PE Hub: Facebook’s Valuation Problem

May 9, 2008

Dan Primack of Thomson Reuters’ PE Hub takes a look at the implications of the $240 million that Microsoft invested in Facebook last year:

The WSJ recently reported that Microsoft is sniffing around Facebook, less than seven months after investing $240 million in the social network at a $15 billion valuation. It was largely discounted as the hopeful fumblings of Steve Ballmer, in his search for a rebound acquisition after being dumped by Yahoo. But it got me to thinking: Microsoft’s initial investment may be one of the worst venture capital deals of all time.

Click here to read the full article.

On a related note, check out this uncomfortably literal depiction of Facebook from BBC’s “The Wall.”

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At the time that Microsoft Corp purchased a small share of Facebook, the criticism was relatively muted, and it’s only belatedly that the deal’s critics have become more vociferous in denouncing what they perceive to be its many downsides, including its overall lack of prudence on the part of Microsoft. “Microsoft’s October purchase of a 1.6 percent Facebook stake implicitly valued the social-networking Web site at $15 billion. Even at the time, some people questioned such an eye-popping valuation. But as the months have passed, the number is looking even more bubbly,” The New York Times reported in an online article on Friday. This raises the question as to whether the company’s Board of Directors are protecting the interests of the company’s shareholders.


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