4 ms·
Don't confuse market cap and purchase price. And I would never use Facebook's ridiculous overpayment as the basis for valuing other companies.
by bluedevil2k 13y ago
Don't confuse market cap and purchase price. And I would never use Facebook's ridiculous overpayment as the basis for valuing other companies.
- rayiner 13y agoPurchase price should be in general a small premium over market cap.
- btilly 13y agoIt should be, but the actual premium is the result of a human decision, and humans sometimes make very bad decisions. (See, for instance, the purchase of Skype by eBay a decade ago. Also on the value of a network that was an alternative to phone calls.)
- baddox 13y agoMarket cap is also the result of human decision.
- btilly 13y agoA single human decision generally has higher variance than a group one. (Not to say that group ones are always reliable.)
- robocat 13y agoeBay made approx 1.4 billion net gain from buying then selling Skype - see http://investor.ebayinc.com/releasedetail.cfm?ReleaseID=829611 http://investor.ebayinc.com/releasedetail.cfm?ReleaseID=8296... "In May 2011, all of the equity in Skype was sold to Microsoft for $8.5 billion. Due to eBay's 30% stake at the time of sale, the company realized a net gain of $1.4 billion on its original investment in Skype."