If you’re trying to sell or buy a private company, one of the hardest thing to figure out is valuation.
In the case of FaceBook.com the valuation may depend if your buying or selling.
Back in October 2007 when it sold a 1.6% stake of Facebook.com to Microsoft for 240 million, the deal implied that Facebook’s stock was worth $35.90 per share and valued the company at $15 billion.
However in June 2008, lawyers for Facebook.com, in a suit that accused the company’s founder, Mark Zuckerberg, of stealing the idea for his site, from three former classmates who started another social network called ConnectU, argued that the stock of the company was only $8.88 a share which would give it a market cap of only $3.7 billion.
Moreover, FaceBook.com used the $8.88 share figure as the appraised value, to value employee stock options for tax purposes.
We know that beauty is in the eye of the beholder and it seems so for purposes of determining the value of a privately owned company.
It is extremely difficult to put a value on goodwill of a company – and I’m pretty sure that $240M is not just based on the financials of facebook at the time of purchase.