Zuckerberg Spills the Beans
The desire of some hedge funds and private companies to keep their financial position under wraps can border on obsession. Granted, competitive issues come into play, as well as regulatory issues. But often the intent is to cloak the operation in mystery, which serves as a marketing ploy and PR stunt, and keeps the rumor mill spinning.
Thankfully not everyone works this way; hedge fund manager Peter Thiel’s comments are widely circulated, which we appreciate, and hope to see more of in the years ahead. Smart people can share their views without tipping their hand and dulling their edge.
Mark Zuckerberg must feel the same way; the founder of Facebook is revealing financial information that has been widely speculated over, but never confirmed. Kara Swisher has all the details:
Want to know about how privately held Facebook is doing from a financial point of view? Well, just ask Mark Zuckerberg!
This afternoon, at an all-hands meeting held in a Palo Alto, Calif., theater near the social-networking site’s headquarters, the 23-year-old founder was quite voluble on that topic, outlining numbers that a more experienced CEO might think twice about unveiling to a large audience.
With an open dial-in number! Many employees, in fact, were horrified that Zuckerberg would be so blabby about such important financial information. Others loved it. BoomTown
2007 Revenue: $150 million
2008 Revenue: $300-$350 million estimated
Projected 2008 CapEx: $200 milllion
Estimated 2008 EBITDA: $50 million
Microsoft’s recent investment was at a valuation of nearly 50x estimated 2008 revenue, a number that is purely the province of fast growing private companies that address large end markets. Facebook was able to get it, but we bet they would agree that it was an aggressive number. Perhaps it will be better justified in a year; playing around with 30x a 2009 revenue estimate of $500 million might get you there. Other metrics could come into play as well if they are able to begin to generate meaningful cash flow and begin to coalesce into a professional organization, which can be accomplished without having to hire a guy like Eric Schmidt or Terry Semel.
It is a promising model, with fat margins and little need to finance working capital or inventory. And as long as Mr. Zuckerberg is willing to eventually come to grips with slowing growth and multiple compression, he should be a happy camper for years to come.
Which he appears to be, based on his facetime with 60 Minutes Lesley Stahl. Check it out if you missed it.
Chatty Zuckerberg Tells All About Facebook Finances
BoomTown
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
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