Froth or not: Facebook at $50B valuation

Dave McClure @davemcclure

yo @dhh: still think Goldman has head up its ass on Facebook @ $50B? http://nyti.ms/GoldmanFB50 http://bit.ly/cSY6qV

DHH @dhh

@davemcclure I think GS is savvy in capitalizing on the froth. With the special vehicle, they're more market makers than participants.

Dave McClure @davemcclure

@dhh fair point & agreed GS will make good either way... but even market makers have to choose good markets to make.

DHH @dhh

@davemcclure Market makers simply have to choose markets with action. They win as long as there's activity. Just like bookies. Go froth!

Dave McClure @davemcclure

@dhh i *srsly* doubt GS in for $450M if they don't believe it's worth >$50B -- volatility alone doesn't matter for shit if IPO is "broken".

DHH @dhh

@davemcclure GS was in it for billions in subprime as well because the market was hot. Market makers will hold positions on their books too.

DHH @dhh

@davemcclure Also, the IPO can be a "success" even if the underlying business doesn't support the valuation. The find a bigger sucker game.

Dave McClure @davemcclure

@dhh so just 2 clarify what yr saying -- stock market, IPOs, Goldman Sachs, modern capitalism are all a big scam. correct?

DHH @dhh

@davemcclure Capitalism as in the exchange of goods and services for money is wonderful. I could do without the bubbles, though.

DHH @dhh

@davemcclure Also, selling a profitable company to the the public at a reasonable valuation is wonderful as well. Frothy P/Es, less so.

Dave McClure @davemcclure

@dhh package deal my friend -- take it or leave it, tulips & all. and btw "frothy" is in the eye of the investor.

DHH @dhh

@davemcclure You can't be for capitalism if you question a $50B valuation of Facebook? Or call out bubbles in general?

Dave McClure @davemcclure

@dhh u took it a step further. selective (mis-)interpretation of when market txtn does, or doesn't, represent "real" value. seems finicky.

DHH @dhh

@davemcclure Also, who was frothy and who was not usually becomes pretty clear when the bubble pops. Then it stops being subjective.

DHH @dhh

@davemcclure It's all a sliding scale or 37signals is worth $100B: http://bit.ly/97tBHb -- markets over-values shit all the time.

Dave McClure @davemcclure

@dhh either u agree the market - flawed as it is - offers practical method of valuation, or it doesn't. else yr just pissing in the wind.

Dave McClure @davemcclure

@dhh and, it also undervalues shit all the time, as when FB was marked at $3B <18 months ago. screaming fucking buy, which is now obvious.

DHH @dhh

@davemcclure I believe that the cynicism of "Finding A Bigger Fool" will drive short-term valuations in short-term bubbles.

DHH @dhh

@davemcclure But I also believe that it's as short-sighted as it's short-term. Capitalism stands most proud on a long scale.

Dave McClure @davemcclure

@dhh difference between "bubble" & long-term value is REVENUE my friend. tulips don't have it, Facebook does. wake up & smell the coffee.

Dave McClure @davemcclure

@dhh we don't really need to debate capitalism -- just need to clarify why u think FB valuation is full of shit when making $2-3B a year.

DHH @dhh

@davemcclure The long-term value is in PROFITS and I doubt FB has enough of that today to support a 50B valuation. Let alone staying power.

Dave McClure @davemcclure

@dhh certainly agree stock market (& market makers) can drive crazy shit all the time. but FB isn't hot air anymore - they're minting cash.

Dave McClure @davemcclure

@dhh i understand u may DOUBT they are profitable, but that doesn't mean they aren't, or that market is irrational at 20-25x revenue.

DHH @dhh

@davemcclure Once they're minting profits to support the $50B valuation and they show the staying power to cement that, I'll cheer.