Why was Facebook valued at 100 billion?

[Timmay]

Before the IPO, it was valued at 100 billion. Who makes that decision when there was no market to set the price. Their revenue was around 3 billion last year. That would mean Facebook was valued at over 30 times earnings. That seems like a really high price considering their business model. They don't own many assets or sell anything tangible. Another social media site could lure their users away and Facebook could circle the drain very quickly.

[Steve D]

Facebook set the value of their IPO (originally around $35 and today at $38) From there, their filing would have said what percentage of the company was being floated and how many shares were offered. From that point it is a simple arithmetic formula to get to valuation.

For example, make believe Facebook floated 25% of the company, selling 1,000,000 shares at $10 each. That would have valued the shares at $10,000,000 - so 1/4 (25%) of the company was worth $10 million, so the whole company is worth $40 mil (obviously, Facebook sold more than 1 million shares at more than $10).

[picador]

You say that revenue was around 3 bill. That would equate to earnings of 3 bill only if the company had no expenses and paid no taxes whatever. Clearly, that is not the case.

[Bobby Tangeray]

The same reason why ghetto mortgages were graded as "AAA"

Facebook IPO is definitely over hyped - this is their strategy:
http://www.roberttanguay.com/news/facebo...fail-scam/

Yahoo has an active lawsuit against Facebook. Don't let anyone you know buy stocks. Invest in local businesses or start your own.