Facebook value down 33% since October 07
by MaxPower
A Russian investment firm, Digital Sky Technologies, has invested $200 million in the social networking company Facebook in return for a 1.96 percent stake, the two companies said Tuesday.The investment values Facebook™s preferred stock at $10 billion, a $5 billion drop from October 2007 when Microsoft paid $240 million for a 1.6 percent stake.
That being said, that is still $200 million for 1.96% of something which won't exist in 10 years.
Interestingly Facebook claims to have had 307 million visitors worldwide in April, almost triple the number a year ago. So the number of visitors triple in a year, but the valuation goes down 33% since late 07, which means the value per visitor declined by about 80%.
The reason behind that drop is likely two-fold - first the vistors which Facebook is incrementally picking up (international mainly) aren't valuable to online advertisers, and there is still an overarching concern that Facebook will never make any money... ever, no matter how many new visitors there are.
Indeed the NYT reported:
Facebook™s revenue is growing 70 percent year-over-year and the company will be cash-flow positive in 2010, even without the additional capital, Mr. Zuckerberg said
Which also is interesting - revenue is up 70% in a year while the number of visitors is up 300%, which implies as above, revenue/visitor is dropping. And the idea that Facebook will be cash flow positive? Let me just say this, I would never start a business, let alone invest in a business which isn't cash flow positive from the start (or close to it, Facebook is now 5 years old). That means that the revenue isn't even covering the operating costs, let alone making a profit for shareholders. If Facebook isn't cash flow positive until 2010, it likely won't be making a decent profit for years afterwards.
And finally, one more sentence in the NYT article makes me take notice:
Digital Sky Technologies also plans to buy at least $100 million of Facebook stock from current and former employees, the companies said.
That is a bad sign. Why would employees want to sell out of Facebook stock? Because they don't see the potential for value appreciation there (or they really need the cash, or both), but bottom line when you see employees selling stock into a purchase it is never a good sign for the future of the company.