Today’s post will be a short one, a followup on my rant on May 18th in which I discussed a value comparison of Facebook’s IP vs Ford discussing their Market Cap (total company valuation) based on their real-world earnings. For our regular blog readers or listeners to my weekly show on Webcology on WebmasterRadio.fm you’ll know that I’m flabbergasted and a bit disgusted by the valuations being flung around for internet companies. Don’t get me wrong, I think the Internet is an awesome place but to value a company like Facebook at 21.4 times annual revenue is just … not right. Turns out … investors and I daresay the rest of the world agrees.
So today my good friend Rob Gagnon of Xoomfile asked me via Skype, “So how much per minute is Facebook losing right now?” That of course got my curiosity up and after a titch of quick math (total loss in Market valuation divided by the number of hours since the IPO went live (333 to the time of this writing) I came up with $2,373,373.37 per hour in lost valuation. That’s $39,556.22 every second or over $47 billion since May 18th when the IPO began.
While I can sympathize with the losses investors are taking, if we take a step back and look at how we’re valuing companies … this outsider is pretty confident we’ll continue to see additional drops in Facebook and likely other tech companies with valuations this far outside of any reasonable revenue vs valuation multiplier. Basically, we need toa sk ourselves … what would this company be worth if we didn’t view capital as Monopoly money and instead looked at the numbers as opposed of the hype.
SEO news blog post by Dave Davies, CEO @ 8:41 am on June 1, 2012