As a shareholder of FB, I guess I just find this odd. Love Instagram but honestly, where’s the $1B of value in here? It’s not as if a huge swath of Instagram pictures don’t get distributed on FB already. Anyway transaction is cash and pre-IPO shares; sick windfall for Instagram. Sucks for Shutterfly.
We picked up Facebook on Sharespost in the lead up to the IPO filing at $34 and have seen it appreciate a touch less than 25% in 9 trading days. The implied valuation according to Sharespost is now a staggering $99 billion. Granted FB will have the most star power of any IPO since Google went public in August 2004–but I still can’t get my head around the valuation no matter how much I actually like what FB is doing. Though the story is about much more than the numbers; can’t you picture every teenager who’s ever heard of ‘the stocks market’ pleading their mom to buy a few shares when it goes public–god forbid they lookup Google and see that it more than quadrupled in the year after it got out…
The issue is that at this current valuation several questions on the sustainability of growth arise. Over the next few days we’ll be discussing this in far greater detail. In the meantime I recommend Tristan Louis’ insightful commentary.
In other news, we’re closing our position on Morgan Stanley today at $20.40 a share after picking it up at the end of January at $18.58. We held it longer than Goldman Sachs hoping to gain an extra something from the FB pixie dust that has graced it–truth is however, the massive discount they probably gave FB in order to win the coveted ‘left lead’ on the tombstone means that the actual economic benefits are negligible and the only prize they walk away with is the intangible prospect of preferred status on future tech IPO’s.