So 50B (or 25 times current sales) is the valuation for Facebook (see Forbes for a sobering comparison to current public companies) What actually makes this even scarier is NOT the current valuation but the expected valuation. My guess is that when you invest in a “hot pre-IPO” stock your expectations for a total return probably range from 2 to 4 times the investment (there is a sexiness to the notion of “doubling your money” that is reserved for the big bet).
So given that the investors are expecting this stock to hit 50-100 times current sales. While it is true that sales will continue to grow its still sobering to see what the expected valuations are (100-200B total market cap). For reference Google as about a 200B market cap right now and at its peak was about 230B.
Secondly this is a very clever vehicle that gets the employees around the typical 6-month post IPO lock-up period. The truth is the vast majority of the money going into this offering is actually just being used to cash out insiders (VCs and employees). As a result they get their IPO (which now means “Internal Private Offering”) and the only ones with the lock-up are the current “market” investors and that lock-up is now 2 years.
The one hopeful note here for those that feel like the wealthy class have been taking advantage of the working class is that the only ones that get taken are the wealthy as not many working class individuals have 2 million to invest right now.
Very clever…
