Facebook raises $1.5 Billion at $50 Billion Valuation | Hacker News Reader

Facebook raises $1.5 Billion at $50 Billion Valuation

techcrunch.com

22 pointssiddhant31 comments

From the release - Facebook "expects to start filing public financial reports no later than April 30, 2012."

TC interpretation - "Clearly, it looks like Facebook plans to IPO no later than April 2012."

My understanding (worth sharing, if I'm correct, as I think TC's surety in their statement is misleading) is that Facebook can report publicly for as long as they like without having to go through an IPO and list.

While they're unlikely to do so indefinitely, I don't think their statement means that "Clearly" they'll be doing an IPO in the next 15 months.

they'll probably register the securities/file an S-1 by April but won't actually hold a sale of new shares until Augustish (Google followed the same timetable in 04).

So, Facebook has now raised, like, $2.3 billion in VC? Isn't that some sort of record?

For sure. At least as of about a year ago the record was somewhere around 1.3B total for Clear. So not only did they break the record for total investment, but they also raised more in a single round than anyone else had ever raised in total.

Curious that when breaking all the records they don't even have a explanation for why they're doing it. Perhaps they think the funding environment is going to change for the worse.

Under the transaction’s terms, Facebook had the option to accept between $375 million and $1.5 billion from the Goldman Sachs overseas offering, at the discretion of Facebook. While the offering was oversubscribed, Facebook made a business decision to limit the offering to $1 billion.

One has to wonder if the fact that Goldman excluded U.S. investors from the round had to do with Facebook not raising the full $1.5 billion (which would push the total investment to a whopping $2 billion).

They quoted a statement saying it was "oversubscribed" and that, had Facebook wanted to, they could have chosen to take $1.5b from it... and then analysed that to mean that they were unable to raise $1.5b. What?

Isn't Zuckerberg getting very close to getting his share control to the point where he doesn't retain a ~50% stake along with his staff[1]?

[1]: http://www.businessinsider.com/chart-of-the-day-who-owns-fac...

He doesn't need more than 50% common stock to retain control of the company. Facebook has different classes of stock. Zuckerberg has more than 50% of voting rights based on ownership of certain classes of stock.

FWIW, the Ford family used to have an even more favorable arrangement for their shares of Ford Motor Company. The family preferred shares were the only ones with voting rights; the publicly traded shares got dividends, but didn't have voting rights at all. They revamped this arrangement ten years ago, but the family "class B" shares still have disproportional voting rights. See http://www.time.com/time/magazine/article/0,9171,823982,00.h...

IIRC, isn't this the case with Google as well (with the triumvirate holding 1/3 each of the voting shares)... the public shares aren't voting shares at all.

I am familiar with the stock market, but I am far from a sophisticated investor. One thing I always had trouble understanding is what is value of holding shares in a company like Google? You have no voting power, no dividends, and an event like liquidation or sale of Google is very unlikely and would only happen in the case of a serious problem (which would have caused the share prices to fall drastically). So what is the tangible value of holding a share in Google (other than the fact other people also want to own this item that to me seems to not have any intrinsic value)?

I believe you'll find that filed under "monetization" - stuff that has value solely because other people assign value to it. Same reason a $100 bill is worth more than the rag it's printed on, or an ounce of gold is worth far more than its industrial uses would imply.

That depends on whether you're looking for primarily an income or an equity outcome (and yes, both would be nice, but most businesses are far better at focusing on and delivering one, not the other).

Most traditional blue chips deliver regular, well-sized dividends. Their stock price (and therefore, as an investor, your equity value) will largely move with the markets. You don't buy them for out-performing equity growth or a liquidity event, but rather for the regular profits they share as dividends. FWIW, I think Microsoft has an option to become one of these companies, instead of chasing rapid shareprice growth.

The comparison is buying for equity, where you hope to buy low and sell high. Dividends aren't a priority - and since they often amount to cents per share and you're chasing share price growth measured in multiples, dividends are almost irrelevant to your success measurements.

As you point out with Google, their share price could already be considered high. I don't know what their dividend plans are for the future, but that (plus growth more in line with the market, maybe a little ahead) is a "tangible value" of holding their shares.

jwegan - I know I've probably oversimplified that for you since you have familiarity, but I thought it worth spelling out for other HN readers with less awareness / experience. Hope it didn't seem condescending.

I see. My excuse is that Khan Academy hasn't covered this yet. :)

Is Facebook a billion burning machine?

Yes.

It may not necessarily be a matter of burn rate; they may be trying to do what Groupon did and spread abroad and compete in areas where they aren't the primary social network like Russia (and Brazil?).

You'd think they already have enough money, though ...

Yes.

So how does the average Joe get in on the IPO action?

>How does the average Joe get in on the shorting action

FTFY

I am chomping at the bit to short them so badly.

champing at the bit.

It seems to be a valid alternative: http://en.wiktionary.org/wiki/chomp_at_the_bit

It isn't. Horses champ at their bits when they're anxious to go. Post-rationalizing "chomping at the bit" is simply incorrect.

Prescriptivists acting as if their fetish is important is more amusing when it's not distracting from demonstrably more valuable subject matter.

I wasn't using some of kind of mongoloid newspeak.

Chill out

Unfortunately, the strategy's not a lock even if you're right on the fundamentals; quoth Keynes, "the market can remain irrational longer than you can remain solvent."

Concretely: If a parade of idiots bid up the price for no good reason whatever, the price is still going up, and you're still at risk of a margin call because of it.

(Accounts with short positions are (quoth investopedia[1]) typically required to own securities worth at least as much as the shorted shares, and typically 30-40% than that. If the value of the shorted shares goes up, you can be required to give the broker more cash to meet this margin requirement, or close out the position immediately at a loss. So, if a stock is getting bid up by crazed fools, and you think it's the next Enron, you can still go broke shorting it even if you're right, unless the crazed fools come to their senses before you run out of money to cover the margin requirement.)

[1]: http://www.investopedia.com/ask/answers/05/shortmarginrequir...

That depends entirely on how it's structured. There's other ways to short a stock indirectly that don't involve equity or margin calls.

You're quite right though. (Keynes quote)

No reason you can't work actively against them and publicize their lack of a sustainable revenue model compared to similarly valued companies while you maintain the position.

Nobody said you had to be silent while your money is on the table. I'd happily work against them.

Something tells me you have a good chance of hearing about it before it happens.

I figure there's no room for Facebook to grow with 500 million users - unlike Groupon at 25 million.

Even without growing the number of users they have, they can certainly raise their revenue per user, which is the big question as far as I can tell.

Facebook or Groupon?

Facebook.

Your best bet is to get an actively managed brokerage account with one of the big players and try to convince your broker that they should get you a cut of the action. You'll pay some extra fees, but I don't think anyone smaller than a Goldman or a Morgan Stanley will have much chance at it.

All that said, with the fees and (IMO) over-valuation of the company, I can't really think of any reason average Joe would want to...

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