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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

#111

Post by 2arrs2ells »

kragen wrote: post #99
nkassis wrote: post #90

Earlier quoted context omitted.

but they have 30 years to reach that. The historical average is probably brought down by much more mature companies. Most tech corps today are 20+, hell Apple and Oracle have almost same P/E at 20 which might be the new average for tech. 10:1 is low.

Yeah, I was thinking of the 30-60 year timescale. The higher P/Es you're talking about are either the result of suckers or the result of expectations of continued substantial growth over the next decade or three. The historical average is brought up by companies like Apple and Oracle. Long-run stable P/Es could rise if the internal rate of return of the economy as a whole fell, so that a good safe investment was one…

Why do you assume the price of energy (and solar panels, for that matter) would stay constant as investors flock to blanket the earth with them?

I like your general logic - but I disagree strongly with your prediction that buying solar panels will generate 40% return on investment (in year 1!) in 2029.

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

#112

Post by 2arrs2ells »

maayank wrote: post #74

Fellow HNers, a real question - what would be the risks of buying Facebook shares in an IPO? Facing (no pun intended) past IPOs like Google's and other tech dears, where the stock multiplied in a very short time and profits in hindsight seem practically guaranteed, what are the risks?

http://www.google.com/finance?chdnp=1&chdd=1&chds=1&...

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

#113

Post by code_duck »

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…

'One of Wall Street's savviest investors', GS, put hundreds of millions into Webvan, too. Maybe they're savvy on Wall Street, but that doesn't mean they are savvy tech-wise. They do know how to make money, however, and ethics need not be an obstacle. Hey, that makes them a great match for Facebook!

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

#114

Post by 16s »

Social media in general seems to be a fad. Maybe I'm wrong, but I just have to wonder out loud. When Farmville and fart apps are worth 50 billion dollars and everyone is into it, I just have to shake my head and wonder if we are squandering some great technology while this fad passes

Don't get me wrong, there's a time and place for this sort of thing, but it seems too front and center today.

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

#115

Post by DuncanIdaho »

DuncanIdaho wrote: post #79
2arrs2ells wrote: post #51

Earlier quoted context omitted.

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

Or Goldman is so loaded with money that they have to put it somewhere - anywhere.

Oh another (more probable?) possibility.

Goldman invested into FB - so they can now act as marketmaker for their customers.

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

#116

Post by bsk »

kragen wrote: post #102
bsk wrote: post #96

Earlier quoted context omitted.

I'm suggesting GS would buy FB stock even if FB was loosing billions every year and there was no hope for future profits. In the same way GS and company are spending who knows how much on political campaigns and lobbing.

Can you unpack this a bit more? I'm still not sure who you're claiming has power in this situation, and why that makes GS want to buy FB stock.

If you look at the market prices of newspapers, radios, TV stations, you'll see that they depend little on their earnings. The buyer pays for influence on the public opinion.

How much do you think will FB support be worth to GS during the next bailout? In understanding what are the common fears, arguments for and against. Even now GS manages many deals, parts of the society don't like - outsourcing, green house options trade, arab and chinese investors, etc.

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

#117

Post by kragen »

2arrs2ells wrote: post #111
kragen wrote: post #99

Earlier quoted context omitted.

Yeah, I was thinking of the 30-60 year timescale. The higher P/Es you're talking about are either the result of suckers or the result of expectations of continued substantial growth over the next decade or three. The historical average is brought up by companies like Apple and Oracle. Long-run stable P/Es could rise if the internal rate of return of the economy as a whole fell, so that a good safe investment was one…

Why do you assume the price of energy (and solar panels, for that matter) would stay constant as investors flock to blanket the earth with them? I like your general logic - but I disagree strongly with your prediction that buying solar panels will generate 40% return on investment (in year 1!) in 2029.

> Why do you assume the price of energy (and solar panels, for that matter) would stay constant as investors flock to blanket the earth with them?

I don't; the energy price I used is about a third to a quarter of today's wholesale electrical price, and the solar-panel price is about a tenth of today's. I assume that those prices will drop rapidly. I think they will probably drop a lot further than that, but it's very difficult to imagine what will happen when some resource drops in cost by more than a factor of ten.

> I like your general logic - but I disagree strongly with your prediction that buying solar panels will generate 40% return on investment (in year 1!) in 2029.

I'd like to disclaim that prediction! It was a scenario, not a forecast.

It doesn't have to be solar panels specifically, but my point is that over time, we may develop capital goods whose internal rate of return is well over the 3% we've become accustomed to. (Solar panels are a plausible candidate because their production is already highly automated, they're made of dirt-cheap raw materials, and they produce energy.) If that happens, whether it's solar panels or automated moon factories, P/E ratios will drop --- at least until the new exponential takeoff hits some resource limit. In the case of solar panels, that will probably be land, until we construct a Dyson sphere.

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

#118

Post by kragen »

bsk wrote: post #116
kragen wrote: post #102

Earlier quoted context omitted.

Can you unpack this a bit more? I'm still not sure who you're claiming has power in this situation, and why that makes GS want to buy FB stock.

If you look at the market prices of newspapers, radios, TV stations, you'll see that they depend little on their earnings. The buyer pays for influence on the public opinion. How much do you think will FB support be worth to GS during the next bailout? In understanding what are the common fears, arguments for and against. Even now GS manages many deals, parts of the society don't like - outsourcing, green house optio…

I don't know whether your first statement is true, but I'm skeptical. Certainly there are some cases where newspapers continue to operate at a loss over many years, but in those cases we hear rumblings about hostile takeovers.

Regardless, I don't think GS comes close to getting that kind of editorial control or information access with this deal.

Although you do suggest the interesting point that Facebook private messages and even public postings could be a very valuable source of insider trading information.

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

#119

Post by beagle3 »

far33d wrote: post #110
beagle3 wrote: post #53

Earlier quoted context omitted.

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 valuatio…

My understanding is that all new hire grants @ facebook are given in restricted stock units (RSU) not options, in part to avoid the 500 shareholder rule.

I don't know how RSUs count against the 500 shareholder rule -- but for tax purposes, they count as an UNrestricted grant. That is, if you get $1M equivalent shares in RSUs, you get taxed immediately on that value, regardless of the restrictions. So you have to pay $350K (and that's just federal!), which you have no way to recover until the restriction is lifted. Worse, if you get fired the next day, you're out $350K with no way to reclaim them.

Pay attention to tax laws. If you are well off, that is your single largest expense.

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