Comments on: Facebook’s horrible, stroke-of-genius IPO http://blogs.reuters.com/felix-salmon/2014/02/20/facebooks-horrible-stroke-of-genius-ipo/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Laraine Overlock http://blogs.reuters.com/felix-salmon/2014/02/20/facebooks-horrible-stroke-of-genius-ipo/comment-page-1/#comment-54433 Thu, 09 Oct 2014 16:40:48 +0000 https://blogs.reuters.com/felix-salmon/?p=23141#comment-54433 Casana I was suggested this blog by my cousin. I’m not sure whether this post is written by him as no one else know such detailed about my problem. You are amazing! Thanks! your article about image1

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By: TFF17 http://blogs.reuters.com/felix-salmon/2014/02/20/facebooks-horrible-stroke-of-genius-ipo/comment-page-1/#comment-49340 Wed, 26 Feb 2014 14:18:31 +0000 https://blogs.reuters.com/felix-salmon/?p=23141#comment-49340 @ckm5, it sounds like you are assigning a value of $0 to the stock portion of the deal. If that is realistic, then Facebook is grossly overvalued.

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By: ckm5 http://blogs.reuters.com/felix-salmon/2014/02/20/facebooks-horrible-stroke-of-genius-ipo/comment-page-1/#comment-49299 Sun, 23 Feb 2014 06:41:32 +0000 https://blogs.reuters.com/felix-salmon/?p=23141#comment-49299 @y2kurtus like many others just do not understand WhatsApp’s business model. It’s not free, it’s only free for the first year, enough to get you addicted.

After that, it’s $1/year, low enough that pretty much all their users pay for it. That’s right, a company with 55 people makes >$400m/year…. There is no need to ‘monetize’ WhatsApp, it’s doing that just fine on it’s own. Quite frankly is a genius business model.

If you look at highly valued tech company P/E ratios, then look at WhatsApps current revenues, then the price is not that out of line.

So, for effectively $4b in cash outlay + some stock, you buy a company at 20-25x earnings which is growing like mad, is cash-flow positive, has a strong & viable revenue model and has a hugely desirable user base.

Seems like a very, very smart deal to me. I think that the stupid people are the ones who do not see just how smart this deal actually is….

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By: TFF http://blogs.reuters.com/felix-salmon/2014/02/20/facebooks-horrible-stroke-of-genius-ipo/comment-page-1/#comment-49298 Sun, 23 Feb 2014 04:17:16 +0000 https://blogs.reuters.com/felix-salmon/?p=23141#comment-49298 What Harpstein said… We have plenty of evidence proving that apps can grow rapidly, much faster than the total usage expands. Most of the growth at this point cannibalizes other apps.

In such an environment, a mature app has to be viewed as a depreciating asset. Something new will come down the pike in a few years, pushing those that came before it to the side.

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By: rvm3 http://blogs.reuters.com/felix-salmon/2014/02/20/facebooks-horrible-stroke-of-genius-ipo/comment-page-1/#comment-49292 Sat, 22 Feb 2014 16:21:26 +0000 https://blogs.reuters.com/felix-salmon/?p=23141#comment-49292 When you say it doesn’t matter how much they pay or how many shares are outstanding, you’re saying it’s a bubble. So don’t pretend to care about anything else.

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By: Harpstein http://blogs.reuters.com/felix-salmon/2014/02/20/facebooks-horrible-stroke-of-genius-ipo/comment-page-1/#comment-49283 Fri, 21 Feb 2014 21:46:39 +0000 https://blogs.reuters.com/felix-salmon/?p=23141#comment-49283 Isn’t there a corollary to your mobile story? If apps can take off for no known reason, then couldn’t they also be abandoned when interest shifts to a new app for no known reason?

It seems like Facebook is buying what they can’t build themselves. Not a horrible strategy, but also not particularly “genius” as you seem to believe.

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By: AngryInCali http://blogs.reuters.com/felix-salmon/2014/02/20/facebooks-horrible-stroke-of-genius-ipo/comment-page-1/#comment-49280 Fri, 21 Feb 2014 17:02:20 +0000 https://blogs.reuters.com/felix-salmon/?p=23141#comment-49280 These acquisitions also have to be viewed as defensive moves. Any network effect-based app doing really well is a real threat to FB, so it’s worth any amount of money to keep them from becoming the new, cool social network (especially when Google has already tried to buy them).

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By: DavidMerkel http://blogs.reuters.com/felix-salmon/2014/02/20/facebooks-horrible-stroke-of-genius-ipo/comment-page-1/#comment-49278 Fri, 21 Feb 2014 12:47:15 +0000 https://blogs.reuters.com/felix-salmon/?p=23141#comment-49278 I think you’re right, Felix. $4B in cash & ~$15B in overvalued $FB stock gets them better connected in mobile. Now Zuckerberg has to make sure that however they integrate or monetize WhatsApp, it doesn’t destroy the underlying value of either part of the business, and drive users away.

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By: y2kurtus http://blogs.reuters.com/felix-salmon/2014/02/20/facebooks-horrible-stroke-of-genius-ipo/comment-page-1/#comment-49275 Fri, 21 Feb 2014 03:41:59 +0000 https://blogs.reuters.com/felix-salmon/?p=23141#comment-49275 Sure Felix… selling ownership in an asset without giving up any control of that asset generally is a good idea. Literally having your cake and eating it too.

I will now demonstrate the lunacy of paying 19 billion for a free app service. Facebook could have done it’s own version of Snapchat AND PAID A BILLION PEOPLE $5 TO USE IT. A fool and his money are easily parted… so too a genius and his infinite supply of non-voting stock! Zuck should sell 10 billion more shares and buy AAPL… Tim Cook could then keep on running it and tell Carl to go pound sand! It’s 1999 all over again baby!

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By: absinthe http://blogs.reuters.com/felix-salmon/2014/02/20/facebooks-horrible-stroke-of-genius-ipo/comment-page-1/#comment-49271 Thu, 20 Feb 2014 17:12:42 +0000 https://blogs.reuters.com/felix-salmon/?p=23141#comment-49271 Firstly, Flappy Bird’s entire existence has been less than one year. And it was developed in two to three days, not one. Let’s get our flappy facts right.

Secondly, “Issuing Facebook stock … costs Zuckerberg effectively nothing: the share price is basically flat today, while it would surely have fallen much further had, say, Microsoft bought WhatsApp instead.” This is really confused. Specifically, you’re confusing finance with product strategy. Facebook could have in principle decomposed this move into an all-cash deal, followed by an unrelated dilutive share issuance into the markets.

Their stock is pretty liquid at this time and scale, but WhatsApp still would have slightly preferred that deal, hence Facebook was the one that wanted to use stock. All that’s going on here with the stock component is that it’s a backdoor capital raise, since doing it as above would have drawn attention/ire. (It might have been annoying to execute as well, and now they’ve shifted that burden onto the WhatsApp owners.) This has zero to do with this specific deal and more to do with Facebook’s general desired financial posture.

Also, you should know better than to read tea leaves in that stock move – some of it’s from the product strategy implications, some of it’s from the effect of the dilution, and there’s no connection between that dilution and some weird counterfactual where Microsoft bought WhatsApp instead.

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