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The Economics of the Madhouse
Comments
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Its not the first time someone has overpaid in an acquisition and it won't be the last.
Remember Time Warner's dreadful acquisition of AOL, Murdoch's of myspace or Microsoft's of Skype (which on fundamental measurements was even more expensive).
My guess is that Whatsapp will do $250M a year in profit and yes $22BN is a lot to pay but just remember, they were paying an overinflated price with an overvalued stock.
The issue I have with tech pricing is that they seem to me to be the biggest example of Schumpeter's 'creative destruction'. So few manage to stay at the top of their game for a decade, let along longer. Something newer and better always comes along. Apple is one of the few that has managed so far.Please stay safe in the sun and learn the A-E of melanoma: A = asymmetry, B = irregular borders, C= different colours, D= diameter, larger than 6mm, E = evolving, is your mole changing? Most moles are not cancerous, any doubts, please check next time you visit your GP.
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Either way it looks like a rotten deal for Facebook. :money:
Worked it out.
Facebook offered $4 billion in cash and $12 billion in stock, with the company’s founders eligible for an additional $3 billion in restricted stock.
That's $19 bn dollars. But the Facebook share price has since gone up by 20 percent, so that's added another $3bn to the stock value bit.
http://dealbook.nytimes.com/2014/10/28/facebooks-21-8-billion-acquisition-lost-138-million-last-year/?_r=00 -
vivatifosi wrote: »... Something newer and better always comes along. Apple is one of the few that has managed so far.
And Apple almost failed.
Back in the mid 90s it was basically bust. And then Jobs came back. And then there were all those ithings and the money rolled in.0 -
....My guess is that Whatsapp will do $250M a year in profit and yes $22BN is a lot to pay but just remember, they were paying an overinflated price with an overvalued stock.
£4 bn of that $22 bn was in cash. $4bn is perhaps a reasonable price for a business that will only do "$250M a year in profit", depending on whether you mean post or pre tax pofits.
But I think Generali was right before. It's "about taking out a competitor". Or at least a potential competitor.0
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