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The last transaction is a reasonable way to access market cap when a reasonable number of the shares are out in the open for free trading. 2/3s of Google shares

by dhh 15y ago

The last transaction is a reasonable way to access market cap when a reasonable number of the shares are out in the open for free trading. 2/3s of Google shares are floating, so what the last trades happened at determine the worth to a reasonable approximation. When just a tiny, tiny sliver of the shares are floating freely, these transactions are a terrible way to access the grand worth of the company. You don't need to extrapolate much further from the 0.01% of the shares bought in this transaction to see how ridiculous that is. That's how 37signals became a $100B company with a $1 investment following the same template.

hugh3 15y ago
You don't need to extrapolate much further from the 0.01% of the shares bought in this transaction to see how ridiculous that is. That's how 37signals became a $100B company with a $1 investment following the same template Extrapolating to the one-dollar case is extrapolating too far. Whoever bought 0.01% of facebook, they were investing real money which they didn't want to lose. ... or were they? If the buyer were already a big facebook shareholder I suppose they might just be trying to build up the company's on-paper valuation prior to the float. Does GSV own a chunk of facebook already?
martinkallstrom 15y ago
Of course scarcity plays into the equation, but Forbes does not try to misrepresent this fact. As a whole, the Forbes article can just as well be read as criticism of using extrapolation as the main valuation apparatus. The journalist very casually dismiss Zuckerberg's wealth as a paper fortune, which turns the headline's hyperbole into irony if you will. My point is that what's actually written in the Forbes article is very open for interpretation, which makes it less of a thing to stomp your foot and grind your teeth about. In my humble view, 37s is much closer to jumping the shark here, than what Forbes is.

by dhh 15y ago

hugh3 15y ago

You don't need to extrapolate much further from the 0.01% of the shares bought in this transaction to see how ridiculous that is. That's how 37signals became a $100B company with a $1 investment following the same template Extrapolating to the one-dollar case is extrapolating too far. Whoever bought 0.01% of facebook, they were investing real money which they didn't want to lose. ... or were they? If the buyer were already a big facebook shareholder I suppose they might just be trying to build up the company's on-paper valuation prior to the float. Does GSV own a chunk of facebook already?

martinkallstrom 15y ago

Of course scarcity plays into the equation, but Forbes does not try to misrepresent this fact. As a whole, the Forbes article can just as well be read as criticism of using extrapolation as the main valuation apparatus. The journalist very casually dismiss Zuckerberg's wealth as a paper fortune, which turns the headline's hyperbole into irony if you will. My point is that what's actually written in the Forbes article is very open for interpretation, which makes it less of a thing to stomp your foot and grind your teeth about. In my humble view, 37s is much closer to jumping the shark here, than what Forbes is.