3 ms·

5% is what, 8-9bil market value? This deal gives out 12bil in stock, so the loss in market cap is less than the dilution of shares from the deal. In other word

5% is what, 8-9bil market value? This deal gives out 12bil in stock, so the loss in market cap is less than the dilution of shares from the deal. In other words, in hearing that 12bil of worth was being taken away from shares, only 75% of that was realized in the fall, making this a net gain in share price (not counting cash). If you count cash, this actually seems pretty neutral.

deleted 13y ago
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anigbrowl 13y ago
Doesn't that assume everyone has priced in the news already? I mean, it might fall another 5% by this time tomorrow and completely invalidate your thesis - having said that it seems to have recouped some of the loss already. I just think it's going to take more than a few hours to see the full effect.
klochner 13y ago
If this were an all stock deal, and the market cap had fallen by $12B (assuming $12B stock given out), that would mean the market were valuing WhatsApp at $0 as an asset. If facebook had fallen in value by more than the purchase price, that would mean the market is saying WhatsApp has negative value, even if it had been given to facebook for free (though it could also mean a loss of faith in facebook leadership). Any loss in market cap following the acquisition means the market is valuing the deal as having negative net value to facebook.
- JetSpiegel 13y ago
  >though it could also mean a loss of faith in facebook leadership That's the zinger right there. It could be anything, from "WhatsApp is worthless" to "This tea leaves are turning green, time to dumb Facebook stock"
steven2012 13y ago
That's only if you believe that Whatsapp is worth $19B (which I don't). If it's not worth $19B, then it's Facebook throwing away $4B cash and diluting themselves for $12-15B. Companies FB could have bought for around $20B: Linkedin, Whole Foods, Broadcom, The Gap, etc. There is no sort of metric that makes sense to purchase this product for $19B. Even if every user paid $1/yr, that's paying $19B for $450M revenue stream, or 40 times revenues. It's insane.

deleted 13y ago

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anigbrowl 13y ago

Doesn't that assume everyone has priced in the news already? I mean, it might fall another 5% by this time tomorrow and completely invalidate your thesis - having said that it seems to have recouped some of the loss already. I just think it's going to take more than a few hours to see the full effect.

klochner 13y ago

If this were an all stock deal, and the market cap had fallen by $12B (assuming $12B stock given out), that would mean the market were valuing WhatsApp at $0 as an asset. If facebook had fallen in value by more than the purchase price, that would mean the market is saying WhatsApp has negative value, even if it had been given to facebook for free (though it could also mean a loss of faith in facebook leadership). Any loss in market cap following the acquisition means the market is valuing the deal as having negative net value to facebook.

JetSpiegel 13y ago
>though it could also mean a loss of faith in facebook leadership That's the zinger right there. It could be anything, from "WhatsApp is worthless" to "This tea leaves are turning green, time to dumb Facebook stock"

steven2012 13y ago

That's only if you believe that Whatsapp is worth $19B (which I don't). If it's not worth $19B, then it's Facebook throwing away $4B cash and diluting themselves for $12-15B. Companies FB could have bought for around $20B: Linkedin, Whole Foods, Broadcom, The Gap, etc. There is no sort of metric that makes sense to purchase this product for $19B. Even if every user paid $1/yr, that's paying $19B for $450M revenue stream, or 40 times revenues. It's insane.