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So if $1 billion in shares trade hands at x valuation, does that prove Facebook is in fact worth >= $33 billion? I find it difficult to believe the value of FB
by mhp 15y ago
So if $1 billion in shares trade hands at x valuation, does that prove Facebook is in fact worth >= $33 billion? I find it difficult to believe the value of FB shares is anything other than what people are paying for it when a whole billion dollars worth of shares trade hands.
We could argue the semantics of 'worth' again ( http://news.ycombinator.com/item?id=1719975 http://news.ycombinator.com/item?id=1719975 ) and whether the long term value is way off base to its current value, but the evidence is overwhelming that FB is currently worth tens of billions of dollars.
- lucasjung 15y agoBy this logic, there was a point in time in Amsterdam when some tulip bulbs were "worth" more than large houses. You are technically correct that facebook is currently worth tens of billions of dollars, but is that real, lasting value or is it a transient inflation of price caused by lots of people investing with very imperfect knowledge of the company and the market? An IPO might reveal the truth.
- mhp 15y agoBy that logic, only sustaining value for some period of x days would allow you to say the value of something is y. That doesn't seem accurate to me. How many days is x?
- lucasjung 15y agoI don't think it's schedule-driven, I think it's event driven. In particular, I think that there are two events that value must survive in order to be demonstrated real: 1: End of severe information asymmetries (going from private to public--i.e. an IPO--will typically do this). 2: A crisis of confidence. A crisis of confidence can temporarily depress the market valuation of something with real value, but the fundamental underlying strengths will drive the price will recover as the crisis abates; inflated value will not recover in this manner after a crisis of confidence because the crisis will have served to expose the fundamental underlying weakness.