Friday, 21 February 2014 15:42

The Man Who Correctly Anticipated Facebook's IPO Value Knows Why Whatsapp Was Purchased Featured

No, Facebook is not stupid for paying $19B for Whatsapp! If they didn’t do it, Google would have!

No, contrary to popular pro-Facebook belief, Whatsapp is not a synergistic buy. Remember, Facebook already has a near identical application (Facebook Messenger) already used by probably hundreds of millions.

So, why did Facebook spend this money (stock)? It’s quite simple and rather obvious, but my competitors in the sell side are remiss in not discussing it... Facebook is DYING as a GROWTH company! My analysis of Facebook's Q1-2013  results read much differently from all of sell side Wall Street's -  The Truth About Facebook That No Media Outlet Or Analyst Has Bothered To Notice:

In my previous warnings of Facebook euphoria, I brought up the topic of growth many times, particularly active user growth. Reference The World's First Phenomenally Forensic Facebook Analysis - This Is What You Need Before You Invest, Pt 1, while remaining cognizant that this was written exactly 1 year ago:

Thus, it is highly unlikely one can legitimately factor in the type of growth needed to justify the current Goldman $50B valuation - particularly when you consider that Facebook's growth is already slowing!

Well, let's see if I had a valid point now that we have clear and convincing historical evidence from which to base our analysis... (click any of these graphics to enlarge to print quality size)c

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At this point, I can't help myself. I MUST point out the literal rippoff that Goldman Sachs pushed as a once in a life time investment a year and a half ago. As excerpted from Facebook Registers The WHOLE WORLD! Or At Least They Would Have To In Order To Justify Goldman's Pricing: Here's What $2 Billion Or So Worth Of Goldman HNW Clients Probably Wish They Read This Time Last Week! while remaining cognizant that this was written exactly 1 year ago...

Just a day or two later I penned Facebook Is Now Relying on Developing Markets For Growth, Is It Working? Let's Delve Into The Numbers...

Facebook is a farce even with the froth taken off of the IPO price. Why? As gleaned fromInternet World Stats...

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These stats are from the 2011-2012 YEAR! Growth has likely slowed more since then! Here's a tidbit for those who don't subscribe that clearly illustrates... When it sounds too good to be true, it's probably not true!

FB IPO Analysis  Valuation Note Page 01FB IPO Analysis Valuation Note Page 01FB IPO Analysis  Valuation Note Page 02FB IPO Analysis Valuation Note Page 02FB IPO Analysis  Valuation Note Page 03FB IPO Analysis Valuation Note Page 03FB IPO Analysis  Valuation Note Page 04FB IPO Analysis Valuation Note Page 04


In More Doubts About "Liking" Facebook, I referenced the following infographic from Finance Degree Center:


As luck would have it, Whatsapp is the fastest growing company (in terms of active users) in the history of technology. Whatsapp also is the messaging market leader in nearly all major developing nations.

So, what Facebook is doing is buying user growth. It’s doing so because…

  • Not only can it not generate said user growth organically anymore, but
  • It is actually losing subscribers

How does Facebook remedy its growth problems? Well, it should be evident at this point, it’s buying the growth! Of course, this begs the question, does a growth company really have to purchase growth? This is a rhetoric question, which leads to this rather painful discovery (posed as a question): If Facebook is no longer a growth company, why doesn’t its valuation reflect that of a rollup instead of a growth company?

If Mr. or Mrs. Market Participant broaches this question, look out belowwwwwwwwww……

Dated Facebook analysis is available to download for all paying subscribers (FB Q4-2012 Analysis & Valuation Note - update with per share valuation). I'm available to discuss this with professional and institutional subscribers via phone or Google+. Click here to subscribe or upgrade.

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