Facebook is not worth $33 billion

Post by kj12345 » Thu, Sep 23, 2010, 5:33 PM UTC

cynicalkane wrote: post #74

spolsky wrote: post #5

I hate to leap in with what seems like an ad-hominem attack on the 37 signals, but their utter and complete misunderstanding of all the basics of business is starting to grate on me, and I'm wondering if it has anything to do with Chicago. Is the problem that they're sitting there in a city without any other Internet industry, stewing in their own witty ideas, listening only to the adoring comments they get from the…

It should be immediately obvious that they're comparing intrinsic value vs market valuation, so no, it's not tautological at all. Everyone who invests should know that market value does not necessarily predict intrinsic value, and it becomes more problematic when there's illiquidity, and when only a small fraction of the company is being bought and sold. These are basics, going back to Ben Graham's famous book on val…

Post by jbail » Thu, Sep 23, 2010, 5:33 PM UTC

dhyasama wrote: post #29

dhh wrote: post #18

Earlier quoted context omitted.

1. Thanks for the word correction, updated. 2. Publicly traded companies have instant liquidity on many more shares, which makes using "last share sold" an meaningful metric. 3. When only 3% of the money a company is supposedly worth has been moved around, it's a poor indicator of what the other 97% would go for. 4. They haven't figured out how to make much profit yet. And it's still questionable whether they will. M…

I can verify point five. New York does indeed smell.

Post by joelhaus » Thu, Sep 23, 2010, 5:34 PM UTC

dhh wrote: post #18

spolsky wrote: post #5

I hate to leap in with what seems like an ad-hominem attack on the 37 signals, but their utter and complete misunderstanding of all the basics of business is starting to grate on me, and I'm wondering if it has anything to do with Chicago. Is the problem that they're sitting there in a city without any other Internet industry, stewing in their own witty ideas, listening only to the adoring comments they get from the…

1. Thanks for the word correction, updated. 2. Publicly traded companies have instant liquidity on many more shares, which makes using "last share sold" an meaningful metric. 3. When only 3% of the money a company is supposedly worth has been moved around, it's a poor indicator of what the other 97% would go for. 4. They haven't figured out how to make much profit yet. And it's still questionable whether they will. M…

  In the real world, markets cannot be absolutely efficient or wholly 
  inefficient. It might be reasonable to see markets as essentially a 
  mixture of both, wherein daily decisions and events cannot always be 
  reflected immediately into a market. If all participants were to believe 
  that the market is efficient, no one would seek extraordinary profits, 
  which is the force that keeps the wheels of the market turning.

  In the age of information technology (IT), however, markets all over the 
  world are gaining greater efficiency. IT allows for a more effective, 
  faster means to disseminate information, and electronic trading allows 
  for prices to adjust more quickly to news entering the market. However, 
  while the pace at which we receive information and make transactions 
  quickens, IT also restricts the time it takes to verify the information 
  used to make a trade. Thus, IT may inadvertently result in less 
  efficiency if the quality of the information we use no longer allows us 
  to make profit-generating decisions.

Post by bradgessler » Thu, Sep 23, 2010, 5:37 PM UTC

Post by brm » Thu, Sep 23, 2010, 5:38 PM UTC

dhh wrote: post #62

spolsky wrote: post #41

Earlier quoted context omitted.

2. That's just not correct. Spend twenty minutes talking to anyone who trades in bonds or equity before you make assumptions about what liquidity you need to get a good price... it's not much. Facebook trades all the time on sharespost, certainly enough to be liquid and to reach a market price. Google itself only has a tiny fraction of the shares available to the public (10% if I remember correctly) and far less than…

2. The bond and equity markets are based on sound regulation, transparency, and quarterly statements. Facebook has none of those things when it operates in the dark of the secondary markets. 3. Again, these premiums are based on outstanding shares traded under the transparency of the public stock market. See Secondary Suckers for a nice take on the perils of the secondary market: http://www.homethinking.com/brontemed…