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Goldman Sachs invests in Facebook at $50 Billion valuation

dealbook.nytimes.com

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Re: Goldman Sachs invests in Facebook at $50 Billion valuation

#31

Post by ShardPhoenix »

brown9-2 wrote: post #13
kragen wrote: post #10

Is that reasonable? Suppose that Facebook eventually needs to settle at a P/E of 10:1. Then it needs $5B/year of profits. If Facebook is like Microsoft in that it can maintain a high profit margin due to continuing to successfully exclude any competitors from its market, just as it has so far (in Microsoft's case, through a combination of government-granted monopolies, criminality, and consistently not fucking up; in…

I'm curious, why would a company "need to settle" at a certain P/E ratio?

If a company is not growing anymore, the only reason to own shares is to get dividends. If the P/E ratio is too high, then the amount of annual dividends per dollar of share won't be worth the risk of the company going bust.

Re: Goldman Sachs invests in Facebook at $50 Billion valuation

#32

Post by meterplech »

brown9-2 wrote: post #9

Goldman's special purpose vehicle sounds like something you'd design if you wanted to piss the SEC off and get into trouble. Also couldn't help but laugh at this line: The stake by Goldman Sachs, considered one of Wall Street’s savviest investors, signals the increasing might of Facebook, which has already been bearing down on giants like Google. One of Wall Street's savviest investors is investing in Facebook in 201…

More than that- this type of deal could potentially greatly harm current Facebook equity holders, or much more likely potential buyers of the IPO. If Goldman Sachs is both an investor and the bank that eventually takes them public this deal is rife with conflicts of interest.

Ex: In order to invest at this "low" valuation Goldman had to promise to set the initial price of the IPO to be artificially high. People buy the IPO in Facebook excitement, and right when insiders are legally allowed to sell they dump stock and exercise options and later investors are screwed. Goldman makes huge profit in this situation- on both fees and their sale of stock.

Re: Goldman Sachs invests in Facebook at $50 Billion valuation

#33

Post by seiji »

anta wrote: post #19

Can someone explain how fb is worth 50B? I.e. how much revenue are they making/projected to make, and how was this number arrived at?

Anecdotally, I know a few companies spending between $15k and $50k+ per day on facebook's version of adwords to shovel the masses into games.

You know how people attribute worth to meaningless points in games? Kid CEOs these days attribute worth to the live-updating user stats (DAUs and MAUs, oh my) of their facebook casual-social-viral games. They'll do anything to make those numbers go up, including spending $200k to $1MM+ per month on ads.

Re: Goldman Sachs invests in Facebook at $50 Billion valuation

#34

Post by andreyf »

rumpelstiltskin wrote: post #26
aditya wrote: post #18

Interesting. Does anyone know how many options a newbie engineer gets at Facebook? at $50B, 0.1% of the company == $50M and 0.01% = $5M not a bad payout vesting over four years, when the stock is probably going to go up... no wonder Google is having trouble keeping talent! EDIT: This might shed more light: http://www.quora.com/Is-this-a-good-offer-for-working-at-Fac... (that says 125k options)

0.001% would be around ballpark.

$500k still isn't anything to sneeze at...

Re: Goldman Sachs invests in Facebook at $50 Billion valuation

#35

Post by bsk »

kragen wrote: post #10

Is that reasonable? Suppose that Facebook eventually needs to settle at a P/E of 10:1. Then it needs $5B/year of profits. If Facebook is like Microsoft in that it can maintain a high profit margin due to continuing to successfully exclude any competitors from its market, just as it has so far (in Microsoft's case, through a combination of government-granted monopolies, criminality, and consistently not fucking up; in…

If these were $50M and not $50B your analysis would've been correct. But with such enormous amounts, it's not about money anymore, it's about power. And Facebook has the power to understand and influence what ppl think.

Re: Goldman Sachs invests in Facebook at $50 Billion valuation

#36

Post by wheels »

kragen wrote: post #10

Is that reasonable? Suppose that Facebook eventually needs to settle at a P/E of 10:1. Then it needs $5B/year of profits. If Facebook is like Microsoft in that it can maintain a high profit margin due to continuing to successfully exclude any competitors from its market, just as it has so far (in Microsoft's case, through a combination of government-granted monopolies, criminality, and consistently not fucking up; in…

10:1 would be a fairly low P/E anytime soon for Facebook. They might need to settle there when they're a 35 year old company like Microsoft (which is currently at 12:1). Google is at 24:1 right now and Amazon and Netflix are pretty hot at the moment with 66:1 and 72:1 respectively.

Re: Goldman Sachs invests in Facebook at $50 Billion valuation

#37

Post by erikpukinskis »

I was curious how their valuation has changed over time, so I hit up Google New Timeline* and put together a spreadsheet with a nice graph:

http://snowedin.net/blog/2011/01/03/up-up-and-away

Unrelated: The "trend" graph type in Google Spreadsheets is pretty awesome. I don't know when they added it, but it rawks.

* http://newstimeline.googlelabs.com?date=2004-04-01&zoom=...

Re: Goldman Sachs invests in Facebook at $50 Billion valuation

#39

Post by stretchwithme »

wheels wrote: post #36
kragen wrote: post #10

Is that reasonable? Suppose that Facebook eventually needs to settle at a P/E of 10:1. Then it needs $5B/year of profits. If Facebook is like Microsoft in that it can maintain a high profit margin due to continuing to successfully exclude any competitors from its market, just as it has so far (in Microsoft's case, through a combination of government-granted monopolies, criminality, and consistently not fucking up; in…

10:1 would be a fairly low P/E anytime soon for Facebook. They might need to settle there when they're a 35 year old company like Microsoft (which is currently at 12:1). Google is at 24:1 right now and Amazon and Netflix are pretty hot at the moment with 66:1 and 72:1 respectively.

I think 10:1 was the eventual P/E that would have to materialize to justify the $50 billion valuation. I think the historical average is something like 15.

Re: Goldman Sachs invests in Facebook at $50 Billion valuation

#40

Post by mtigas »

erikpukinskis wrote: post #37

I was curious how their valuation has changed over time, so I hit up Google New Timeline* and put together a spreadsheet with a nice graph: http://snowedin.net/blog/2011/01/03/up-up-and-away Unrelated: The "trend" graph type in Google Spreadsheets is pretty awesome. I don't know when they added it, but it rawks. * http://newstimeline.googlelabs.com?date=2004-04-01&zoom=...

Is that Google Spreadsheet publicly-viewable? Your page is showing either "User not signed in" or "Access denied" (if signed into Google), in the spot where I assume there should be an embedded spreadsheet.
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