Facebook valued at $50 Billion

[GGT]

1) Do you think that's an accurate valuation? (FYI: That's more than Boeing's value, and more than several airlines are valued, combined.)

2) What do you think about the deal struck with Goldman Sachs and Russian DST?

3) Do you have faith the SEC will meet its regulatory mandate?

Facebook Inc. struck a deal with Goldman Sachs Group Inc. and others to raise $500 million, said people familiar with the matter, becoming the latest Internet company to build a war chest that will allow it to stay private longer.

The agreement, which includes funding from Digital Sky Technologies, a Russian Internet investment firm, values Facebook at $50 billion, said the people familiar with the matter. That's up from $10 billion in mid-2009.

The deal ignited Monday a frenzy of phone calls and emails by clients in the private wealth-management division at Goldman Sachs, who will get an opportunity to buy equity in Facebook, said people familiar with the matter.

Regulators, meanwhile, continue to examine a surge of trading in shares of Facebook and other still-private tech companies. SecondMarket Inc., which helps match buyers and sellers of pre-IPO companies, said Monday it received a letter of inquiry from the Securities and Exchange Commission on Thursday.

SecondMarket said the inquiry related to pooled investment funds that have been formed to buy private company stock. "We are fully cooperating with the SEC in this inquiry," the company said.


Read more: http://online.wsj.com/article/SB1000...#ixzz1A4leoHtL

Sounds to me like they already have more than 499 investors.....


EDIT to add this nugget:

http://www.marketwatch.com/story/why...ion-2011-01-04

The company says it has more than 500 million users, and more than three-quarters of them are overseas. It is growing like Topsy. More than half of users log on every day. In total, Facebookers waste — er, “spend” — 700 billion minutes on this website every month. That’s 23-1/2 hours per user. No kidding. That’s roughly the equivalent of a full day each month, or three eight-hour workdays, every month. According to comScore Inc., people worldwide now spend more time on Facebook each month than they do on all of Google’s sites.

I've heard they have 600,000,000 worldwide users. Crazy numbers.

Do you use Facebook?

[earthJoker]

Yes I use it, to stay in contact with old friends or people I rarely see. But not show of every part of my life.

[agamemnus]

I don't think Facebook is worth this much. Being used a lot doesn't actually translate to making a lot of money in the long run. I think it's worth 500 million at most. (discounting their cash reserves)

I think Zuckerman would be very smart to cash out as much as he can while Facebook's value is so high.

[GGT]

Articles posit that Zuckerman distrusts Wall Street. Kind of ironic, since he chose a Wall Street "icon" Goldman Sachs to strike a pre-IPO deal, and presumably agreed to their transaction fees. He/they are milking private venture capital before it goes public. It's in "their best interest" to have a $50 BILLION valuation.

Reminds me of Enron and the dot com bubble. Of course, I could be wrong.

What strikes me as underhanded and/or unfair is that GS is doing this off their books or balance sheet, which means they're borrowing cheap Federal Reserve bank funds to set up this deal. Kind of hard to believe GS hasn't had their special "bank holding" status rescinded yet. They're not really a bank, but they enjoy access to the Fed's bank rates for borrowing money, ie tax payer dollars.

Maybe someone can explain to me how this is "fair", or how our Federal Reserve (Central Bank), Treasury, SEC, Comptroller of Currency, or FDIC (or any other number of gov't agencies involved with public money) can get away with this type of Corporate favoritism?

[Ominous Gamer]

$50 Billion? Nice. Zuckerman may be a douchebag to the highest degree, but it is definitely time for him to suck it up and pawn that shit off on someone else, before reality shows back up.

[GGT]

There's also speculation on financial blogs that GS has created a CDS (credit default swap) to insure their risk against the SVI (Special Vehicle Instrument) they created, so either way they benefit. Kind of like what was done with sub-prime mortgages, MBS and synthetic CDOs.

"Market Makers" or Market Manipulators? You can do a lot with a few billion bucks parked here and there....

[LittleFuzzy]

1) Do you think that's an accurate valuation? (FYI: That's more than Boeing's value, and more than several airlines are valued, combined.)

2) What do you think about the deal struck with Goldman Sachs and Russian DST?

3) Do you have faith the SEC will meet its regulatory mandate?





Sounds to me like they already have more than 499 investors.....


EDIT to add this nugget:

http://www.marketwatch.com/story/why...ion-2011-01-04



I've heard they have 600,000,000 worldwide users. Crazy numbers.

Do you use Facebook?

I do, but the time I spend on it is ~2 hours/3 months. I didn't think it was worth the valuation when Microsoft bought part of it, but now I'm not so sure. The users estimation is inflated though, there's quite a bit of automated activity.

[GGT]

I do, but the time I spend on it is ~2 hours/3 months. I didn't think it was worth the valuation when Microsoft bought part of it, but now I'm not so sure. The users estimation is inflated though, there's quite a bit of automated activity.

Who knows how they came up with this valuation, anyway? I gather they use specific member information rather freely.....that's why their flubbed "privacy and security" measures made users angry. I decided long ago not to join, so all I know is what I've read in the news.....

Maybe time spent on the site matters less than simply joining and their data sharing?

I have a hard time believing Facebook is worth that much. They don't really produce something. Definitely a moot point, huh.

[Aimless]

Er, why not? It's a well-managed and highly lucrative business with continuously increasing revenue (checkit, more captivating than google and about as interested in serving ads) and presumably it'll be alive for a few more years to come...

[LittleFuzzy]

Who knows how they came up with this valuation, anyway?

Extrapolation of how much people are paying for these tiny pieces, to the whole. If these people are paying $500 million for small parts of the company, and those small parts are considered to be 1% of the company, than if the whole company were on the market and getting this price it would be worth $50 billion. It's not a measure of the company's assets, but at how much 100% ownership would be on the open market based on what would be considered the stock price. And of course if the whole thing were on the market, it would undoubtedly be worth substantially less, you can consider this type of valuation to be pretty meaningless data, except what it tells you for how excessively some people will spend to acquire a tiny piece of it.

[GGT]

Er, why not? It's a well-managed and highly lucrative business with continuously increasing revenue (checkit, more captivating than google and about as interested in serving ads) and presumably it'll be alive for a few more years to come...

Well, because not all "services" are equal?

I've been reading about this Liquid Biopsy that can potentially detect cancer genes in single drops of blood, J & J, CellSearch and Veridex.......http://www.realclearpolitics.com/new..._from_j_j.html.... and I find it disturbing that there's more venture capital in social web sites.

People can use social media to find ways to handle cancer, hunt down treatments, find support groups because that makes more money than funding cancer research?

[GGT]

[...]It's not a measure of the company's assets,

Of course, but that's because as a privately held company, no one really knows their balance sheets.

but at how much 100% ownership would be on the open market based on what would be considered the stock price. And of course if the whole thing were on the market, it would undoubtedly be worth substantially less, you can consider this type of valuation to be pretty meaningless data, except what it tells you for how excessively some people will spend to acquire a tiny piece of it.

Maybe that's my objection in a nutshell. There won't be 100% ownership, and it's not on the open market to set its stock price. The whole thing is "closed" to Zuckerman, GS and its wealthy investors pre-IPO. Then they'll release the behemoth to the public who wants to get in on ground-level profits, after special accounting and definitions have already taken place.

Call me paranoid or suspicious, but the whole thing looks rigged, and not to the favor of the average consumer, let alone the municipality bond manager or pensioner. Lately, even our public money managers and private endowments have been hoodwinked by the "financial investment" industry. I see no reason to suddenly trust "bankers" now. Do you?

I don't even count Goldman Sachs as a fricking bank-holding company. They're really an enormously wealthy investment firm with hedge funds, speculators, and "Market Makers" attached at the hip. Why should they have special status to borrow from the Federal Reserve at ~0 interest?

[GGT]

This post-link is dedicated to Dread and wiggin and Loki. The main people I recall saying that I was using "buzz words" or being "non-sensical" when mentioning my skepticism about Dark Pools, Shadow Banking, or HFT (high-frequency trading). Not limited to the flash crash in May, or my doubts about synthetic derivatives.

The thread about investing in corporate stock vs playing a gambling casino was too long ago to drag up. But buying into Facebook makes it current again. Hidden trading in secondary markets or proprietary trading, big players manipulating things. SSDD.

Investing Dying as Computer Trading, ETFs & Dark Pools Proliferate
Published: Tuesday, 4 Jan 2011 |


There’s an old Wall Street adage meant to inspire investors that goes “it’s not a stock market, but a market of stocks.” Consider that dead.

Computer trading, dark pools and exchange-traded funds are dominating market action on a daily basis, statistics show, killing the buy and hold philosophy still attempted by many professional and retail investors alike. Everything moves up or down together at a speed faster than which a normal person can react, traders said.

High frequency trading accounts for 70 percent of market volume on a daily basis, according to several traders’ estimates. The average holding period for U.S. stocks is now just 2.8 months, according to the Crosscurrents newsletter. In the 1980s, it was two years.

“The theory that buy-and-hold was the superior way to ensure gains over the long term, has been ditched completely in favor of technology,” said Alan Newman, author of the monthly newsletter. “HFT promises gains are best provided by holding periods measuring as few as microseconds, possibly a few minutes, or at worst, a few hours.”

The problem is only made worst by the proliferation of exchange-traded funds, traders said. The vehicles, which make trading a group of stocks as easy as buying and selling an individual security, passed the $1 trillion in assets mark at the end of last year, according to BlackRock. This is probably why all ten sectors of the S&P 500 finished in the black for two consecutive years, something that’s only happened one other time since 1960, according to Bespoke Investment Group.

“The capital raising stock market of the past hundred years has morphed in just the last 10 years into a casino,” said Sal Arnuk of Themis Trading and a market infrastructure expert who advised the SEC after last year’s so-called Flash Crash. “Who is doing the fundamental work analyzing stocks? In the end, we’ve greatly increased systemic risk.”

Another factor jumped into the fray in December: dark pools. Off-exchange trading accounted for more than a third of the trading volume in December, says Raymond James. While these trades are eventually reported to the public markets, they further damage price discovery, an essential element for a fair securities market, investors said.

“This was a record high market share for off-exchange trading and we believe the SEC will ultimately be forced to react to support the price discovery process by limiting off-exchange trading for all traces except for large block trades,” wrote Raymond James analyst Patrick O’Shaughnessy in a note to clients yesterday.

“This destroys capital markets,” said Jon Najarian, co-founder of TradeMonster and a ‘Fast Money’ trader. “Hidden trading venues, where some participants get to peek at the orders as they are entered so long as they agree to ‘interact’ with a minimum percentage, is not an exchange, it’s a license to steal.”

While many see these forces aligning to cause a sort of self-correcting powerful drop in the market down the road, others feel like it’s creating an opportunity for the stock pickers to mount a comeback.

At the end of last year, something strange happened. After tracking the S&P 500 for most of 2010, the Russell 2000 Index, made up of many small companies with very different characteristics and merits, broke away in the final three months to double the gains of large cap benchmark for the year.

“Small cap outperformance in the last quarter is a very good sign this trend is ending,” said Joshua Brown, money manager and author of The Reformed Broker blog. “Winners and losers are starting to separate themselves after a year of the whole risk-on (buy anything), risk off (sell everything) of the last year.”

Of course, you could have just bought the iShares Russell 200 Index ETF in September.

http://www.cnbc.com/id/40907838

[LittleFuzzy]

Then they'll release the behemoth to the public who wants to get in on ground-level profits, after special accounting and definitions have already taken place.

Maybe, maybe not. It's certainly possible this is simply a prelude to an IPO, but it could just as easily be a measure by which Zuckerman and others can avoid having to let it go public at all.

Call me paranoid or suspicious, but the whole thing looks rigged, and not to the favor of the average consumer, let alone the municipality bond manager or pensioner. Lately, even our public money managers and private endowments have been hoodwinked by the "financial investment" industry. I see no reason to suddenly trust "bankers" now. Do you?

So don't buy. You don't have to trust anybody. If you don't care about it or think it is overvalued, then you can simply not participate. I doubt any bond managers are trying to get in on this, it's not the sort of investment opportunity they're looking for or would be able to take advantage of.

[Aimless]

People can use social media to find ways to handle cancer, hunt down treatments, find support groups because that makes more money than funding cancer research?

Wait, what? I really do not follow

[Flixy]

Yeah I use it, pretty frequently. Mostly to catch up with friends (being in college means that most of my friends are spread around the country) and to plan parties. And to waste time. I love wasting time!

[Ominous Gamer]

Wait, what? I really do not follow

Sarcasm, its a sideways attempt to complain about how medical research isn't followed up on unless it promises profits and/or patents.

[GGT]

Maybe, maybe not. It's certainly possible this is simply a prelude to an IPO, but it could just as easily be a measure by which Zuckerman and others can avoid having to let it go public at all.

So don't buy. You don't have to trust anybody. If you don't care about it or think it is overvalued, then you can simply not participate. I doubt any bond managers are trying to get in on this, it's not the sort of investment opportunity they're looking for or would be able to take advantage of.

I'm not convinced that "not buying" translates into "don't worry". Worldcom, Enron, GE, GMAC, AIG....they all started out the same way. Ditto for synthetic derivatives. What they had in common were large financial firms intertwined with common peoples' money, considered too big to fail only after they'd already done their damage and ran away with huge profits.

Sarcasm, its a sideways attempt to complain about how medical research isn't followed up on unless it promises profits and/or patents.

It's not really sarcasm, but it is sideways. It's actively dissing venture capitalists for capitalizing on peoples' short term greed, instead of financing long term public good.

[agamemnus]

Well, you (or your city's/state's funds manager) can choose to invest through the special vehicle (choo choo)... you don't invest automatically.

[GGT]

Well, you (or your city's/state's funds manager) can choose to invest through the special vehicle (choo choo)... you don't invest automatically.

So what? Every current Facebook user is drawn into the scheme, like it or not. Do they have a comparable alternative yet, and will there be more competition after millions or billions of dollars are spent on Facebook, to the exclusion of other sites?

This sounds to me like the birth of a potential monopoly. Money talks, and big money is powerful. Cite another social network valued at $50 BILLION, or even ten sites valued at $5 BILLION.

[Lewkowski]

I think it is or will be worth 50 billion soonish.

[GGT]

I think it is or will be worth 50 billion soonish.

Well folks, there it is. Lewk says so.

[agamemnus]

So what? Every current Facebook user is drawn into the scheme, like it or not. Do they have a comparable alternative yet, and will there be more competition after millions or billions of dollars are spent on Facebook, to the exclusion of other sites?

This sounds to me like the birth of a potential monopoly. Money talks, and big money is powerful. Cite another social network valued at $50 BILLION, or even ten sites valued at $5 BILLION.

It could never be a monopoly... people would just use a different site if they don't like it. There are already a few Facebook-like imitators, though they are in other countries. That's what the 50 billion valuators are forgetting. This isn't Microsoft in the 80s and 90s.

[GGT]

It could never be a monopoly... people would just use a different site if they don't like it. There are already a few Facebook-like imitators, though they are in other countries. That's what the 50 billion valuators are forgetting. This isn't Microsoft in the 80s and 90s.

Can you name ten other social networks valued at $5 BILLION, or one site used by 60 million people that got $50 million in venture capital?

[agamemnus]

Dunno about any other valuations being done on any other such company.

They're not as widespread, no. But, market dominance doesn't equal monopoly!

Also --- Doesn't China have its own Facebook clone (since it's banned there..)? China does have a lot more people than the US...

[GGT]

I know China has its own search engine called Baidu, and they're a competitor with Google.

Market dominance doesn't equal a monopoly by definition, but in practical terms it may as well be a monopoly. Or at least cornering the market. By establishing early power through massive funding, a whale can drown or swallow the little fish. Plus sailors and their boats. How is that a fair and level playing field?


*If China were to fund and build an awesome social network that connected jobs with socializing and email, and one billion Chinese used it daily, never feeling the need to find an alternative (because none exists)......my guess is American web developers and marketers would call foul and want in on the action.

But when it's a domestic site originating within our borders, not so much. Almost like a blind trust that anything happening in the US is copasetic, by virtue of being an American product.

[agamemnus]

Well, China is already restricting Facebook from being used: Facebook doesn't really care though because of their popularity in other places.

China places unfair rules to foreign competitors and allows its state companies to steal technology. That is definitely bad for everyone who isn't China... and unfair to competitors.

On a different note... it's true that someone with a huge market share could abuse it easily if the industry's so-called "barriers to entry" are high. It doesn't automatically mean that they will in every industry, and in this case the barriers to entry are not high. Anyone could create a "better" Facebook. If people didn't like what Facebook was doing they could instantly move to another site (perhaps even via Facebook's communication tools). The same thing happened to MySpace.

Here's a nice summary on Wikipedia.
By late 2007 into 2008, Myspace was considered the leading social networking site, and consistently beat out main competitor Facebook in traffic. When Facebook launched new features in an effort to attract a variety of users, Myspace found itself in a continuing decline of membership. As of July 2010, the site was ranked 25th in Internet traffic,[30] opposed to the 2nd position held by Facebook.[31]

[LittleFuzzy]

I'm not convinced that "not buying" translates into "don't worry".

Yeah, I know, your nose frequently gets all out of joint about things which don't affect you, don't affect anyone you know, and for which there is not even cause for some sort of abstract moral or social outrage. All that is likely happening here are some rich people and companies are letting themselves get fleeced because they think if they don't and they're wrong, some competitor might get a a way to exploit a major ad-space advantage.

Worldcom, Enron, GE, GMAC, AIG....they all started out the same way. Ditto for synthetic derivatives. What they had in common were large financial firms intertwined with common peoples' money, considered too big to fail only after they'd already done their damage and ran away with huge profits.

What common people's money? The only people involved in this are DST, Goldman Sachs, and Sachs clients for whom it make sense to sequester millions in an investment that's not going to pay out anything for some time.

Your objection is to companies raising money from the markets at all.

[GGT]

Yeah, I know, your nose frequently gets all out of joint about things which don't affect you, don't affect anyone you know, and for which there is not even cause for some sort of abstract moral or social outrage. All that is likely happening here are some rich people and companies are letting themselves get fleeced because they think if they don't and they're wrong, some competitor might get a a way to exploit a major ad-space advantage.

What common people's money? The only people involved in this are DST, Goldman Sachs, and Sachs clients for whom it make sense to sequester millions in an investment that's not going to pay out anything for some time.

Your objection is to companies raising money from the markets at all.

No, my objection is special bank-holding status for GS. At the height of the financial melt-down, they were allowed to fall under the safety umbrella of "Bank". As far as I know, they still enjoy this special status and are free to borrow from Federal Reserve (common people's money) at basically 0%, even though they're not really a "Bank" but an investment firm.

That's not just an abstract moral outrage. That's a fair challenge to the structure of our financial system when it doesn't make sense. Excuse me for noticing.

[LittleFuzzy]

No, my objection is special bank-holding status for GS. At the height of the financial melt-down, they were allowed to fall under the safety umbrella of "Bank". As far as I know, they still enjoy this special status and are free to borrow from Federal Reserve (common people's money) at basically 0%, even though they're not really a "Bank" but an investment firm.

That's not just an abstract moral outrage. That's a fair challenge to the structure of our financial system when it doesn't make sense. Excuse me for noticing.

Yet most of your posts in the thread are about the valuation of Facebook, what Zuckerman might do with that money, how the "deal is rigged and not in favor of the consumer" whatever that may mean, particular in this sub-discussion between you and I. Your objection is to Facebook raising money from the markets.