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Fb Business Valuation

In: Business and Management

Submitted By 2balls
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BUSINESS
VALUATION

Dt: March, 10, 2011

FACEBOOK

Facebook Business Valuation Case

Valuation
Based on 5 year cash flow projections Facebook can be valued at 41.51 Billion dollars. Based on the analysis and the most likely scenario of projections the company can be fairly valued at 38.2 Billion Dollars but when superimposed on the dynamic pattern of internet businesses a valuation of 41.5 Billion dollars can be assumed a fair value. The company at present has a very strong impact and potential to grow in the near future but at the same time it faces a lot of risks that can put it out of business any time in the future. For Facebook to sustain it must diversify. In the light of new developments and information release regarding Facebook‘s business model, Goldman Sach‘s valuation of the company at 50 Billion dollars is opportunist.
The reason for this discrepancy could be a conflict of interest as the company gets a priority while going public. This could also be because of the information limitation.

Likelihood
NPV (CF)
NPV (TV)
Facebook
Valuation

Optimistic
Scenario
25%
50.31
10

Pessimistic
Scenario
25%
27.68
2

Given the latest improvements and introduction of Facebook email and deals in April,
2011 and also potential talks of evolving it as a search engine with a one stop availability, the company can be valued up to 100 Billion dollars. Realistic
Scenario
50%
33.02
5

41.51

*Values in Billion $s
The scenarios are created on the basis of previous experiences with other such social networking website.
Optimistic Scenario:
This scenario is based on the last 2 year performance of Facebook and assumes that the company will have the same growth patterns for the next 5 years as well. However, the occurrence of this scenario has a lot of ifs and buts therefore the likelihood of this rated at a…...

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