Saturday, November 10, 2007

The Psychology of the Absurd Valuation

A few weeks ago, Microsoft made a $240 million investment in Facebook for a 1.6% stake.  That puts Facebook’s valuation at $15 billion versus sales of approximately $150 million. That’s a breathtaking 100-times revenues valuation.  By conventional logic, that’s a nearly impossible valuation to justify. But that pre-supposes that valuation is inherently a logical process. […]

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