Report: Facebook IPO in early 2012, for $100 billion+ | Hacker News Reader

Report: Facebook IPO in early 2012, for $100 billion+

seattletimes.nwsource.com

27 pointskoenigdavidmj21 comments

This is not really a story. The 500-shareholder rule stipulates that companies must start releasing data 90 days after the end of the year on which they pass that threshold. That's why FB did the Goldman deal at the beginning of the year--so they'd have the maximum time possible during which they could operate as a private company while still doing a raise that put them over the maximum.

And the $100bn number is also not much news. There's a liquidity premium for trading on the public markets. The highest LinkedIn trade on the private markets was less than half of their lowest post-IPO valuation. FB can't expect the same premium, but 20% is not a stretch.

Employees have been grumbling about illiquid stock since, well, long before Facbeook existed. That's one of the big reasons companies go public; it was a big reason for Microsoft's IPO, for example.

Basically, you could have written this story on the first working day of the year.

But hey, the fact that it's still true is news.

Not as big news as "Facebook expected to IPO at $300 million" or "Facebook expected to IPO at $30 million" or "Facebook declares bankruptcy" or "Facebook closes down social networking site and will IPO as steel manufacturer", but news nonetheless.

Personally I'm rooting against it purely on the basis that the few facebook employees I've met have been annoying twats and I don't want them to become rich. But I admit there's a bigger picture here.

I know this is flawed logic and doesn't account for a number of variables, but:

The most surprising fact in this article is that, if this is true, Facebook is essentially 1/2 of a Microsoft in terms of valuation. As much has Microsoft has been lagging over the past few years, I just don't think that Facebook is 1/2 of a Microsoft at this point. Maybe 1/5 of a Microsoft.

Based on a sane P/E and assuming strong revenue growth and minimal risk Facebook should sit around 1/15th of a Microsoft. If they can hit 10billion / year in revenue in 3-5 years they might be worth ~1/3 of Microsoft but IMO anyone buying Facebook at 100billion is an idiot or banking on the greater fool theory when there are not all that many fools left.

PS: IMO, the odds Facebook will be worth 400 billion in 5 years is much worse than the chances it will be worth less than 25 billion in 5 years. Buying a sock with no dividends in sight, a strong chance of losing 75+% of it's value and little real room for growth is a poor long term prospect. In the short term day traders may be irrational but the market is a fickle beast and can turn on a company vary quickly.

Interesting juxtaposition with this:

http://www.insidefacebook.com/2011/06/12/facebook-sees-big-t...

If Facebook's profits touch $1Billion this year (as is expected), the valuation of $100 billion puts it at a P/E of 100. Thats high, but not too high for a growth company (Amazon has a similar number). In fact, the forward looking P/E (assuming Facebook might make $2 billion next year) is a (relatively) low 50. Google has a P/E of about 15. One of the reasons that the P/E is so low is the belief that Google has grown a lot, and wont grow much more.

To be honest, this is somewhat of a disappointment. The companies that solve 'hard', core-tech problems like Google and Microsoft are falling behind. Sad. Sad.

Sad, or a good buying opportunity? I bought some GOOG the other day because, damn, P/E of 15? I'll take that!

GOOG can't expand its userbase much more (since it's already, to first approximation, everyone on the planet), but it can certainly find new ways to give 'em stuff they're willing to pay for.

They haven't been good at that, historically.

Partly, they are cursed by success: a new business would have to be stunningly lucrative to be more than a rounding error of their current business, it is so incredibly successful. According to the Innovator's Dilemma, they would have to spin out an autonomous unit that could get excited about small wins and shape itself to them.

But google doesn't do that - they have all these fun little 'entrepreneurial' projects, but none of them mean anything to google organizationally, because they don't, and virtually can't, impact the bottom line. They're just PR.

That also fits well with larry page's thinking. he likes big projects. he likes that even before google, so he probably likes that even more now.

Google reminds me of how a jet plane takes off and reaches cruising altitude. What ground breaking significant product releases has Google brought to market in the past 2 years? That might explain a P/E of 15.

Google is being properly judged by the investment community now that the IPO has passed and the "hype" has faded away.

> What ground breaking significant product releases has Google brought to market in the past 2 years?

Off the top of my head (although it's not technically a single product release) taking mobile OS market share from low single digits to just shy of 40% in under two years strikes me as a pretty significant accomplishment by any reasonable standard.

The two year time frame is kind of harsh. Things need time to grow. See: Chrome, Android. Both were released 2.5 - 3 years ago, but have only really started hitting their stride in the past year. Give Wallet, Music, Chromebooks, etc. time to grow.

Are there any sources out there for net income results for Facebook? Even estimated?

There are rumors that Facebook is pulling in between 1.5b to 2.0b dollars a year in revenue. EBITDA values would be crucial here in determining how good of an investment Facebook would be.

It will be very interesting, because Groupon is about to approach the open market with some very dubious, if not scary EBITDA numbers.

Until congress passes some sensible data farming legislation, that is.

The beginning of the end...

A billion dollars isn't cool. You know what's cool...?

I don't think Facebook is worth more than $20 billion, at most. Where's the revenue to back that kind of number up?

Last I heard they were pulling in $2 billion a year, so $20 billion would definitely be on the low side.

$100 billion is still high imho (though I've been wrong before, and previously thought they were crazy for turning down one billion), unless they come up with a better way to monetize their huge userbase in the next six months.

What's revenue have to do with anything? P/Es are based on earnings, not revenues.

FB's operating margins are extremely high. The usual number I hear is 40%+, with each marginal dollar of revenue contributing about $.60 in operating profit.

I thought that was profit.

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