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Facebook, whad'ya got?

By ANTHONY HALL, United Press International   |   April 18, 2012 at 9:21 AM   |   Comments

One has to wonder how U.S. Internet giant Facebook will make serious decisions once the company goes public in an overheated initial stock offering.

The Wall Street Journal reported Wednesday that Chief Executive Officer Mark Zuckerberg -- the CEO who looks like he is excited that Little League is starting soon -- first informed Facebook board members he was about to spend $1 billion to buy a start-up with 13 employees on the morning the deal was announced.

How's that for checks -- rather large checks -- and balances -- that is, rather wobbly balances?

The overheated purchase -- buying a company for $1 billion that is less than 2 years old and far from proving its worth as a money-maker -- is symbolic enough for our purposes here. The value of some companies -- General Motors, for example -- involves tangible goods -- chairs you can sit on, buildings, plots of land, very large factories, pension funds, contracts with dealerships. Out back somewhere are large piles of metal that will someday morph into a cars.

If you had to liquidate GM -- just saying -- you would have something to sell. If you had to liquidate Facebook, after sending the employees home, there would be some office furniture and some computers that in a month will be outdated. Internet firms are, by definition, counterfeit. You can't even visit the Internet, really. Facebook, in the general scheme of things, is like food dye or like a sky-writing airplane. You can write your name with it. You can sell advertising.

By definition, again, any investment is a risk. Investing in Facebook is like an investment in a rather large Etch-O-Sketch. Give it a shake and all that's left is the hangover.

Yes, Facebook is the darling of the corporate world, the protege, the business equivalent of a man-child. More power to it, and all that. But how much more ethereal can it get than the purchase of Instagram for $1 billion in a deal that involved two 20-something CEOs meeting at one of their homes and -- one imagines while dueling it out over a really cool, practically epic game of Halo -- agreeing to the deal that would make Instagram founder Kevin Systrom $400 million overnight?

The giveaway is the deal started with a $2 billion price tag, suggested by Systrom. This was negotiated down to $1 billion. But only if Zuckerberg got the top bunk and no giggling after lights out. It sounds like they were trading magic cards.

Turns out -- that's exactly right.

But a $2 billion deal whittled down to $1 billion? Clearly and indisputably, these guys ... were guessing.

Sure, this gets humble pretty quick. Facebook is likely to be valued at $100 billion or so when it does go public. And there will be a few more millionaires strutting around in Palo Alto, Calif. It's going to be great. Everybody wins. It's going to be really epic, man.

In international markets Wednesday, the Nikkei 225 index in Japan added 2.14 percent, while the Shanghai composite index in China rose 1.96 percent. The Hang Seng index in Hong Kong gained 1.06 percent, while the Sensex in India added 0.2 percent.

The S&P/ASX 200 in Australia gained 1.4 percent.

In midday trading in Europe, the FTSE 100 index in Britain fell 0.23 percent, while the DAX 30 in Germany lost 0.86 percent. The CAC 40 in France slid 1.83 percent, while the Stoxx Europe 600 gave up 0.59 percent.

© 2012 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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