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The Value of Facebook

Aymar Jean Christian August 15, 2008 uncategorized No Comments on The Value of Facebook

It seems this is really an internal problem, but could this mean that Facebook has been overvalued all along? Is this drag down from the overall economy or a Facebook-specific situation? Is the site losing growth-potential? These are all important questions, because it seems Facebook has two choices: a Google-like behemoth that dominates social-networking, swallowing up competitors and innovating fast enough to keep users from migrating OR a regular, pretty good social networking site that has a loyal base but whose aspirations do not lie outside its modest URL. I think Facebook wants the former, but can it get there? Is its business versatile enough?

I’m very unsure about it.

Has Facebook’s Value Taken a Hit?

Insiders are selling stock in the company—and getting a fraction of the price it appeared to command last year

http://images.businessweek.com/story/08/600/0807_mz_facebook.jpgFacebook founder Mark Zuckerberg. Noah Berger/The New York Times/Redux

Insiders at Facebook are selling stock in the social-networking giant, and the prices they’re getting for their shares suggest the sky-high valuation backers once placed on the company may prove unrealistic.

Just a few months ago, Facebook was widely viewed as the next Google (GOOG) in Silicon Valley. Microsoft (MSFT) bought a small preferred equity stake last October that the two companies said implied a valuation of $15 billion for all of Facebook. Shareholders in the still-private company appeared to be setting themselves up for a blockbuster initial public offering.

The prices for Facebook shares in these transactions reflect a total valuation far lower than $15 billion. Albukerk, the founder and managing director of EB Exchange Funds, says that two current directors and one former executive recently contacted him about selling some of their stock for prices implying a $5 billion valuation. He also says that two investment firms have bought large chunks of Facebook stock at a valuation of about $3.75 billion. Hans Swildens, founder of Industry Ventures, a San Francisco firm that buys stock in private companies, says his firm has been talking with a growing number of Facebook employees. “There’s a lot of interest among people to sell shares,” says Swildens.

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About The Author

Aymar Jean Christian is assistant professor of communication at Northwestern University. He writes about media and society for a number of publications. For more information, click the "About" tab at the top of the page.

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