Insane in the Membrane:
Facebook’s Purchase of
WhatsApp for $19B
by
Bob Fine
First off, I’m not going to argue against whether the purchase of WhatsApp by Facebook is a good strategic move or not. I have no doubt it will play an important role in the development of their mobile strategy.
But I am going to argue that valuing the company at $19 billion is not only insane and ludicrous, and so far out of whack, that it’s a reckless decision by the board of Facebook, and the shareholders should be outraged.
Is $19 billion a ridiculous number to be paying for WhatsApp?
Let the numbers speak for themselves:
How much revenue does WhatsApp generate?
- WhatsApp generates $1 million/year
Other large Internet economy purchases from the last couple of years:
- Google paid $12.5 billion for Motorola Mobility in 2011
- Facebook paid $1 billion for Instagram in 2012
- Yahoo paid $1.1 billion for Tumblr in 2013
The league of companies that WhatsApp now falls under:
- Netflix has a market cap of $26 billion
- Western Digital has a market cap of $20.4 billion
- The Gap has a market cap of $19 billion
- Hershey has a market cap of $24 billion
Companies that are worth less than WhatsApp purchase price:
- Nintendo has a market cap of $17.4 billion
- Chipotle has a market cap of $17.1 billion
- SanDisk has a market cap of $18.1 billion
- Sony has a market cap of $17.8 billion
- Citrix has a market cap of $11.3 billion
- United/Continental Airlines has a market cap of $16.5 billion
- Starwood Hotels & Resorts has a market cap of $15.1 billion
- TD Ameritrade has a market cap of $18.3 billion
WhatsApp is now worth half of all of Yahoo:
- Yahoo has a market cap of $38.3 billion
The value of WhatsApps puts it in the same league as the top 20 richest Americans. A league that includes Bill Gates, Warren Buffett, Jeff Bezos, George Soros, Michael Bloomberg and Mark Zuckerberg.
You tell me how far out of whack this is? Am I wrong?
