Facebook’s $70Billion Valuation, realistic?

Facebook ValuationWhen you value a company the size of Facebook its not normally to hard to work out an accurate figure, this is because they are normally on the public stock exchange.

For a company on the stock exchange you know two important details, the current number of shares and the price at which these shares are been sold and purchased for, aka their “trade price”. So as a company is made up of its shares a simple multiplication of the two values gives you the company’s value. It’s not technically that simple but you get the idea…

So here is the problem, Facebook are holding out form going public,  they are therefore not on the public stock exchange, meaning we don’t actually know the daily share price. However they do keep privately selling shares via SecondMarket auctions, so we can do the same calculations again. To save boring you with that, last December their shares were selling for $22.75, which valued them around $50 Billion. However they are now selling for $28.26 (Probably due to the Goldam Sachs Investment) which values them at a cool $70 Billion.

Or does it?

Imagine your trying to sell something and you offer it to 5 of your friends,  now offer the same product but on eBay, will the sale price be the same? No, It’s a completely different audience and the chances of getting the exact or even similar price is very unlikely, basically that’s what’s going on here.

The day them shares are open to everyone, that valuation is likely to rocket up, to what no one really knows. However for me that means the company isn’t really valued at $70Billion if they wouldn’t sell it for that, so it must be more $100Billion? $200Billion? No one knows, until its on the public exchange…

There is also the potential that it could drop, however that’s probably unrealistic.

Technology enthusiastic with many ongoing online projects one of which is this personal blog PingBin. While also working full time within a data center designing and maintaining the network infrastructure.

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