News item: "Facebook now 'worth $33 billion'."
Counterpoint: Facebook is not worth $33,000,000,000. Excerpts:
If you boil it down to what valuations really should be about, discounted future cash flow, it gets completely bizarro-world funny. The rumor is that Facebook will be generating a billion dollars in revenue. That’s certainly real money, right?
Wrong. Real money is what’s left over after you pay your expenses. If the supposed billion dollars Facebook is allegedly pulling in this year was happening at anywhere a decent margin, they wouldn’t have needed a series E round of $120 million from Elevation Partners just three months ago.
But let’s be charitable. Let’s imagine that Facebook miraculously made $200 million this year — a 20% margin. (I don’t think that’s true, otherwise why take another $120 million from Elevation Partners, but hey, let your imagination roam). That would put Facebook’s P/E at some 165.
That’s about 7.5 times as much as Google, the golden cash cow of the internet world. Would you seriously think that Facebook is 7.5 times as good or as promising a business as Google? Get outta here.
Read the whole thing. What was that about suckers being born every minute? It's no secret that I have a low opinion of Facebook but my opinion of those who would squander their money on Facebook STOCK is lower still.
Like everyone else in the known universe I DO have regrets about missing out on a couple of IPOs, though. If I'd have rolled the complete contents of my IRA into MSFT back in the day, or even what was left of it when GOOG went public, I'd be smoking a Cuban cigar while writing this from my condo in Miami Beach... instead of writing from a trailer park in New Mexico. Coulda-shoulda-woulda, and all that. I won't be putting any money into Facebook, however.