Tuesday, March 25, 2008

Facebook Worth 15 Billion?

For those of you who haven’t heard of Facebook here is an extract from the “about” section of Facebooks website.

About Facebook
Facebook is a social utility that connects people with friends and others who work, study and live around them. People use Facebook to keep up with friends, upload an unlimited number of photos, share links and videos, and learn more about the people they meet.

Anyone can join Facebook
All that's needed to join Facebook is a valid email address. To connect with coworkers or classmates, use your school or work email address to register. Once you register, join a regional network to connect with the people in your area.

Discover the people around you
Facebook is made up of many networks, each based around a company, region, or school. Join the networks that reflect your real-life communities to learn more about the people who work, live, or study around you.”

Microsoft recently invested $240 million for a 1.6% stake in facebook while Hong Kong billionaire Li Ka-shing invested $60 million for a 0.4% stake. Using those figures, would value the company at a whopping $15 billion. I have little doubt that the 4 year old company and its 23 year old founder are brilliant but are they worth $15 billion? Just to put this into perspective here are the market capitalizations of some popular Canadian large caps.

Telus – $7.7 billion
Shoppers Drug Mart – $11 billion
Tim Hortons – $7.4 billion
Loblaws – $7.9 billion
Bombardier – $10 billion

Although there is no denying the popularity or marketing potential of Facebook I would have reservations about investing in an online “social utility” that is valued the same as Tim Hortons and Telus combined. The valuation may be appropriate if its current growth were to continue indefinitely however, personally I think there is a chance that Facebook has the potential to become a “flavour of the month”. Anyone remember geocities? Of course there is a chance that it may stick around however, if I had $15 billion to invest I think I would rather take my chances and buy both Telus and Tim Horton than gamble on Facebook. Which would you rather own?

75 comments:

Four Pillars said...

I use Facebook and I think it's kind of dumb.

I'll take a double-double instead! :)

Mike

Anonymous said...

Why the comments on facebook? It has not IPO'ed nor does the owner intend to IPO anytime soon. Say what you like, but their are raking in hundreds of millions in ad revenues. Would I invest in that long term? no. Would I invest in their IPO? Hell yes! But I would be sure to sell it within a few months unless they announced new revenue streams.

Middle Class Millionaire said...

Anonymous,

I commented on facebook because there is always speculation that it may IPO. I don't have any figures on facebooks revenue and although hundreds of millions is a lot in revenue Telus had revenue in excess of 9 billion last year while tims was around 2 billion.

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