According to TechCrunch.com, a block of shares traded for Facebook.com at $28.26 a share yesterday on SecondMarket.com
Based on that sale Facebook.com is now valued at $70 Billion dollars.
So in less than 2 weeks Facebook has gone from a $50Billion dollar valuation to a $70 Billion dollar valuation, and of course the shares are not even public yet.
As a comparison, Google valuation is $200 Billion and Apple valuation is at $320 Billion based on the closing stock prices on Friday.
Isn’t this just the epitome of absurdity.
It goes to show one thing, America is as greedy and stupid as ever. The mind set of todays nation will be it’s downfall.
Curious Michael, can you think of any examples of such valuations based on nothing say 60 years ago?
Josh
I don’t think the valuation is based on nothing.
The markets are always forward looking.
Facebook.com is now the most visited site on the net and their logo appears just about on every website on the net and on plenty of other advertising and commercials.
So its not about what the company is “worth” today but about what it will be worth in the future.
this story has suggested me to register the domain VeryLuckyBook
Hello Mike,
You have hit the nail squarely on the head. Facebook has built an impressive brand and is on its way to creative expansion into new markets. Mark had a vision and relentlessly pursued its completion. “Logic will get you somewhere, dreaming will get you everywhere™ “JAS
Jeff Schneider ( Contact Group ) / ( Metal Tiger )
” So its not about what the company is “worth” today but about what it will be worth in the future. ”
I understand this to a point of course, the point for me is when the valuation exceeds what may be considered achievable and hype starts to take over.
The days of actually proving one’s self seems to be a thing of the past. It is sad to see that we no longer value real returns but rather gamble, yes gamble on what might be in hopes of bigger returns… and I say gamble because the fact is they fail most often.
I could be wrong and in 5 years we’ll look back and facebook could be bigger than the auto industry or I could be right and they’ll be laying off half the staff like Myspace and slowly dissolve.
I suppose when it is a personal choice to engage in the high risk world of investing it’s one thing, when these large firms use the little guys money, for me thats another.
The video-social arena hasn’t even begun to grow…loads of opportunity out there.
– TBC
Josh
Goldman Sachs has been called many things but the “little guys” is not one.
What we are witnessing is another Goldman Sachs pump and dump scam akin to the last Internet bust. Like the shills here that buy a couple of 3D domains then pump then up, they make a splash with a big investment that says worth it (why wouldn’t it be worth it if Goldman Sachs thinks so- who cares what the numbers are).
Thomas J. Stanley and William D. Danko who wrote “The Millionaire Next Store” were on CNBC warning of Facebook failure because of this pump and dump scheme.
so, now, the Facebook shares owned by the U2 singer Bono have reached the $1 billion value
reface.me/news/who-owns-facebook
I didnt mean it to read GS was the little guy 🙂
Hey easy money, easy come, easy go!
Mark stole a vision and relentlessly pursued its completion.
There. Fixed.
Meantime while Twitter is straining to find a revenue model and Facebook is beyond ads, like MySpace, they are simply opening a free mall for EVERY ONE ELSE to make money in. Forget Goldman Sachs. How about rapper 50 cent making $10 shilling up a stock 0n Twitter.
http://www.telegraph.co.uk/technology/twitter/8254618/Rapper-50-Cent-makes-10m-after-plugging-stock-on-Twitter.html
That’as 50 cent making $10 million shilling up a stock on Twitter (previous comment not approved yet)
if Facebook will release its own Search Engine [ x.co/L84R ] to compete with Google its value may reach $100Bn in a few months
That’s a 40% increase in less than 2 weeks. I agree with Josh here, this is more a hype than a realistic valuation. Even if Facebook would be on every website on this planet, the numbers are pretty far fetched and not very realistic.
5 years ago everybody said MySpace would be the biggest thing ever. Now Facebook is hot on the block. Another 5 years down the line we’ll probably see something else, something even better and more sophisticated.
while MySpace seems on sale
huffingtonpost.com/2011/01/13/newscorp-myspace-sale_n_808799.html
Everyone said that about Google 10 years ago as well
The following is a quote from a article that Martin Hutchinson wrote;
“At 25 times revenue and more than 100 times earnings, Goldman’s Facebook deal smacks of the “dot-bomb” debacle. And the fact that this financing deal came to pass after a major Wall Street firm effectively drove a truck through two central features of securities regulation is more than a little reminiscent of the investment-banking shenanigans that fed into the global financial crisis.”
Mind you, he penned this when the valuation was 50 billion.
Plenty of money to be made in the pump-n-dump schemes if you know they exist and how to play them – just make sure to tithe your 10% every time.
There are some very good insights and ideas in the totality of the article.
The link to the article is here:
http://moneymorning.com/2011/01/14/goldmans-facebook-deal-highlights-the-dangers-that-wall-street-is-creating-for-main-street/?preview=true
I think that Facebook has a great opportunity. They need to spin off a couple new business units. I think that a $70B valuation is ridiculous for a company that is only earning $2B a year. But I think that Facebook is going to find ways to earn 5x that amount relatively soon.
Michael,
Google is more than just a search engine. It’s a full-grown enterprise with a foot in many different sectors, online and offline. Facebook is a social interaction tool, just like myspace and twitter – that’s it (for now).
Google can’t be replaced that easily because they are innovative, they adapt, they continue to conquer new arenas and they’re on top of the food chain.
If Facebook was to get involved with more than just running a social interaction platform, their chances of future survival would definitely increase. If not, they’ll probably follow the path of MySpace.
I think that’s a very good example of evolution. If you adapt and stay on top of the game, you prevail. If you sit back and look around too much, you’ll be gone in a heartbeat.
Unless GS gets some laws changed, which can be done, it needs to be out of their position by December 2012. Therefore, we a time-line of sorts for the pump-n-dump.
According to Martin Huchtinson;
“Finally, there’s the so-called “Volcker Rule,” which prevents banks (which is what Goldman Sachs technically now is) from buying large-scale equity participations for their own account. Since that rule’s actual implementation was delayed until 2013, Goldman’s Facebook deal was technically legal – assuming that is the position can be sold before December 2012. “
“What we are witnessing is another Goldman Sachs pump and dump scam akin to the last Internet bust”
More than likely, wallstreet and the banks hav’nt learned a damn thing from the recent world wide economic crisis.
Why would they when they are still “earning” their obscene bonuses and holding governments to ranson.
“Goldman Sachs has been called many things but the “little guys” is not one.”
You should hear what Max Keiser has to say about Goldman Sachs 😉 …he used to be a wallstreet trader and he sounds very well informed.
Some of you should know how these things are calculated…
Without knowing how many shares were actually transacted..
I’d think it was a vested party “painting the tape”..
Anyone could buy a block of 5000 shares (or whatever) at $56 per share.
This would give an implied valuation of $140 BN for FB
A bit like (although not as absurd) ) how some of you clowns see a random .TV (or any other ‘pattern’ or flavor-of-the-month-extn) sell for high figures – and then the rest of you circle-jerkers (with a vested interest) jump on the bandwagon screaming how “your portfolio suddenly just increased in value”…
Looking deeper..
FB has 2.5 BILLION Nshares outstanding.
Actually, only a minuscule, paltry 0.1% of shares (= 2.7 million shares) of approximately $67 million was actually transacted.
Peanut chump change in the overall big picture – totally meaningless
How to ‘paint the tape’: Party A sells to related party B who is happy to purchase the share block(s), to create the impression of demand at the $70 BN implied valuation
Always be on the same side as Goldman!
Aggro
Here is another block of shares that traded this week, this one on sharespost.com
They will publish the results by Monday but its a block of 360,000 shares with a minimum of $100K investment
These are not generally small blocks of stock that are selling:
“””In connection with the current auction of Facebook, Inc. Class B Common Stock, we are now able to announce that Sellers at the auction have contractually committed to sell 360,000 shares of Class B Common Stock at this auction. Buyer’s Bids are due this Friday, January 14 by 5:00 pm PT. The reserve price is $27.00 and the auction will be conducted on a sealed bid basis. Buyers proposing to participate in the auction will be pre-qualified by our affiliated broker dealer and will purchase through a single investment vehicle.
Auction Details
Auction Schedule
Number of Shares: 360,000 shares
Issuer: Facebook, Inc.
Type of Shares: Class B Common Stock
Reserve Price: $27.00
Minimum Investment Amount: $100,000*
Seller Commitments Due: Jan 10, 9 pm PT
Final Number of Shares at Auction Announced: Jan 11, 9 am PT
Buyer Bids/Subscription Documents Due: Jan 14, 5 pm PT
Participants Informed of Auction Results: Jan 17, 9 am PT
Time to close of Auction: 3 days
Mr T
All I’m saying is that if you went back 10 years you would find the same discussion about Google, that is its another search engine and look what happened to Alta Vista and Lycos.
That’s why the shares of Google when they 1st went public hung around $100 for a while as people had the same debate about its future as we are now having about Facebook
“Everyone said that about Google 10 years ago as well”
Yep, Google and about 100 more companies that we never talk about anymore. Sometimes the company does win, but usually not.
The issue I take with the Google comparison Michael is they may be the exception not the rule.
Google has a real market ( conversion ) for visitors based on the search platform, even still I cannot recall the exact number but it only makes up 20% of their overall rev. Facebook would need to venture away from the current platform in MANY ways.
Josh
Of course Google is the exception.
So is Apple.
A huge percentage of new businesses fail.
That’s why not everyone has a movie made about their company’
To grow in a few years from $0 value to tens or hundreds billions of dollars in valuation and to have it stick is rare, but that doesn’t mean Facebook isn’t one of those exceptions.
True, apple as well, but apple was onto something inventive at the time, there was a real product and as we see today a very real demand. FB has the interest of the world but the niche they are moving toward has been done before or tried, it isnt a tangible product but rather one dependent upon users to convert. I know Google is in that boat too but again that boat is one of many, FB needs to offer imo something out of the box to make a real impact.
Facebook has very large and still unexplored ways to make more money with online ads like Google
What constitutes “value” on Facebook? The potential for advertising viewer ship? Some crazy games? Myspace used to be the hottest thing around and everyone migrated to Facebook. I think another 2-3 years (if even that) the appeal of Facebook will peak and people will migrate to the next thing. Sure, the audience base will be huge, but in terms of trending everything is cyclical and the “buzz” will be somewhere else.
Anyone that studies markets, marketing, trends and recent history should know this. The fact that both Facebook and Goldman Sachs made such a huge spectacle of the “investment” should tell you something right there.
Facebook will need to convert users from the mindset of socializing to that of shopping. Until that happens Facebook conversions will always fall below par.
That’s a big challenge. The right mindset equals big profits, the wrong mindset equals small profits.
I’m not saying it can’t be done, but it’s like asking a guy on vacation,relaxing on the beach in the sun, if he wants to buy a car stereo. He’s just not in the right mindset for doing business. Catch him at another time and you might be able to sell him a car stereo. That’s his serious time, not play time. Google/Facebook = Serious Time/Relax Time.
It’s a big hurdle for Facebook.
Have a look at this banter between me and domain shane on my blog on a post about 50 cent inspired by what I said here.
HortiCultra said…
And completely illegal, leading to him removing the tweets and opening up an investigation. He is facing big big fines. But he can afford it.
12:17 PM
s said…
Thanks for the update Shane. But you know others are doing this all the time. MySpace became the biggest outlet for Indy Bands and all MySpace got was to serve google ads that no one clicked on. I wrote about the 17 year old that was making millions selling MS backgrounds. There was no business plan to capture revenue, which on social media is bigger from licensing than it will ever be via ads. Think of Elliot Spitzer’s whore who got famous and made $1 million on downloads of a bad song. NewsCorp should have got 10 percent of that. Easier on millions of pages than .09 cents a click. This is where the profit lies on FB too. Get a piece of the action. And charge companies as if their fan pages was a full page ad in the WSJ.
1:19 PM
HortiCultra said…
Most people aren’t aware of the new disclosure laws that went into effect last year. You have to disclose any affiliation you have to the subject you discuss online. You work for a bike maker and you say you love that bike on a forum without disclosing your position you are now officially breaking the law. I only know this because my wife is in Human resources and this has become part of the responsibilities of human resource departments around the nation. Informing employees of the new law and to make sure they don’t break it. The lawsuits are small now but growing every year. I have a feeling 50 cent may become a big case.
1:44 PM
s said…
That disclosure alone would take up more than 1/2 of the 40 characters.
I think all these innovations should be membership fee based. A small fee for consumers (like a text message plan) and a larger fee for corporations based on their annual revenue. Of course each would have a tweet ceiling like mileage on a rental car you turn it back in and pay more if you use more. But once they start off for free, they become and eyeballs seeks advertiser play and like aol and yahoo- they don’t sustain themselves because no one comes there to look at ads.
Even Twitter became an app that costs $3.99 to activate, that would be millions of dollars and I doubt people would turn away. You think nothing of paying for apps, cable, gym etc because you can find money for it if the service never starts out as free because your expectations are different.
Ning just made this transition. It’s harder to do after the fact and you will lose some accounts- but you will make more on the less who stay and save server/bandwidth costs of those that don’t.
Apple has always been this way with mobile me and they get people signing up and renewing. It’s one of their digital cash cows. They have the market seeded with browsers and more.. Mikes thread on Goldman Sachs/Facebook which led to this post of mine trying to look at value should look at Apple. That’s real money that took years to build a foundation for flow.
Twitter on the other hand is launching a new interface/display page that short changes the user and adds more space for ads no one’s going to look at.
Google hasn’t produced profits in its early years but now it’s a web superpower
the Facebook investors bet on its future
It seems like there is far too much growth priced into the stock. The valuation of $70B seems highly overpriced for what it is.
Brad
I guess micro has already tripled their investment…
1.6% at 240 big ones 3 years ago
First off, it’s not a problem to base a company’s market cap on the sale price of a large chunk of shares as with the Goldmans Sachs purchase of 1% of the total shares. However, you CANNOT base the market cap on a few shares changing hands. Market cap is stock price x total shares outstanding. Just because someone sold a few shares at a certain price does not mean ALL the shares are worth that price.
Second, Facebook cannot be compared to Google. Apples to oranges and Facebook has a long road ahead to be in Google’s league.
Facebooksucks.com
I wonder if Fannie Mae and Freddie Mac know anyhting about this valuation? Hey, where did all the realestate agents end up going after the housing collapse anyways? You don’t suppose they????? nawwwwwwww?
@MHB
Big difference in monetizing between Google and Facebook. As a search engine, Google was holding the keys to the castle. Facebook, like MySpace, is a social site except that Facebook wisely kept control and standardized look and feel (the first time I came to a MySpace page and couldn’t read it because the wallpaper made it look like a bad acip trip I knew they were doomed). Is Facebook worth a bucket of money? Absolutely. $70 billion? Not even close and I’ll tell you why. I’ve been to Facebook countless times and have never once clicked an advertisement. And, in my opinion, that’s key to monetization. With Google, I began clicking on their top and side ads very early on because it was an extension of the reason I was there in the first place – search. Facebook needs to come up with a monetization formula that has the public clicking like Pavlovian dogs or they will eventually go the way of MySpace.
@David J Castello
Dead on the money. Facebook might boast 500M members, but of that only a fraction are really “Actice”. Of those even a smaller percent actually generate any revenue for FB.
They are the hot thing today, but could go the way of MySpace. There are too many limitations to their website for any serious company to do “business” on there.
The only way anyone will make money @ 70B valuation is to sell to a bigger fool. At some point though reality wins and companies have to actually make money to justify the price.
Brad
Should read “Active”.
Brad
… When …
the fickle “Public” *decides that*
it is NOT … T H E COOL …
“IT” Website,
anymore …
It is all over!
Tend to agree this valuation is dumb. Google is a/the middleman between us and the worlds info, and as David said, serves relevant ads to lever that, etc. Facebook hosts useless conversations and is a platform for the vain. They dont have the same leverage.. These platforms will come to splinter imho anyways – i dont need the network effect when I limit my circle of friends anyways as most do. Part of the point is there’s unlimited cash thrashing around that needs a home so bubbles happen. Like, we ‘need’ new pop stars because the pipe is there and needs to be filled..
What is going to happen to every commercial entity with 3,000 or 300,000 fans when the get a bill from FB to keep their page? They are going to pay it. It will not be search, it will be this and other things yet to be thought of which opens the money faucet.
@ Steve M
one can steal an idea and make it into a $10MM idea. It takes execution, not ideas to build what FB has. Those creepy twins should take their $65MM and go away. They would have sold out much earlier and should have jumped in the ring to compete rather than litigate.
On second thought …
Goldman Sachs, Bernie Madoff’s Buddies ….
(ha, ha) there is no future in “honest money” for FB now,
they will Rape and Strip everything they can and max the
now cash flow! …
Investments in the Front Door / Skimming out the Back Door
Mafia Style …
Mark Suckerman already got his bags packed,
do you honestly think he cares?
When the time is right MZ unloads for a unheard of Fortune,
and then vanishes.
Just saying, LOL
Attorney Howard Nue just NOW! released this POST ….
REP. CLIFF STEARNS PLANS TO INTRODUCE PRIVACY BILL
Rep. Cliff Stearns, R-Fla., plans to pick up where he and former Rep.Rick Boucher, D-Va., left off in the last Congress in trying to craft an online privacy bill
://howardneu.com/blog/legal/REP-CLIFF-STEARNS-PLANS-TO-INTRODUCE-PRIVACY-BILL.php
SUPPORT HIM!
Is it 1998 again?
This reminds me of CROX, that slipper company went all the way to $70 bucks before sliding down to $1 last year. FB is nothing but a photo album site.
You know that professional investors average worse than the S & P average. That means you can close your eye and throw a dart and you are more likely to be a better investor than these idiots following the herd to the slaughter house.
FB photo album site is going to be worth more than Microsoft within 2 weeks at this pace. This is a sure sign it will be topping. You really want to make money, GO SHORT ON FB NOW!
@BFitz, if FB is going to charge companies big bucks for their “FB Page” they’re only going to loose in the long run. FBk is a social extension to a website, it’s not a necessity.
Facebook only needs to increase its annual profits to reach the same annual-profits vs. company-value level of Google
Robert
I don’t really know how you can compare Facebook, the busiest site on the Internet to the maker of one product which happened to by IMHO the ugliest shoe ever created.
Moreover since the stock is not publicly traded and looks like it will not be until 2012, there is no way of shorting the stock, which would be a bad best since the next valuation we hear will be $100 Million
@ David, there are many other ways to make money online, other than advertising, FB has so many other services it could introduce such as payements, voip, subscription based services for larger FB-pages or commercial ones etc.
About the evaluation: I think its not expensive at 50 or 70 Billions, it´s a super-fast growing new company evaluated at a PE of 25 or 35, this is reasonable and if you break it down /user they currently only earn 4 USD/user/year, they could easily earn 40 or more USD/user someday in the near future.
I guess they have no pressure and will make everybody more and more depending on them before they start to cash in on services etc.
My main fear about FB is that they will herald and accelerate the next internet dot com bust should they not manage effectively the wide spread fallout of their unwarranted valuations. Cue to a few months, IPO happens, people buy shares and then starts dumping them, causing a general dumping of technology companies on the back that they are over hyped, and no one wants to be caught in a Facebook-gate (future).
@ Mr T
Every local TV station and national brand has a FB page. Nearly every restaurant in America. It is not a vehicle to a web page or a vehicle to sell ads. It is a vehicle to communicate. And when a business wants to communicate to the public, it pays. It pays for TV ads to communicate, print, PPC and soon it will pay for the right to reach the rapidly approaching 1 billion FB users. Just like some businesses cannot afford TV or print some will leave FB. If a business cannot afford to stay in touch with it’s fans via FB they will have no value to FB. FB users (the public) won’t care just like we don’t care who is not running ads on the Golden Globes tonight. What would McDonald’s pay to keep in touch with it 6.8MM fans who they know are on FB twice a day but search G twice a week? Toyota -326K fans, Outback 1MM, Coke 21MM, Starbucks 19MM. 50 cents a fan a year? 10 cents a month? Would a restaurant with 3000 fans pay $300 a month? Yes, a full page ad in a city magazine is $4,000 a month and the pages cannot talk back.
Here is your real threat: http://city360.co/ They are charging businesses to list on their geo-FB pages and businesses are paying. (love the .co)
@ Michael Marcovici
We can learn a lot from Tech Bubble 1.0. Unlike other historical manias, though, TB1.0 addressed a very real, legitimate paradigm shift in human history. The macro-sentiments people expressed by piling their money into tech stocks were otherwise sane; they were right in wanting to get ahead of that curve… It’s just that too many started to lose touch with reality as it pertained to value and risk profiling which allowed small groups of smart people to bilk huge groups of dumb ones.
G had a sky-high p/e when they went public in 2004- if I recall correctly, it (p/e) was in the high 100’s when they IPO’d at less than $100 a share. They were raising cash to scale up their infrastructure in anticipation of an enormous rise in the marketing value of paid search. They knew what they were doing and they were absolutely correct.
No one denies that FB has a shit-ton going for it and it’s unique status as ‘middle earth’ offers it some very unique opportunities in terms of things it might be able to pull off (I am a user of FB ads for certain campaigns and have had success with them), but unlike G, the ‘potential’ offered by Facebook-Of-The-Future is far more abstract, far less defined and operating without anything resembling the pregame road map G had when they went public.
If we can learn anything from TB1.0, it’s that Tech moves much faster than companies do. Ask Microsoft, ask Myspace, ask Ebay, ask Lycos… In the Google IPO, you were buying into a high earnings multiple but you knew what you were betting on: the future of paid search.
Just what am I betting on if I were to buy Facebook at an enormously high multiple? What revenue streams do they plan on growing *that much* to realize anything resembling an accurate valuation? This is what I can’t figure out, but I’m sure they will start to provide insights before they go fully public.
Facebook is a phenomenon…Astonishing.
But, if you ever consider investing your hard-earned, cold cash, at the kind of p:e ratios that are likely to be asked for Facebook, be VERY wary, my friends…..All the hallmarks of price outstripping earnings performance, by a wide measure. Faddish stockmarket darlings come to mind, that bust just as quickly as they arise.
Also, its core ‘product’ is flighty….In the same way Facebook, itself, overtook the (then) dominant & ascendant MySpace, some other faddish thing could could just as quickly arrive to outflank FB…
Here are the results of the sharespost.com facebook sale announced today:
“”SharesPost’s affiliated broker dealer has completed a sealed bid auction of 362,035 shares of the Common Stock of Facebook, Inc. for certain qualifying SharePost members. A clearing price of $27.60 per share was established. “”
UPDATE:
Goldman Sachs decided to exclude U.S. clients from the private offering of as much as $1.5 billion in shares of social-networking company Facebook, citing “intense media attention.”
In a statement provided to The Wall Street Journal, Goldman said the move came after officials at the New York securities firm “concluded the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law.”
http://online.wsj.com/article/SB10001424052748703396604576087941210274036.html?mod=djemalertMARKET
What, only foreigners are allowed to profit from the self-created-intelligence-files of American Citizens???
That’s not fair.
I completely understand why businesses use Facebook, however, for joe-six-pack, it reminds me of MLM (multi-level-marketing) meets high school.
multi-level-SOCIAL-marketing
“Goldman said the move came after officials at the New York securities firm “concluded the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law.”
LOL, like 500 million users, a 50 billion valuation and a newly released Hollywood movie does’nt attract “media attention” 😉
“Foreign investors are not covered by the same rules and will still be able to participate in the Facebook offering. Given the level of demand, Goldman will still probably be able to raise the money for Facebook but not from US investors, who will now only be able to invest in Facebook if the company goes public.”
….The Facebook fiasco comes as US regulators are scrutinising the increasingly hot market in investments in private companies. The Securities and Exchange Commission, the US’s financial watchdog, is believed to be investigating activity in Facebook,…………..”
guardian.co.uk/business/2011/jan/17/goldman-sachs-facebook-private-placement
……the whole things smells fishy to me.