Re:Here comes another bubble...
by marvin on Tuesday May 27, 2008 @11:10AM
(#201037)
The Ford Motor Company vs. Facebook valuation point can be explained by the fact that Ford has a debt/equity ratio of more than 23 (debt to market cap of 11, 170 billion in total debt - http://finance.yahoo.com/q/ks?s=F) and is, like the rest of the US auto industry, in a downward spiral. This isn't a good company to use as comparison, because public perception of its economic muscle is much greater than what the stock market says. In relation to its revenue, Ford is in serious trouble.
Facebook is grossly overvalued by any traditional measure of company value (valuation/revenue in the region of 100), but on the other hand Facebook isn't priced by the open market. The only thing supporting the company's valuation is Microsoft's 250$ million investment, which was probably more politically motivated than motivated by economics. (At a valuation like this one, which other market players would be remotely interested in investing?)
At this point, what happens in Silicon Valley isn't a bubble. Investment is under control. Certain companies are overvalued, but the valuations aren't supported by any form of mass hysteria: if anyone is burned, the effects will be local.
And don't forget that even during the IT bubble at the turn of the millennium, many sound companies were created. There is bound to be a smaller or larger degree of dead weight dragged along by any new breaking of ground in technology. This isn't a new phenomenon by any measure.
Re:Here comes another bubble...
by timr on Tuesday May 27, 2008 @03:17PM
(#201320)
"Certain companies are overvalued, but the valuations aren't supported by any form of mass hysteria: if anyone is burned, the effects will be local."
Where do you think the money is coming from? There may not be an IPO market, but Joe VC is getting his capital from individual investors and organizations that are just as flighty and nervous as they were in 1999.
All it will take is one or two high-profile failures, and it'll be nuclear winter in the valley again. The mechanism may be different, but the results will be the same.
Re:Here comes another bubble...
by hugh on Tuesday May 27, 2008 @07:18PM
(#201540)
Sure, but Joe VC's venture funds usually have a ten-year lifetime, so year-to-year fluctuations in the skittishness of investors shouldn't be that big a problem. Your average VC is still working to invest a big pile of money he raised years ago, while trying to raise money he won't invest for years.
Re:Here comes another bubble...
by nazgulnarsil on Tuesday May 27, 2008 @04:13PM
(#201357)
it's fun to watch the growing pains of a new form of communication. I bet there were similar bubbles at the dawn of television as the modern day super-stations formed.
Facebook is grossly overvalued by any traditional measure of company value (valuation/revenue in the region of 100), but on the other hand Facebook isn't priced by the open market. The only thing supporting the company's valuation is Microsoft's 250$ million investment, which was probably more politically motivated than motivated by economics. (At a valuation like this one, which other market players would be remotely interested in investing?)
At this point, what happens in Silicon Valley isn't a bubble. Investment is under control. Certain companies are overvalued, but the valuations aren't supported by any form of mass hysteria: if anyone is burned, the effects will be local.
And don't forget that even during the IT bubble at the turn of the millennium, many sound companies were created. There is bound to be a smaller or larger degree of dead weight dragged along by any new breaking of ground in technology. This isn't a new phenomenon by any measure.
Where do you think the money is coming from? There may not be an IPO market, but Joe VC is getting his capital from individual investors and organizations that are just as flighty and nervous as they were in 1999.
All it will take is one or two high-profile failures, and it'll be nuclear winter in the valley again. The mechanism may be different, but the results will be the same.
Catchy and creative!
Anyway, still a fun watch.