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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

#51

Post by 2arrs2ells »

anigbrowl wrote: post #28
yurylifshits wrote: post #22

Earlier quoted context omitted.

Well, Google has essentially the same number of users and is traded at 190B capitalization. So, a Google user is worth over $300. As people spend more time on FB then at Google, I can understand why FB user is seen as $100 asset.

A reasonable point, but Google has several years' worth of results under its belt. When the IPO was conducted I think the company was valued at about $25 billion; now it has net annual earnings about $6-7 billion - so while the P/E ratio is still high, at least it's based on actual numbers. I'm not saying FB couldn't be worth even more than Google - it's just that since they've never had to file earnings statements e…

I imagine Goldman Sachs has access to numbers that are a lot less speculative than the ones we have access to.

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

#52

Post by hessenwolf »

brown9-2 wrote: post #45
ShardPhoenix wrote: post #31

Earlier quoted context omitted.

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.

Who even says they would pay dividends? How many tech companies do nowadays?

Very few, and why does anybody buy their stock? This guy I know has been borrowing more and more money for years and never paid a red cent back, and now you want to lend him your money?

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

#53

Post by beagle3 »

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% is still probably a generous estimate -- given Facebook's 3000 or so employees and the fact that all not-very-senior employees should add up to 2%.

Also, stock options need to have a hardly-discounted exercise price attached. That is, an employee that gets a stock option package reflecting shares worth $500K will have to shell out (at least) $450K to exercise them when the time comes. So based on this valuation, if facebook is worth "only" $70B in 4 years, the profit is going to be $250K or ~$60K/year. Nothing to sneeze at, and definitely a nice bonus -- but not more than that. And if facebook is worth $30B at the end of 4 years, today's stock option grant is worth virtually nothing.

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

#54

Post by varjag »

dotcoma wrote: post #48
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?

simple. every user is worth 100 dollars. Like in the old days of 1999.

However accounted for inflation, it's only $76 of 1999 dollars per user. I'd say at this valuation it's a steal!

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

#55

Post by mynameishere »

2arrs2ells wrote: post #49
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…

Why in the world are you talking about Facebook blackmailing users to earn $2/$3 per user? Advertising (and maintaining what's left of their reputation) is clearly fall more lucrative. If each user just clicks on one Facebook ad each year, that's $2/user/year right there.

If each user just clicks on one Facebook ad each year, that's $2/user/year right there.

CPCs are not 2 dollars on facebook.

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

#56

Post by dotcoma »

varjag wrote: post #54
dotcoma wrote: post #48

Earlier quoted context omitted.

simple. every user is worth 100 dollars. Like in the old days of 1999.

However accounted for inflation, it's only $76 of 1999 dollars per user. I'd say at this valuation it's a steal!

I'll invest in the next round then! ;-)

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

#57

Post by blasdel »

vamsee wrote: post #23
radicaldreamer wrote: post #16

Earlier quoted context omitted.

How did DHH become an authority on company valuations?

I don't think he needs to be. It's just a standard tactic at their blog. They always come off as being a bit contrarian for the sake of it. Or they just want more traffic.

While talking to Jason Fried after Startup School 2009, I realized that trolling on their blog is what they do instead of adding features to their products.

Everybody needs a creative outlet! Letting everyone at 37signals post directly to SvN is a way to keep the minimalists sane.

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

#58

Post by scottmp10 »

nitrogen wrote: post #5

Are the extremely high Facebook valuations a result of the company's stock structure? I'll admit my only information on the subject comes from The Social Network, but it sounded like only ~35% of the stock was actually sold. So, since investors are fighting over 35% instead of 100% of the company, a more accurate valuation would be .35*50bil = $17.5 billion. Is this remotely reasonable, or am I way off?

I think Facebook will issue new shares to the new investors so who owns the existing shares doesn't matter. The new valuation is determined only by the total number of shares before the deal, the number of shares being issued, and the size of the investment.

Valuation = new value per share * total shares = (amount invested / # new shares issued) * (# existing shares + # new shares issued)

Although they probably agree on the valuation and the amount of capital to be invested first. Then the number of shares to be issued is set so those numbers to match.

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

#59

Post by btilly »

brown9-2 wrote: post #45
ShardPhoenix wrote: post #31

Earlier quoted context omitted.

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.

Who even says they would pay dividends? How many tech companies do nowadays?

Most tech companies do stock buybacks rather than dividends. From the point of view of shareholders, it is almost the same thing.

Here are the differences. Dividends generate ordinary income, which people may have to pay taxes on. Dividends drop the price of the stock by the amount of the dividend.

By contrast a stock buyback reduces the value of the company and the outstanding stock by the same amount, and therefore leaves the stock price alone to first order effects. Over time this increases the likelihood of incurring long-term capital gains, which are generally better from a taxation purpose.

The never stated difference, which I think is important, is that dividends hurt anyone holding options, while a stock buyback increases volatility which helps anyone holding options. Since tech companies tend to have lots of employees with options, this matters a lot to them.

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

#60

Post by pavs »

dave1619 wrote: post #24

Congrats to Facebook and their team. Well-deserved for building a site millions love.

For some reason I find it hard to love facebook and I am not sure I understand why. I am certainly not jealous of their (relatively) easier path to glory or I am too suspicious about their lapses in user privacy (most companies had their fair share, including google). Yet I find it easier to like google as a companies and not like facebook at all.

Anyone else feels like this?

I think, to me, facebook reminds me of microsoft too much. They have similarities in the way they work by selectively closing everyone off of their pretty little garden.

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