Mark Hulbert Gets Medieval on Facebook’s Valuation
- Joshua M Brown
- May 26th, 2012
In case you missed it, this week Mark Hulbert added insult to injury when he came out and was like “Who cares about the post-mortem of what happened with the Facebook IPO, let’s focus on what it’s actually worth now.”
And the number he comes up with is $13, LOLOLOLOL.
But he’s using IPO math, not the “cash flow assumption” bullshit you’ll find in a sell-side buy rec…
Courtesy of a just-released study, calculating a fair price for Facebook’s stock isn’t as difficult as it might otherwise seem.
The study is entitled “Post-IPO Employment and Revenue Growth for U.S. IPOs, June 1996–2010.” Its authors are Jay Ritter, a finance professor at the University of Florida, and two researchers at the University of California, Davis: Martin Kenney, a professor in the Department of Human and Community Development, and Donald Patton, a research associate in that same department.
The researchers found that the revenue of the average company going public in the period analyzed in the study grew by 212% over the five years after its IPO (excluding spinoffs and buyouts). Assuming Facebook’s revenue grows just as fast, and given that the company’s latest-year revenue was $3.71 billion, its annual revenue in five years’ time will be $11.58 billion.
Get over there for the whole delineation…
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.