4 ms·

Interesting that Microsoft paid with shares. They effectively just issued $7.9B in equity without having to go to the public markets for it. Granted it’s only ~

Interesting that Microsoft paid with shares. They effectively just issued $7.9B in equity without having to go to the public markets for it. Granted it’s only ~1% of their $780B market cap... but this also suggests they believe their shares are perhaps a little richly valued.

kbutler 8y ago
They are using previously allocated $30 billion share buyback to repurchase the shares from the open market. So they are still planning to purchase more shares than this $7.5B issue. https://seekingalpha.com/article/4179322-github-deal-fits-new-microsoft https://seekingalpha.com/article/4179322-github-deal-fits-ne...
- ramen-san 8y ago
  Yes, it's true they have a stock buyback plan, so net-net it will be a wash. But the marginal decision remains the same - should we pay cash or shares for Github? If they really felt their shares were undervalued, why not just pay cash? Stock buyback plans are heavily pre-meditated programs with relatively rigid rules. It's not like they added an extra ~8B to the last buyback plan in anticipation of this exact event.
sireat 8y ago
Most big cap tech stocks seem a bit richly valued by classical measures. I'd love to see more discussion on the acquisition valuation here. Considering that Github had sales of around 200M last year and is losing money, the 7.9B is a pretty rich multiple. Sure Github is a nice fit for Microsoft (more perhaps than something like Minecraft is). Still, this seems more like mindshare or perhaps defensive purchase.
- ramen-san 8y ago
  Agreed - definite 'strategic' rationale for the purchase. Can't get there by any conventional valuation method. But to put things another way, do you believe that having Github as a Microsoft property (or the insurance that buys) is worth 1% of the company? Not too hard to get to big numbers when we're talking about a 3/4 trillion dollar company. This one kind of feels like Skype, in that it felt like they overpaid there as well (I remember thinking that Silverlake had performed a masterful coup with Skype) ... only time will tell whether Github loses their mojo as in the Skype situation. I'm not a skype user, but my general sense is that the service has been completely eclipsed by everything else in that space.

kbutler 8y ago

They are using previously allocated $30 billion share buyback to repurchase the shares from the open market. So they are still planning to purchase more shares than this $7.5B issue. https://seekingalpha.com/article/4179322-github-deal-fits-new-microsoft https://seekingalpha.com/article/4179322-github-deal-fits-ne...

ramen-san 8y ago
Yes, it's true they have a stock buyback plan, so net-net it will be a wash. But the marginal decision remains the same - should we pay cash or shares for Github? If they really felt their shares were undervalued, why not just pay cash? Stock buyback plans are heavily pre-meditated programs with relatively rigid rules. It's not like they added an extra ~8B to the last buyback plan in anticipation of this exact event.

sireat 8y ago

Most big cap tech stocks seem a bit richly valued by classical measures. I'd love to see more discussion on the acquisition valuation here. Considering that Github had sales of around 200M last year and is losing money, the 7.9B is a pretty rich multiple. Sure Github is a nice fit for Microsoft (more perhaps than something like Minecraft is). Still, this seems more like mindshare or perhaps defensive purchase.

ramen-san 8y ago
Agreed - definite 'strategic' rationale for the purchase. Can't get there by any conventional valuation method. But to put things another way, do you believe that having Github as a Microsoft property (or the insurance that buys) is worth 1% of the company? Not too hard to get to big numbers when we're talking about a 3/4 trillion dollar company. This one kind of feels like Skype, in that it felt like they overpaid there as well (I remember thinking that Silverlake had performed a masterful coup with Skype) ... only time will tell whether Github loses their mojo as in the Skype situation. I'm not a skype user, but my general sense is that the service has been completely eclipsed by everything else in that space.