Facebook Valuation > $100 Billion: The Math Done!

According to Business Insider, on its final Pre-IPO private market transaction on SharesPost, the private capital online marketplace, shares of Facebook traded at a value of $44.10 per share. Using the 2.33 billion fully diluted outstanding share count cited in Facebook’s IPO prospectus, that equates to a value of just under $103 billion.

Given Facebook’s last year earnings of $1 billion, that gives the firm an implied P/E of approximately 103X, which is incredibly high, considering that for Apple and Google, the ratios are respectively, 17X and 22X. Moreover, in absolute terms, Facebook’s valuation is 1/2 that of Google, whereas its revenues are 1/10th that of Google’s (1/3rd of Google’s Free Cash Flow).

The Business Insider’s report could not be independently verified at the time of this piece; however, the latest contracts posts on SharesPost do show that Facebook’s valuation has been hovering around the $100 billion mark, even exceeding at times, in private transactions.

To justify such valuations, Facebook has to grow incredibly big, incredibly fast. Most investors and analysts are counting on Facebook finally monetizing, post-IPO, on its approx. 1 billion global users – something it has not done extensively nor successfully yet.

Meanwhile, according to PrivCo, the private company data accumulator, Facebook is rumored to begin its roadshow in the first week of April, 2012. However, with Facebook Q1 ending on March 31, 2012, it appears unlikely that the roadshow will begin so soon after the close of Q1, since Facebook would need to disclose Q1 results prior to launching the roadshow. Also, the Wall Street Journal reports that Facebook is targeting May, 2012 for its IPO., which seems quite realistic.

Whatever happens, the next few months are going to be eventful (Finance pun intended) and the next few years, tumultuous!

Advertisements

3 Comments

  1. hmm…interesting! With the introduction of ‘subscription’, facebook has already made twitter a bit irrelevant. Now if they can somehow convert their users’ influence into monetary terms, facebook might give a hard time to ‘Klout’ too!

    Reply

  2. ”Most investors and analysts are counting on Facebook finally monetizing, post-IPO, on its approx. 1 billion global users – something it has not done extensively nor successfully yet.”

    -does that mean users have to pay to log into facebook? Is monetizing facebook one of the predominant reasons for such incredible valuation? If that’s the case, I am not sure about such optimism; monetizing facebook will definitely cost them with a loss of millions of users.

    Reply

    1. Nah! I don’t foresee Facebook charging users to login. Monetizing would involve more targeted ads, better click-thru conversions, more marketplace engagements, conversion of “like”s into buying/ engagement actions, etc.

      Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s