die when people's moms got on there
Me too. However, it does seem to be useful as a one-stop site to catch up on what current and old acquaintances are up to. More so than twitter, at any rate. Not to mention that you can stalk more easily.
Posted on 1/27/11 at 1:34 pm to Tiger JJ
FB had 2B in Revenues in 2010. With a 50% profit margin, that gives them a P/E of 75, or a discount rate of 1.3333->%, and that's assuming they earn 50 cents on the dollar, probably somewhat of a grand assumption.
In other words, they're already being valued, it seems, for the enormous growth they've realized to date. In order to make this a good investment, you'd have to believe not only that this valuation is fair, but also that this enormous growth will continue for years to come.
I just don't think I'd be willing to make that bet, namely that their "E" will catch up to their "P" in a quick enough fashion as to make this investment worth it.
I also don't think the underwriters would dare value this thing this high in the event there was a public offering. Remember that the recent trend in IPOs is to price them at the low end of the valuation range or, perhaps, even below it. So there's that risk factor, too. If they price the IPO low, the guys who bought in during the private placement will all of a sudden be subjected to that lower valuation. There's the chance the stock begins to run like mad immediately after the IPO, but again this is a gamble on top of a gamble on top of a gamble (fair valuation; extremely fast growth; market will immediately and efficiently account for a public offering priced at a very low valuation).
I think those buying the stock are more excited to be able to tell their friends at the next cocktail party that they own some of FB than they are about the appreciation prospects for their purchase. That or they're just being fleeced.
In other words, they're already being valued, it seems, for the enormous growth they've realized to date. In order to make this a good investment, you'd have to believe not only that this valuation is fair, but also that this enormous growth will continue for years to come.
I just don't think I'd be willing to make that bet, namely that their "E" will catch up to their "P" in a quick enough fashion as to make this investment worth it.
I also don't think the underwriters would dare value this thing this high in the event there was a public offering. Remember that the recent trend in IPOs is to price them at the low end of the valuation range or, perhaps, even below it. So there's that risk factor, too. If they price the IPO low, the guys who bought in during the private placement will all of a sudden be subjected to that lower valuation. There's the chance the stock begins to run like mad immediately after the IPO, but again this is a gamble on top of a gamble on top of a gamble (fair valuation; extremely fast growth; market will immediately and efficiently account for a public offering priced at a very low valuation).
I think those buying the stock are more excited to be able to tell their friends at the next cocktail party that they own some of FB than they are about the appreciation prospects for their purchase. That or they're just being fleeced.
This post was edited on 1/27/11 at 1:41 pm
Posted on 1/27/11 at 1:37 pm to RedStickBR
I would never buy it. And if I was an early employee, I would go out of my way to sell at least 90% of my holding. But the Goldman IPO number was $50B and it was 6X over-subscribed.
Posted on 1/27/11 at 1:40 pm to Tiger JJ
Goldman is bungling this thing. They've already been way too public about it and the SEC's breathing down their necks has caused them to pull the offering for U.S. investors.
They need to watch it or they'll lose lead underwriter status if and when FB does IPO. They've already been embarrassed when they were merely only syndicate members with respect to Google's IPO.
If they do end up bungling it, think any other bank would value FB as high as Goldman has?
There's just a ridiculous amount of risk involved with buying this stock, IMO.
They need to watch it or they'll lose lead underwriter status if and when FB does IPO. They've already been embarrassed when they were merely only syndicate members with respect to Google's IPO.
If they do end up bungling it, think any other bank would value FB as high as Goldman has?
There's just a ridiculous amount of risk involved with buying this stock, IMO.
This post was edited on 1/27/11 at 1:42 pm
Posted on 1/27/11 at 1:42 pm to RedStickBR
quote:
If they do end up bungling it, think any other bank would value FB as high as Goldman has?
Given how over-subscribed it is and how active it is in the secondary markets? yes
Posted on 1/27/11 at 1:51 pm to RedStickBR
quote:
In other words, they're already being valued, it seems, for the enormous growth they've realized to date. In order to make this a good investment, you'd have to believe not only that this valuation is fair, but also that this enormous growth will continue for years to come.
I'm on the side that the growth will continue because I talk with people in the industry often about their transition to online gaming, facebook retail, etc.
Not to mention the number of users is only going to increase as the non-pc generations die off.
Posted on 1/27/11 at 1:53 pm to Tiger JJ
quote:
Given how over-subscribed it is and how active it is in the secondary markets? yes
You could be correct. FB and co. probably wouldn't even do business with another bank unless said bank at least matched Goldman's valuation.
Another interesting thing to keep an ear out for involves a potential second look into the Winklevoss' case which could very well come into play.
LINK
Zuckerberg will be in a pickle if in that case he's trying to argue that his company should be valued very low due to the enormous risk involved and thus the very high discount rate used to compute the NPV of a settlement payout while at the same time the company is being valued extremely high by Goldman, etc.
Posted on 1/27/11 at 1:56 pm to Golfer
I think you're right w/ respect to online gaming. That could be FB's bread and butter going forward. That market is growing at an exponential rate.
As far as people using FB just for social networking, I think that aspect of the business will fall off at some point. There's a struggle between privacy on one hand and increasing appeal to advertisers on the other.
I think eventually FB will need to evolve into something which, at its core, has less to do with social networking per say and perhaps more to do with social gaming, etc.
I predict in five years we'll have more specialized means through which to organize our social networks, i.e., one for gays, one for blacks, one for business people (Linked In), etc., much like we've seen in the television industry where channels have become more and more specialized to cater to unique interests.
As far as people using FB just for social networking, I think that aspect of the business will fall off at some point. There's a struggle between privacy on one hand and increasing appeal to advertisers on the other.
I think eventually FB will need to evolve into something which, at its core, has less to do with social networking per say and perhaps more to do with social gaming, etc.
I predict in five years we'll have more specialized means through which to organize our social networks, i.e., one for gays, one for blacks, one for business people (Linked In), etc., much like we've seen in the television industry where channels have become more and more specialized to cater to unique interests.
This post was edited on 1/27/11 at 1:58 pm
Posted on 1/27/11 at 2:13 pm to RedStickBR
quote:
I think those buying the stock are more excited to be able to tell their friends at the next cocktail party that they own some of FB than they are about the appreciation prospects for their purchase. That or they're just being fleeced.
Are you sure we aren't talking about dinars?
This post was edited on 1/27/11 at 2:51 pm
Posted on 1/27/11 at 2:17 pm to RedStickBR
I think they will continue to experience huge growth, not necessarily in users, but in revenues. Its amazing to me how dismissive older generations (not moms) are to new tech in general. Regardless, I think they'll keep seeing huge growth, but if I'm modelling it, the growth rate is inflecting in like 2 years, and its decreasing in 4 or 5.
Same thing with GOOG; they will scale with the continued growth of the internet in its various forms, but it WILL reach a saturation point, and they WILL mature into a stable/cash-cow instead of this year over year revenue growth monster.
Its basically how I feel about APPL too, although they are, IMO, much less predictable, given their nature. That said, at no point can I ever imagine FB producing cash flows that are anywhere remotely close to bringing their P/E down to something justifiable. And I still don't think they're going to go public any time in the near future.
Same thing with GOOG; they will scale with the continued growth of the internet in its various forms, but it WILL reach a saturation point, and they WILL mature into a stable/cash-cow instead of this year over year revenue growth monster.
Its basically how I feel about APPL too, although they are, IMO, much less predictable, given their nature. That said, at no point can I ever imagine FB producing cash flows that are anywhere remotely close to bringing their P/E down to something justifiable. And I still don't think they're going to go public any time in the near future.
Posted on 1/27/11 at 2:30 pm to foshizzle
Posted on 1/27/11 at 2:31 pm to kfizzle85
quote:
at no point can I ever imagine FB producing cash flows that are anywhere remotely close to bringing their P/E down to something justifiable.
I agree 100% with this.
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