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Goldman Sachs invests in Facebook at $50 Billion valuation
- maayank 16y agoFellow 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?
- 2arrs2ells 16y agohttp://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1230930000000&chddm=258387&chls=IntervalBasedLine&q=NYSE:VG&ntsp=0 http://www.google.com/finance?chdnp=1&chdd=1&chds=1&...
- organicgrant 16y agoAt this valuation, I want to put money into SecondMarket stock, not Facebook. Facebook is a great company, with tremendous prospects. Its growth curve is going to slow significantly, however.
- jayzee 16y agoThe SEC may catch up with SecondMarket and plug the leak at any time and possibly quite soon.
- bhousel 16y agoWhat's the leak? They are a holding company and a member of FINRA. I'm genuinely interested in how you think the SEC might shut them down. Besides, SecondMarket is growing fast in Europe and Asia too.. They trade stocks all over the world now, so it's not just one 'leak' that the SEC can plug.
- powera 16y agoDid somebody say bubble? From later in the article, it's a total of $2 billion, with 1.5 billion being in a special fund designed to make a mockery of SEC regulations: "As part of the deal, Goldman is expected to raise as much as $1.5 billion from investors for Facebook at the $50 billion valuation".
- deleted 16y ago[deleted]
- nitrogen 16y agoAre 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?
- scottmp10 16y agoI 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.
- nitrogen 16y agoRight, but if the movie is to be believed, then Zuckerberg and several others have non-diluting shares. I'm wondering how much that restriction on the circulating share pool affects the valuation.
- A1kmm 16y agoIf $US 810^8 (from http://economictimes.indiatimes.com/infotech/internet/Facebook-09-revenue-neared-800-mn-Sources/articleshow/6063819.cms http://economictimes.indiatimes.com/infotech/internet/Facebo...) is a good estimate of Facebook's revenue, then, assuming fairly stable advertising income (a reasonable assumption, as Facebook has a market share nearing saturation, and the market in social networking is mainstream enough that it probably won't grow too much), a valuation of $US510^10 is 62.5 years of growth. Facebook's brand has a lot of valuable goodwill, but they are still vulnerable to competition, and might not last 62.5 years - so the valuation seems way too high.
- brown9-2 16y agoGoldman'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 2011?
- pmorici 16y ago"if you wanted to piss the SEC off and get into trouble." How many officials in the current administration are former Goldman Sachs employees? Do you think that affects the likelihood of them getting into trouble?
- borism 16y agoHow many officials in any administration are former Goldman Sachs employees? What does that have to do with anything anyway?
- yummyfajitas 16y agoThe implicit assumption is that people are willing to subvert their current employer for the benefit of their former employer (perhaps with the hope of being rehired by the former employer).
- borism 16y agoYup, let's judge people by their former employers, not by their actions. I mean, Hank Paulson's decision not to bail out Lehman would have been totally OK, have he not been former Goldman CEO...
- afterburner 16y agoNot sure how many (if any) layers of sarcasm to strip away, so I'll just say: Hank Paulson's decision not to bail out Lehman was not OK regardless. His former employer simply might have informed that incorrect (for the US/world in general) decision. Simple bias; had GS been on the chopping block, I can personally guarantee he would not have advised letting it tank.
- kragen 16y agoIs 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 Facebook's case, perhaps not) then it could have profits like that with as little as $6B/year or so of revenue. Presumably, within a couple of years, the majority of the internet's users will be Facebook users, which is something like two or three billion people. Is it reasonable to expect Facebook to extract US$2 to US$3 per year per user? It's hard for me to imagine how they could fail to extract several times that. If nothing else, the blackmail value of the data they already have on hand ought to be larger than that. ("Upgrade to Facebook Premium today in order to have the option to keep your past private messages from being visible to all your Facebook friends!" But it probably wouldn't be done in such a public way, in order to dampen backlash.) They can probably also sell preprocessed datasets of people who read subversive literature online to national intelligence agencies: not just the US and UK, but also Egypt, China, Pakistan, Syria, Italy, and Russia. If laundered through some kind of data broker, they could even get plausible deniability. That would be out of keeping with the kind of privacy invasion Facebook is currently well-known for, though, so it probably wouldn't happen without a change of control of the company first. So the mere $50B valuation represents an assessment that Facebook's popularity could be short-lived, or that it could become subject to much more intense competition than it is today, driving its revenues down toward their costs. I hope to God that Goldman is right.
- brown9-2 16y agoI'm curious, why would a company "need to settle" at a certain P/E ratio?
- ShardPhoenix 16y agoIf 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.
- Abid 16y agoHas DHH exploded yet (again)? http://37signals.com/svn/posts/2585-facebook-is-not-worth-33000000000 http://37signals.com/svn/posts/2585-facebook-is-not-worth-33...
- radicaldreamer 16y agoHow did DHH become an authority on company valuations?
- vamsee 16y agoI 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.
- blasdel 16y agoWhile 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.
- chailatte 16y agoAh, yes. The magic of dollar printing. It's a shame it will all come to an end soon.
- deleted 16y ago[deleted]
- anigbrowl 16y agoAre Facebook's users worth $100 each to the company - all 500m of them? Really?
- vamsee 16y agoNow that you put it that way, why not? Maybe not all of them, but the high-spending ones offset the poorer ones, no? That being said, I've read earlier that Fb actively dangles the $100Bn valuation post-IPO scenario to lure new hires. So perhaps it's not entirely a surprise that GS wants in on some action.
- yurylifshits 16y agoWell, 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.
- organicgrant 16y agoWell stated argument, but I think Google (at present) is much more diverse a company product-wise, and way better at monetization in terms of screen real estate and multi-modal revenue streams. (infrastructure, ad networks, functional products, etc) Virtual gifts aren't changing the world anytime soon.
- anigbrowl 16y agoA 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 etc. yet, all such estimates are far more speculative. http://www.google-ipo.com/ http://www.google-ipo.com/ http://en.wikipedia.org/wiki/History_of_Google#Financing_and_initial_public_offering http://en.wikipedia.org/wiki/History_of_Google#Financing_and... http://blogs.wsj.com/digits/2010/03/04/investors-bet-on-price-of-facebook-ipo/ http://blogs.wsj.com/digits/2010/03/04/investors-bet-on-pric...
- aditya 16y agoInteresting. 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-Facebook-as-a-Software-Engineer-120-000-year-salary-and-125-000-stock-options http://www.quora.com/Is-this-a-good-offer-for-working-at-Fac... (that says 125k options)
- alexgartrell 16y agoI don't think I'm leaking any IP when I say that, if the stock grant were that generous, you probably would have heard about it. edit: speaking, of course, of a newbie who was hired very recently with the 10 digit valuation in mind
- rumpelstiltskin 16y ago0.001% would be around ballpark.
- random42 16y agoI don't understand how you arrived at those percentages. Facebook already has 3k+ employees.
- beagle3 16y ago0.001% 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.
- anta 16y agoCan 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?
- seiji 16y agoAnecdotally, I know a few companies spending between $15k and $50k+ per day on facebook's version of adwords to shovel the masses into games. You know how people attribute worth to meaningless points in games? Kid CEOs these days attribute worth to the live-updating user stats (DAUs and MAUs, oh my) of their facebook casual-social-viral games. They'll do anything to make those numbers go up, including spending $200k to $1MM+ per month on ads.
- dotcoma 16y agosimple. every user is worth 100 dollars. Like in the old days of 1999.
- varjag 16y agoHowever accounted for inflation, it's only $76 of 1999 dollars per user. I'd say at this valuation it's a steal!
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- dave1619 16y agoCongrats to Facebook and their team. Well-deserved for building a site millions love.
- pavs 16y agoFor 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.
- code_duck 16y agoI see them as the new Microsoft as well. Something about how their style of 'innovation'.
- hackinthebochs 16y agoI know I'll get downvoted for this, but honestly I think it's all just hivemind at work. There's no reason to hate facebook as much as people do. Facebook's core business is closed, just like Microsoft's, and yes Google's. People just get seduced by all the 'free' and open services Google provides and forget that their core business is search, which is just as opaque.
- deleted 16y ago[deleted]
- RtodaAV 16y agoThis seems to good to be true.
- erikpukinskis 16y agoI was curious how their valuation has changed over time, so I hit up Google New Timeline* and put together a spreadsheet with a nice graph: http://snowedin.net/blog/2011/01/03/up-up-and-away http://snowedin.net/blog/2011/01/03/up-up-and-away Unrelated: The "trend" graph type in Google Spreadsheets is pretty awesome. I don't know when they added it, but it rawks. * http://newstimeline.googlelabs.com?date=2004-04-01&zoom=3&subs=anews.facebook+valuation%2Cperiodical.Time%2Cevent http://newstimeline.googlelabs.com?date=2004-04-01&zoom=...
- mtigas 16y agoIs that Google Spreadsheet publicly-viewable? Your page is showing either "User not signed in" or "Access denied" (if signed into Google), in the spot where I assume there should be an embedded spreadsheet.
- erikpukinskis 16y agoSorry, should be working now. Had the spreadsheet on "Anyone with the link can view" but apparently the embedded chart is only available if you make the spreadsheet public to everyone.
- mtigas 16y agoWorks now, thanks!
- stretchwithme 16y agoIt looks like GS found a place to spend all those billions we gave AIG to give to them.
- organicgrant 16y agoGoogle has users. Facebook has watchers. What did Yahoo have?
- codyguy 16y agoAh, the new year. People are gambling away to glory again. Maybe they are sure someone will bail them out.
- flipbrad 16y agoThis deal comes 6 months after AOL (an experienced tech player, mind you) sells Bebo for about $10m rather than the $850m it spent to acquire it. The context is markedly different, of course, notably since Facebook was the reason for the collapsed value over at Bebo.
- motters 16y agoI think this is a sign that I should get off of Facebook ASAP. I don't want to be doing anything which boosts the bonuses of Goldman Sachs.
- dagw 16y agoBy that logic you should stop doing business with any company that Goldman Sachs has invested in, which I think you'll find is just about every major company in the world.
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- kayoone 16y agohow much does Zuck still own of FB ? I read 25% percent somewhere, is that true ? Hes almost up with the google guys in terms of net worth then.
- tybris 16y agoFrom the article: > For Mr. Zuckerberg, the deal may double his personal fortune, which Forbes estimated at $6.9 billion when Facebook was valued at $23 billion. That would put him in a league with the founders of Google, Larry Page and Sergey Brin, who are reportedly worth $15 billion apiece.
- kayoone 16y agoThx, they even compare it with the googlers aswell :)
- iphoneedbot 16y agoApples to Oranges comparison: Porsche -> Mkt cap 11.72B Volkswagen-> Mkt cap 54.59B
- organicgrant 16y agoYet Porsche owned/owns 75% of VW. Do your research.
- iphoneedbot 16y agoYou've missed the point. btw, VW owns Porsche now- after Porsche's failed take-over attempt.
- curtisspope 16y agomoney in the bank counts. not valuation.
- curtisspope 16y agoclear sign of an ipo. also why are they raising more capital?
- 16s 16y agoSocial 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.
- 1010011010 16y agoWhere's the scam? The vampire squid is involved.