Facebook released their financial results on Thursday. Facebook’s growth figures in their first quarter as a
public company following their IPO would have been impressive for most
companies. Nonetheless,
Facebook stock took a face plant following the earnings
release. Below is a second quarter
summary of their financial results. On Friday, Facebook closed at $23.71. This gives them a market capitalization of $44.5
billion. Click
to enlarge the table. CEO Zuckerberg may stay
under the radar for the next several weeks.
The $95 to $100 billion IPO pundits are taking a low
profile. Probably focusing on their
tweeting.
In May, GreenCrest Capital’s Max Wolf felt that Facebook's
financial numbers suggested
a valuation of $60 billion. This is
37% less than the $96 billion Facebook was
thinking of. His figure as of July 27,
is off by only $15 billion, on the high side.
Also in May, Anup
Srivastava, an assistant professor of accounting information and management,
Kellogg School of Management, ran a valuation model and arrived at a base case valuation of $25 billion. “This is based on the firm’s revenues
reaching approximately $21 billion in ten years’ time from approximately $4
billion today, and the firm maintaining a high return on assets of
approximately 20 percent.” His model, as of July 27, is off by only $19 billion, on the low side. The last link at the bottom of this blog
leads to Srivastava’s original article in “Expertly Wrapped” an online
publication by Kellogg faculty. This also provides a link to his valuation
model. Discounted cash flow analyses can
be a good thing!
As an amusing aside, average the two figures above by these
individuals - $44.8 billion, off by only $0.3 billion ! A sample of
two smartest guys in the room probably doesn’t qualify for wisdom of crowds
status.
Facebook will free up
nearly 1.7 billion shares - four times the number now trading, beginning in August. Provisions currently barring employees from selling their holdings will start. Unfortunately for the employees, if they
execute these immediately, they are taxed as regular income.
Shares of online coupon purveyor Groupon Inc. declined 8.9%
when its lock-up expired on June 1. The
stock dropped nearly 20% that week. Likewise, shares of online gaming company Zynga Inc. fell
7.9% when its lock-up expired on May 29. The stock price ended up falling 9.1% for the week. Look for some sort of dip as Facebook employees start selling some of their stock, and people continue accessing Facebook on their mobiles. No revenue for Facebook when they do this.
Real estate agents in Palo Alto, Atherton, and Menlo Park (where Facebook is
headquartered), are probably looking at Facebook’s stock price a lot more than
mortgage lending rates.
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