Facebook keeps rising in estimated value

[William Gaatjes]

Who has already felt for it and bought shares ?

Facebook is now estimated at a value of 50 billion dollars.

Goldman Sachs seem to have bought for 450 million dollars of shares.
Russian Sky technologies has also invested 50 million dollars but seems to have already invested around 500 million dollars before.

As expected, Goldman Sachs is expected to be the bank to take Facebook to wallstreet exchange.

http://dealbook.nytimes.com/2011/01/02/goldman-invests-in-facebook-at-50-billion-valuation/

http://online.wsj.com/article/SB10001424052748703675904576064210094944044.html

I expect another bubble to happen. Maybe 1 of the companies i mentioned in the prediction thread will make it and the others will go belly up or at least the investors will.
I would not be surpirsed if it would go like this :
Step 1, first company is successful to gain trust. Step 2, following companies will fail but with tremendous profit for the investment bank. Step 3, first company has losses and will be sold for peanuts.

 

[William Gaatjes]

Who thinks this will be another form of laddering ?

Jay Ritter, a professor of finance at the University of Florida who specializes in IPOs, says banks like Goldman knew full well that many of the public offerings they were touting would never make a dime. "In the early Eighties, the major underwriters insisted on three years of profitability. Then it was one year, then it was a quarter. By the time of the Internet bubble, they were not even requiring profitability in the foreseeable future."
Goldman has denied that it changed its underwriting standards during the Internet years, but its own statistics belie the claim. Just as it did with the investment trust in the 1920s, Goldman started slow and finished crazy in the Internet years. After it took a little-known company with weak financials called Yahoo! public in 1996, once the tech boom had already begun, Goldman quickly became the IPO king of the Internet era. Of the 24 companies it took public in 1997, a third were losing money at the time of the IPO. In 1999, at the height of the boom, it took 47 companies public, including stillborns like Webvan and eToys, investment offerings that were in many ways the modern equivalents of Blue Ridge and Shenandoah. The following year, it underwrote 18 companies in the first four months, 14 of which were money losers at the time. As a leading underwriter of Internet stocks during the boom, Goldman provided profits far more volatile than those of its competitors: In 1999, the average Goldman IPO leapt 281 percent above its offering price, compared to the Wall Street average of 181 percent.

How did Goldman achieve such extraordinary results? One answer is that they used a practice called "laddering," which is just a fancy way of saying they manipulated the share price of new offerings. Here's how it works: Say you're Goldman Sachs, and Bullshit.com comes to you and asks you to take their company public. You agree on the usual terms: You'll price the stock, determine how many shares should be released and take the Bullshit.com CEO on a "road show" to schmooze investors, all in exchange for a substantial fee (typically six to seven percent of the amount raised). You then promise your best clients the right to buy big chunks of the IPO at the low offering price — let's say Bullshit.com's starting share price is $15 — in exchange for a promise that they will buy more shares later on the open market. That seemingly simple demand gives you inside knowledge of the IPO's future, knowledge that wasn't disclosed to the day trader schmucks who only had the prospectus to go by: You know that certain of your clients who bought X amount of shares at $15 are also going to buy Y more shares at $20 or $25, virtually guaranteeing that the price is going to go to $25 and beyond. In this way, Goldman could artificially jack up the new company's price, which of course was to the bank's benefit — a six percent fee of a $500 million IPO is serious money.

Goldman was repeatedly sued by shareholders for engaging in laddering in a variety of Internet IPOs, including Webvan and NetZero. The deceptive practices also caught the attention of Nicholas Maier, the syndicate manager of Cramer & Co., the hedge fund run at the time by the now-famous chattering television asshole Jim Cramer, himself a Goldman alum. Maier told the SEC that while working for Cramer between 1996 and 1998, he was repeatedly forced to engage in laddering practices during IPO deals with Goldman.

"Goldman, from what I witnessed, they were the worst perpetrator," Maier said. "They totally fueled the bubble. And it's specifically that kind of behavior that has caused the market crash. They built these stocks upon an illegal foundation — manipulated up — and ultimately, it really was the small person who ended up buying in." In 2005, Goldman agreed to pay $40 million for its laddering violations — a puny penalty relative to the enormous profits it made. (Goldman, which has denied wrongdoing in all of the cases it has settled, refused to respond to questions for this story.)

This is from the NY times and Washington post :

Goldman Sachs has reached out to its wealthy private clients, offering them a chance to invest in Facebook, the hot social networking giant that is considering a possible public offering in 2012, according to people familiar with the matter.

On Sunday night, a number of Goldman clients received an email from their Goldman broker, offering them the opportunity to invest in an unnamed “private company that is considering a transaction to raise additional capital.” Another person briefed on the deal said that Goldman clients would have to pony up a minimum of $2 million to invest and would be prohibited from selling their shares until 2013.

A Goldman spokesman declined to comment.

Facebook has raised $500 million from Goldman Sachs and a Russian investor in a transaction that values the company at $50 billion, according to people involved in the transaction. As part of its deal with Facebook, Goldman is expected to raise as much as $1.5 billion from investors for Facebook.

The email sent to Goldman clients warns that recipients who trade in secondary markets where private firms like Facebook trade may want to steer clear of participating because if they opt in they may receive material non-public information on the unnamed company that will restrict future trading.

Inundated with demand, Goldman Sachs Group Inc. plans to stop taking orders for shares of Facebook Inc. on Thursday, and has told some would-be investors to expect just a small fraction of the shares they requested, according to people familiar with the situation.

The interest, amounting to several billion dollars in an equity offering likely to be no more than $1.5 billion, is a sign of investor fascination with the closely held social-networking company despite a dearth of available information about its operations and financial condition. Goldman has provided some potential investors with little more than a snapshot of Facebook's online traffic, advertisements and other basic measurements, with no disclosure of the Palo Alto, Calif., company's bottom line, people familiar with the matter said.

Some additional details about Facebook's performance emerged late Wednesday as part of an offering document. According to people familiar with the document, Facebook had net income of $200 million in 2009 on revenue of $777 million. Figures for 2010 weren't disclosed, but analysts have said the company's revenue last year could be as much as $2 billion, fueled by advertising growth.

A Facebook spokesman declined to comment.

Wealthy Goldman clients have been jockeying for a piece of Facebook since the deal was struck last weekend, a situation reminiscent of the technology bubble of the late 1990s when online-grocery seller Webvan Group Inc. and other upstarts with far shorter track records than Facebook sold stakes to investors.

Goldman initially was expected to solicit investors at least until the end of this week. The Wall Street bank mostly is approaching individual Goldman clients, though an unknown number of hedge funds, private-equity firms and other institutions that make trades or do other business with Goldman also have been asked if they would be interested in buying a piece of Facebook, according to people who have been contacted by Goldman.

 

[Blackjack200]

Who has already felt for it and bought shares ?

Considering you need a $10 million account at GS to invest...

...probably everyone since these boards are loaded with millionares.

 

[bfdd]

Facebook is worth a shitload of money, maybe slightly overvalued, because they have a shitload of users and their information to better advertise to them.

 

[GTaudiophile]

Goldman stinks to high hell.

 

[IceBergSLiM]

Wallstreet stinks to high hell.

Can't wait for wikileaks to expose these crooks even more than we already know.

 

[PottedMeat]

Can't wait for wikileaks to expose these crooks even more than we already know.

i don't remember wikileaks saying they had anything on Goldman, didn't they say they had a Bank of America exec's hard drive & emails?

 

[Darwin333]

Facebook is worth a shitload of money, maybe slightly overvalued, because they have a shitload of users and their information to better advertise to them.

The entire advertising industry in the US was $60B in 2010. How much of that do you reasonably think that FB can takeover?

No way they are worth $50B. I damn sure won't be one of the bagholders.

 

[IceBergSLiM]

i don't remember wikileaks saying they had anything on Goldman, didn't they say they had a Bank of America exec's hard drive & emails?

I'm certain WL hasn't shown their entire hand. We know GS is crooked......Just wait.....

 

[Blackjack200]

The entire advertising industry in the US was $60B in 2010. How much of that do you reasonably think that FB can takeover?

No way they are worth $50B. I damn sure won't be one of the bagholders.

While I agree that FB is overvalued, the size of the American advertising industry is irrelevant when valuating a global company.

I look at revenues of $2 billion and scant profits versus a (implied) valuation of $50 billion and I shake my head.

But I was wrong about Google, so I'm probably wrong about FB too.

 

[kranky]

Facebook had net income of $200 million in 2009 on revenue of $777 million. Figures for 2010 weren't disclosed, but analysts have said the company's revenue last year could be as much as $2 billion, fueled by advertising growth.

OK, let's assume the $2 billion in revenue is right, and let's say they are stunningly profitable and assume a 50% net profit. That would mean they earned $1 billion in profit in 2010.

Is this company really worth 50 times earnings - no matter how rosy their prospects appear to be?

 

[Blackjack200]

It would have to quadruple in size to reach a 10:1 P/E ratio, which is usually itself associated with growth stocks.

But again, Google had stupid P/E ratios too, so who knows.

 

[Dissipate]

I'm sure those investors won't be happy when Facebook goes the way of MySpace. It will all start when a large clique of 'cool' people consider Facebook to be 'uncool', and then bail out to something more 'exclusive' and 'trendy'.

 

[kranky]

I'm sure those investors won't be happy when Facebook goes the way of MySpace. It will all start when a large clique of 'cool' people consider Facebook to be 'uncool', and then bail out to something more 'exclusive' and 'trendy'.

That's really the issue, isn't it? The analogy to MySpace is very fitting. If you look at the spectrum of what could possibly happen in the future to affect Facebook's value, there are a lot more things that could hurt it than help.

 

[Blackjack200]

That's really the issue, isn't it? The analogy to MySpace is very fitting. If you look at the spectrum of what could possibly happen in the future to affect Facebook's value, there are a lot more things that could hurt it than help.

I don't think Myspace was ever really as established as Facebook. But I do agree that the lack of barriers-to-entry in this kind of industry would be pretty scary for an investor betting on huge growth. Amazon has a huge network of distribution plants and logistics, Google has their search algorithm. What does Facebook really have to protect itself?

 

[Throckmorton]

I don't think Myspace was ever really as established as Facebook. But I do agree that the lack of barriers-to-entry in this kind of industry would be pretty scary for an investor betting on huge growth. Amazon has a huge network of distribution plants and logistics, Google has their search algorithm. What does Facebook really have to protect itself?

Facebook has become a utility. I don't call my friends on the phone, I don't email them, and I sure as hell don't write them letters. Communication only happens on Facebook and AIM (no AIM for most new friends)

 

[CupCak3]

But I was wrong about Google, so I'm probably wrong about FB too.

You're not the only one kicking himself

At least google has done a very good job of expanding their services and userbase. While I'm not sure what other things Facebook can offer, one thing going for them is many current users seem to actively use it for longer periods of time thank many other Web products.

 

[Blackjack200]

Facebook has become a utility. I don't call my friends on the phone, I don't email them, and I sure as hell don't write them letters. Communication only happens on Facebook and AIM (no AIM for most new friends)

Right, but my point is, what stops another company from taking Facebook's place as that hub?

 

[Throckmorton]

Right, but my point is, what stops another company from taking Facebook's place as that hub?

Inertia

 

[halik]

The entire advertising industry in the US was $60B in 2010. How much of that do you reasonably think that FB can takeover?

No way they are worth $50B. I damn sure won't be one of the bagholders.

This. You're talking about internet advertising, right? I hear internet advertising was in the 20-35bn range in the US.

 

[Dissipate]

Facebook has become a utility. I don't call my friends on the phone, I don't email them, and I sure as hell don't write them letters. Communication only happens on Facebook and AIM (no AIM for most new friends)

Embedded in your argument is its own refutation. For you the phone, email and letters were phased out, and yet somehow you believe it won't happen to Facebook.

 

[bfdd]

The entire advertising industry in the US was $60B in 2010. How much of that do you reasonably think that FB can takeover?

No way they are worth $50B. I damn sure won't be one of the bagholders.

Oh I agree $50B is way over valued, but the company is worth a shit load. Like I said they handle more data than google daily and they have intimate knowledge of a few hundred million people to advertise too. Probably worth around 20b though.

 

[IHateMyJob2004]

Who has already felt for it and bought shares ?
Facebook is now estimated at a value of 50 billion dollars.

Goldman Sachs seem to have bought for 450 million dollars of shares.
Russian Sky technologies has also invested 50 million dollars but seems to have already invested around 500 million dollars before.

As expected, Goldman Sachs is expected to be the bank to take Facebook to wallstreet exchange.

http://dealbook.nytimes.com/2011/01/02/goldman-invests-in-facebook-at-50-billion-valuation/

http://online.wsj.com/article/SB10001424052748703675904576064210094944044.html

I expect another bubble to happen. Maybe 1 of the companies i mentioned in the prediction thread will make it and the others will go belly up or at least the investors will.
I would not be surpirsed if it would go like this :
Step 1, first company is successful to gain trust. Step 2, following companies will fail but with tremendous profit for the investment bank. Step 3, first company has losses and will be sold for peanuts.

Umm, it's a private company so jsut about no one. It is a comapny with mutliple owners, so you could technical become a shareholder but not through public exchanges.

It's value is simple. Take todays, FCF and multiply by 5. This company is going to be worthless in 5 years.

 

[Imp]

Facebook has become a utility. I don't call my friends on the phone, I don't email them, and I sure as hell don't write them letters. Communication only happens on Facebook and AIM (no AIM for most new friends)

That sounds like a problem in itself. These people abandoned all "accepted" forms of communication (i.e. e-mail, phone calls) and went with the hot new product. What happens when the next hot new product comes by?

You wouldn't think you could do much better than MySpace, but then we got Facebook, now Twitter.

 

[bfdd]

btw does this really comes as a surprise to anyone when Apple has a 300+ billion market cap? Here comes the next "dot com" bubble.