Chillin' out till it needs to be funded
Facebook billionaires may be more than a dozen by the time the valuation rollls off a cliff but the Founder’s 28% of the stock is going to be limited to 56 % of voting rights post IPO in control and the 4th richest man in the world behind Gates, Buffet and Larry Ellison
Facebook valuation is currently close to $100 bln and Zuckerberg’s $28 bln riches will keep him on the index as long as the market can digest the valuation of 20-25 times sales and 100 times 2011 profits. Google currently trades at 20 times earnings having begun its life on the exchange at 121 times earnings making Facebook thinner by a 20% (21%) margin
Also Larry Ellison’s fortune is a wee bit close at $27 bln in September 2010 and given a sdash of good fortune Zuck could well be no. 3 but Gates is far ahead at $56 bln, his worst in 2009 at $40 bln ahead of Warren Buffet then at $37 bln. Warren Buffet was at a comfortable $39 bln in September 2011
Back at Menlo Park, Facebook is unlikely to double its Sales this year, analysts estimating yet a $7 bln mark on revenues led by Sheryl Sandberg’s efforts to shore up the advertising model which counts Netflix and WashPo amongst its larger accounts.
For Facebook’s Daily users of 425 mln as of the S-1 filing, an average of 5 page views could land the user $25 worth of advertising tin the United States and a minimum of $10 worldwide, giving Facebook $3,600 in advertising from each Daily user in the year at the minimum ( such as in far flung India or Hongkong) or $1.8 bln in such advertising alone.
Social Gaming revenues with Zynga’s lion share at $445 mln is a total of $555 bln in the current year which could grow to $1 bln in the most optimistic projections. A conservative valuation would give Facebook a Sales estimate of a little below $ 6 bln and Profits could come at a slightly higher margin of 30% at $1.8 bln. in 2012. In the next 2 years the margins will likely drop off below 25% as IPO proceeds received by Facebook (excl deferred tax on Secondary sales by existing shareholders) are reinvested into data infrastructure. At @013 revenues of $10 bln and 2013 revenues of $12 bln that would be $2.75 bln and $3 bln in profits , capping the lower base of Facebook’s valuation at $50 bln even if the multiple corrects for intractable advertising etc later
Of course if the growth in revenues tapers off, though one will have to at least wait for Q3 before such allegations can be substantiated, the valuation could lo0k like a tail event chop off like in the banking sector