> Facebook spent $20 billion on WhatsApp and Instagram; Microsoft spent $26 billion on LinkedIn and $7.5 billion on GitHub. Deals such as these were possible only because those acquiring companies were themselves so very profitable.
Instagram had $0 revenue when acquired. WhatsApp had some revenue, but was not profitable IIRC.
>I worked for a company that sold for over half a trillion
Que?
There are only a few companies worth that much in the world. The only (well known) company big enough to buy another company for that amount is Saudi Aramco.
> While the acquisition price is public, would love to learn more about revenue or # of customers. They must have had some serious revenue/traction to be bought for $170M.
Not exactly. I was at a startup that was only doing about $15M in annual revenue that got picked up for $350M. A lot of common PE values in tech are well past 25x in public stocks which seems (oddly) "normal" these days.
>I guess anything makes sense to a company that paid $26 billion USD for LinkedIn.
Is there data to support that this was overvalued? Not personally a big fan of LinkedIn, but it seemed like probably a good long-term buy for Microsoft.
> How big are FB video games today? Zynga was purchased for $12.7B when Take-Two's market cap was ~$20B without really impacting Take-Two's market cap meaning that Take-Two purchased a company for $12.7B that the market valued at ~$0 (generously if we assume the following peak of $28B was the acquisition, then the market valued it at ~4B).
I'm not sure that's correct.
If a company worth $10B pays $1B in cash to purchase a gold bar that's worth $1B, it's market cap should not change. That doesn't mean that the gold bar is worthless!
Likewise, if a company worth $10B pays $1B in cash to purchase a company that's worth $1B... It's market cap should not change, either!
The only situation in which the market cap should change is if the purchase unlocks some kind of new synergy between the two companies, that wasn't present when they were separate entities (Or if the shareholders think that the management of the buying company has gone insane.) But that still has zero bearing on the 'market value' of the acquired company.
A few when ago when Microsoft announced it was buying LinkedIn, the shares were trading around $10-$15 less than the announced acquisition price for months. I wouldn't put too much weight into any sort of imputed probability from the price.
This is a tired argument. Everything is a tradeoff. In this case it's a tradeoff between adoption and revenue. Hipstamatic chose the revenue-first approach (they apparently made plenty of money) and Instagram chose the adoption-first approach. Which one is more valuable (and you must include strategic value in this evaluation!) right now? Clearly Instagram.
> Also he's right that now that Instagram was valued at $1 billion, we're already starting to see others like Square immediately looking to raise capital at huge valuations, just because Instagram was valued so high.
I'm very, very skeptical that this is the case. Has anyone involved in the situation made any statement hinting at that?
> Shouldn't companies be valued based on how much potential for making money they have in the future
> In contrast to the Google IPO in which the stock skyrocketed on the first day and really took off after that. Google may have been able to extract quite a bit from their IPO than they did.
Google priced their shares based on an auction, I'd say it was priced right. It was also much smaller because it wasn't a bunch of insiders trying to dump their shares at an inflated value.
Google sold 19.6M shares, 14.1M of them were from corporate. There were 271M shares in total, so only a very small amount of the company was transferred. In contrast for FB, there are 2.14B total shares and the IPO was for 421.2M of them, a much larger percentage of the company. In addition, insiders made up 241M of those shares sold, which is actually the majority of the IPO.
> if the rumored $80 million price tag was correct, that was a precipitous drop in value for a company that raised almost $300 million, per PitchBook, and sported a $1 billion valuation in 2015
> Funny how everyone talks like Mashable lost to Techcrunch. Look up how much TC got acquired for, it's actually less than what Mashable got acquired for.
Mashable raised $46m and sold for ~$50m. It was a fire sale. TechCrunch sold for ~$30m with the founder owning the majority of the stock.
That was 2009 though, was 1B USD small compared to the average corporate acquisitions at the time?
Instagram was also sold for 1B if I recall correctly.
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