I value corporations for a living, so when I heard that Facebook was valued at $50B I scoffed a little. And when I read that Goldman employees passed on the opportunity to own it before they offered it to their clients, I thought for sure it was overvalued. I am here to tell you that their value is pretty much fair market.
Method:
I recently did the valuation for a hotly mentioned failed Google acquisition last year so I already had a multiples model in my recycling bin. The TTM EBITDA multiple for my public comparables is 38.3x. From here I took what unofficial information is available from their recent private placement as well as market medians from my public comparables.
Guideline Depreciation&Amortization = 6.5%
Guideline Tax: 35%
Sales : $2B
Unofficial Net income : 400M
Implied Depr+Amort : 130M
Implied Tax: $215
This gives us a rough EBITDA of 750M and an implied MVIC of nearly $30B. Far from the $50B, but this is based on the median multiple of tech firms I selected. The 75th percentile and max EBITDA multiples ranged from 50x - 80x. These higher multiples obviously come from less mature companies that are probably more in line with what we can expect from Facebook and their expontential income growth. My estimate for Facebook is somewhere between 37B and 47B. Get in!
This analysis is worthless. How many companies in your comp set are bigger than fbook? Let me guess, zero? And how many are significantly smaller, at least 75%?
Agreed.
This is why we do a size adjustment in valuation models such as this. If the top percentiles have an EBITDA multiple of +50x, and you do a downward adjustment to account for size premium is it all of a sudden going to be 25x? Not quite. The difference in CAPM should translate to somewhere in the neighborhood of +-3-9X.
Are you asking me how many $50B expansionary companies there are? I would have to say there are essentially none outside of Google(even thought they are having organic growth issues) and Amazon, but wait! I included both Google and Amazon. Amazon has an MVIC of approx. 50B and their EBITBA multiple is 38x. Interesting...Google is around 20X, but they have a ton of cash and very little organic growth. This is why you are seeing them acquire random companies and scrabble on internal R&D.
The personal attacks at this level of discourse is pretty much unacceptable. There are plenty of jerks in this line of work, but I can tell you now that they get labeled and burn out very quickly. Personality in this business is far greater than the skill you may think you have.
Well I guess that solves it then.
This reminds me of the examples you see of 'weak' answers for interview valuation questions.
Do you own Facebook shares?
hahahha
Definitely a troll/joke.
Why you guys hating on this guy for actually trying to do something productive in regards to the FB thing instead of saying something like: "OMG FB is amaaaaazing! Their platform and growth is why they're worth so much, they'll be bigger than Apple soon!!"
I'm pretty sure literally no one has responded that way on this forum...at all
The value in facebook lies in their ridiculous penetration into certain markets, and the sticky factor in which users who spend time don't just go on for a few seconds to google something, but are there for extended periods of time, often hours, browsing the site. The issue is whether or not they can convert that into real advertising revenue.
Dude, if you are going to get upset about personal attacks then this probably isn't the site for you...
I still completely disagree with your comp set analysis, but now I will move on to the otter shoddy parts of your analysis. You know what the difference of google and amazon is from facebook? They both have/had proven disruptive business models. How does facebook have exponential revenue growth? Can you even tell me what their business model is?
Pretty sure their business model involves poking people.
50B valuation of FB is pie in the sky....GS will make money but that is it, investors getting in post IPO will be burned.
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