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Facebook and valuation

This might be old news for many following Facebook's IPO filing with SEC, but I found it interesting to read about the valuation numbers.

The document says the company valued its class B shares (will explain later what it is) at $ 29.73 per share as on December 31, 2011. The valuation has progressively improved from $ 25.54 as on March end of 2011. An increase of roughly $ 4 in nine months time.

A recent Techcrunch report says Facebook is likely to the valued at $ 40 per share. So the value of share has increased by one-third in the last five months.

If one look closer, its not an apple-to-apple comparison. The shares that will be sold to public is class A common stock, which will carry one vote per share whereas class B common stock will entitle to 10 votes per share. So basically, class B shares are valued much more than class A because it gives more voting rights. Then the increase in valuation Facebook is expecting from the public this time is much more than 33% of its own internal valuation done in December 2011.

The question that needs to be asked is what has changed so much to demand such a high valuation.

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