Facebook is not worth $33 billion • Hacker News Board

Re: Facebook is not worth $33 billion

#251

Post by protez » Sat, Sep 25, 2010, 3:00 AM UTC

GavinB wrote: post #57

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…

http://www.sharespost.com/companies/facebook I think the simple summary of your point is this: Things are worth what people are willing to pay for them, not what other people think they should be willing to pay for them. Facebook is worth $26 billion. That doesn't mean that buying it at a valuation of $26 billion is a good investment. Worth and my estimation of what it will be worth in the future two are different th…

Estimation beats market cap when it comes to the sustainable value, which only comes from hard-earned cash, not crazy bomb-passing games you can observe in every bubble scene. I do think that FB can be traded around $50 billion and may be $500 billion (Who cares? Most of investors-speculators don't care about its paper worth on the market.) if another dot-com bubble forms. However, what would be its sustainable value? How will it generate its profit to justify its valuation? Until it's on its verified earnings statement, it's just another bomb-passing game. Who really care whether it's $5 billion, or $500 billion, if one believes he can pass his bomb to the enthusiastic guy beside him?

Re: Facebook is not worth $33 billion

#252

Post by [deleted] » Sat, Sep 25, 2010, 11:42 AM UTC

harryh wrote: post #140

dhh wrote: post #137

Earlier quoted context omitted.

I like the basic concept and would definitely put money on it. But making internet bets in comments on HN seems unlikely to pan out in the future. You ready to escrow that $10K?

> You ready to escrow that $10K? Sure. As long as you do the same.

[deleted]

Re: Facebook is not worth $33 billion

#253

Post by hymanroth » Sat, Sep 25, 2010, 1:12 PM UTC

spolsky wrote: post #41

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…

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…

Hi Joel, ex stock analyst here. What you say re minority trades is correct in so far as that is the way market valuations are calculated. However, what David says is also correct: just because someone pays X for a tiny fraction of the company doesn't mean someone else will pay the same for all of it.

Wily investors always look for meaningful volumes before taking big jumps/declines in share prices seriously.

One of the easiest ways to ramp a stock (apart from getting your journalist buddy to write a puff piece) is to continually lift the offer for small volumes.

Re: Facebook is not worth $33 billion

#254

Post by foljs » Sat, Sep 25, 2010, 3:36 PM UTC

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…

"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 groupies?"

As opposed to being located in a circle-jerk of similar minded companies and VCs, responsible for the first internet boom?

"The whole section "Minority investment evaluations aren’t real" is so economically bizarre and incorrect that I don't even know where to start. It's like you wrote a blog post arguing that it is incorrect to refer to a 5' tall boy as 5' tall because he's often sitting down."

If he's ALWAYS sitting down, then it's accurate to argue he's not really 5' tall ―not for any practical purpose, that is.

But not only "minority valuations" are not real, but majority valuations are not real either. Valuations are based on guesses, feelings, estimations and some facts thrown in for good measure. A declaration of fact, they are not. Some time they are even complete BS.

"Finally, to the main point. Facebook has certainly figured out how to make money off of 500,000,000 users. And as they optimize, they will make a lot more money. When they figure out how to make another DIME off of every user, they will instantly be making another $50,000,000 a year... in pure profit. How much profit will 37signals make if you figure out how to make another dime off of every customer? Eh David?"

And how useful is David's products to customers, eh Joel? How possible it is that they jump ship en masse when something trendier comes along, compared to Facebook? That is, which business is based on a solid offering, and which on virtual smoke and manure?

Yahoo could once milk 500,000,000 users too. Nowadays, not so much.

"Facebook works on the theory that when you have a lot of people, you don't have to make as much per person, because the amount of money you make is the number of customers times the amount of money you make off of each one. Again, that pesky multiplication."

Yes, many a business failure was based on that theory. It's the old, "we lose money on each product, but we'll make it up on volume" idea, adjusted as "we make a tiny fraction of money from each user, providing no real benefit or substance, and he can jump ship tomorrow like he did on several of our predecessors, from Frienster to MySpace, but we'll make it up on volume".

"It's weird, it's like in Chicago they don't have multiplication or something."

Most likely it's like NY has no manners...

But the real question is, should someone even partially responsible for Visual Basic even be allowed to talk about tech?

Re: Facebook is not worth $33 billion

#255

Post by drumdance » Sat, Sep 25, 2010, 4:22 PM UTC

mnemonicsloth wrote: post #116

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…

Uh, Joel, have you bought any Facebook stock on Sharespost? Valuing Facebook just by the market price on Sharespost is like predicting the outcome of an election when only 1% of the votes have been counted. Maybe those votes are a representative sampling, maybe not. I'm inclined to think not, because you have to be an accredited investor, ie already wealthy, to buy pre-IPO shares. Facebook's investors are there for t…

Predicting the outcome of the election when only 1% of the votes have been counted is sometimes known as polling.

Re: Facebook is not worth $33 billion

#256

Post by drumdance » Sat, Sep 25, 2010, 4:24 PM UTC

hymanroth wrote: post #253

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…

Hi Joel, ex stock analyst here. What you say re minority trades is correct in so far as that is the way market valuations are calculated. However, what David says is also correct: just because someone pays X for a tiny fraction of the company doesn't mean someone else will pay the same for all of it. Wily investors always look for meaningful volumes before taking big jumps/declines in share prices seriously. One of t…

As Joel points out, it's tautological. How many companies would buy up Google for it's current market valuation? Apple? Since no buyers have tried to do that, are they ipso facto no actually worth that market cap?

Re: Facebook is not worth $33 billion

#257

Post by hymanroth » Sat, Sep 25, 2010, 5:02 PM UTC

drumdance wrote: post #256

hymanroth wrote: post #253

Earlier quoted context omitted.

Hi Joel, ex stock analyst here. What you say re minority trades is correct in so far as that is the way market valuations are calculated. However, what David says is also correct: just because someone pays X for a tiny fraction of the company doesn't mean someone else will pay the same for all of it. Wily investors always look for meaningful volumes before taking big jumps/declines in share prices seriously. One of t…

As Joel points out, it's tautological. How many companies would buy up Google for it's current market valuation? Apple? Since no buyers have tried to do that, are they ipso facto no actually worth that market cap?

Yes, but Google's valuation is confirmed by trading volumes.

In the early days of computerized trading it was quite common for even quite liquid stocks to be suspended limit up/down because of programming bugs.

But by Joel's logic, the market has 'spoken' and these companies are now worth 10% more/less than 30 seconds prior, when in fact all that has happened is some faulty code just ripped through the book on minimal volumes.

The point is that 'true' valuations are validated by significant volumes. Hence Google's valuation is real. Depending on your viewpoint, the size of the recent transactions in FB may or may not be material - and I think this is the point that David was making.

Re: Facebook is not worth $33 billion

#258

Post by [deleted] » Sat, Sep 25, 2010, 5:21 PM UTC

drumdance wrote: post #255

mnemonicsloth wrote: post #116

Earlier quoted context omitted.

Uh, Joel, have you bought any Facebook stock on Sharespost? Valuing Facebook just by the market price on Sharespost is like predicting the outcome of an election when only 1% of the votes have been counted. Maybe those votes are a representative sampling, maybe not. I'm inclined to think not, because you have to be an accredited investor, ie already wealthy, to buy pre-IPO shares. Facebook's investors are there for t…

Predicting the outcome of the election when only 1% of the votes have been counted is sometimes known as polling.

[deleted]

Re: Facebook is not worth $33 billion

#259

Post by messel » Sat, Sep 25, 2010, 5:21 PM UTC

drumdance wrote: post #255

mnemonicsloth wrote: post #116

Earlier quoted context omitted.

Uh, Joel, have you bought any Facebook stock on Sharespost? Valuing Facebook just by the market price on Sharespost is like predicting the outcome of an election when only 1% of the votes have been counted. Maybe those votes are a representative sampling, maybe not. I'm inclined to think not, because you have to be an accredited investor, ie already wealthy, to buy pre-IPO shares. Facebook's investors are there for t…

Predicting the outcome of the election when only 1% of the votes have been counted is sometimes known as polling.

It would be so much more effective if people they polled represented a uniform distribution (or any known).

Re: Facebook is not worth $33 billion

#260

Post by messel » Sat, Sep 25, 2010, 5:21 PM UTC

drumdance wrote: post #255

mnemonicsloth wrote: post #116

Earlier quoted context omitted.

Uh, Joel, have you bought any Facebook stock on Sharespost? Valuing Facebook just by the market price on Sharespost is like predicting the outcome of an election when only 1% of the votes have been counted. Maybe those votes are a representative sampling, maybe not. I'm inclined to think not, because you have to be an accredited investor, ie already wealthy, to buy pre-IPO shares. Facebook's investors are there for t…

Predicting the outcome of the election when only 1% of the votes have been counted is sometimes known as polling.

It would be so much more effective if people they polled represented a uniform distribution (or any known).