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I was the "now worth $747 million" commenter! I mean - at closing today - it's worth that. As in, if they could sell their newly owned stock today that's what t

by memnips 14y ago

I was the "now worth $747 million" commenter! I mean - at closing today - it's worth that. As in, if they could sell their newly owned stock today that's what they would have. The original deal was "valued" at $1bn. It closed at a value closer to $747 million. Instagram is doing just fine either way.

ChuckMcM 14y ago
I think you missed the parent's point here, the deal was 300M cash and 1% of Facebook. It is still that as far as I can tell. It was reported as a $1B deal because if you did the math at the time that was what you got. Now in say 5 years if you do the math again you will get another number, could be a bigger number, could be smaller, but it will still be 1% (caveat new stock issuing). You could say it was a 70 degree deal on the 9th of April because that was the temperature in Palo Alto then but only a 63 degree deal now. Ok, that's a silly way to measure it but it illustrates the point the parent was making.
- memnips 14y ago
  I guess I'm still missing it. I think measuring economic deals in dollars is pretty sensible. I'm not implying the terms of the deal have changed, however the value of the deal has changed MATERIALLY since it was announced to approved.
  - ChuckMcM 14y ago
    You are just using a different way to describe the deal. The grandparent described it "$300M cash plus 1% of Facebook" that description of the deal was accurate when it was announced and it is still accurate. You choose to measure it as "30M * FBStockPrice-in-dollars + 300M * $1 cash" which is also accurate but it is not a 'stable' definition because it varies day to day. The point the parent was making (IMO) was that the terms of the deal haven't changed, the point you are making is that the value of the deal is changing. When the deal was made part stock (variable) and part cash (invariable) the folks at Instagram 'bought in' or agreed to the fact that the value would vary with FB's price so the fact that the stock component is worth half what it was, may not have been 'expected' but it was already accounted for. The discussion about stock collars (a financial mechanism that keeps the variable bit within some bounds between the time the deal is made and when it closes), suggested the Instagram guys could have made a better deal for themselves, but we don't know, perhaps they (Instagram) felt that $300M was fine even if FB went to 0 (it won't but its an example).

by memnips 14y ago

ChuckMcM 14y ago

I think you missed the parent's point here, the deal was 300M cash and 1% of Facebook. It is still that as far as I can tell. It was reported as a $1B deal because if you did the math at the time that was what you got. Now in say 5 years if you do the math again you will get another number, could be a bigger number, could be smaller, but it will still be 1% (caveat new stock issuing). You could say it was a 70 degree deal on the 9th of April because that was the temperature in Palo Alto then but only a 63 degree deal now. Ok, that's a silly way to measure it but it illustrates the point the parent was making.

memnips 14y ago
I guess I'm still missing it. I think measuring economic deals in dollars is pretty sensible. I'm not implying the terms of the deal have changed, however the value of the deal has changed MATERIALLY since it was announced to approved.
- ChuckMcM 14y ago
  You are just using a different way to describe the deal. The grandparent described it "$300M cash plus 1% of Facebook" that description of the deal was accurate when it was announced and it is still accurate. You choose to measure it as "30M * FBStockPrice-in-dollars + 300M * $1 cash" which is also accurate but it is not a 'stable' definition because it varies day to day. The point the parent was making (IMO) was that the terms of the deal haven't changed, the point you are making is that the value of the deal is changing. When the deal was made part stock (variable) and part cash (invariable) the folks at Instagram 'bought in' or agreed to the fact that the value would vary with FB's price so the fact that the stock component is worth half what it was, may not have been 'expected' but it was already accounted for. The discussion about stock collars (a financial mechanism that keeps the variable bit within some bounds between the time the deal is made and when it closes), suggested the Instagram guys could have made a better deal for themselves, but we don't know, perhaps they (Instagram) felt that $300M was fine even if FB went to 0 (it won't but its an example).