Whether you’re negotiating a divorce settlement or your company is for sale, the value of your company is critically important. And while there are times that you’re happy with a relatively low value, there are certainly situations when you might ask, “but what about Facebook?”
Facebook is the world’s largest social network, with more than 900 million users. In a highly anticipated and followed Initial Public Offering (IPO) in 2012, Facebook’s implied company valuation approximated $100 billion, making it one of the largest in the history of technology stocks.
But for an industry that prides itself on fundamentals, what did Wall Street anticipate when Facebook opened up at $38 per share? The $38 per share price implied that Facebook was worth 89 times its historical earnings and 76 times its projected earnings, according to Barron’s online. Contrasted with established companies such as Google (14 times projected earnings), Apple (11 times projected earnings) and the NASDAQ and S&P 500 (11 – 15 times earnings), was Facebook valued properly or was it simply a case of irrational exuberance? (more…)