Facebook to Buy Time-Warner in a Multibillion Dollar Stock Deal

Not really, but the obvious parallels between the dot-bomb mania of the late 1990s, and this bit of Vampire Squid^* inspired pump and dump, Goldman Sachs is investing money in, and creating a (completely fictitious) market cap for Facebook of around $50 billion.

Karl Denninger says that it's a scam, and that whoever invests in after Goldman will be left holding the bag, while William Cohan at the New York Times runs the numbers:

Despite the high price of its investment, Goldman sees in Facebook a business bonanza, a nearly perfect nugget of investment-banking opportunities. First, Goldman’s cost of capital is close to zero — as a bank holding company, it can borrow from the Federal Reserve at negligible interest rates — so any capital gain it makes on its venture in Facebook will be sheer profit. Second, Goldman has almost certainly locked up the role of lead manager of the inevitable Facebook initial public offering.

Fees for underwriting public offerings are generally about 7 percent of the value of the stock sold. Facebook could easily sell $2 billion of stock or more, generating fees to Goldman and the other underwriters of at least $140 million. The other benefit for Goldman in leading the public offering — aside from major bragging rights — is that it can use its marketing, sales and distribution muscle to make sure the value of Facebook at the time of the offering exceeds the $50 billion valuation at which Goldman invested.

Goldman has also won from Facebook the right to offer an additional $1.5 billion of the company’s stock to its private-wealth clients. According to The Times, Goldman will be creating a “special purpose vehicle” to sell the stock to its wealthy clients and then will charge them a 4 percent initial fee plus 5 percent of any profits. While on paper it seems that these high rollers would be foolish to invest in Facebook at such a lofty valuation, they will still most certainly feel increased loyalty to Goldman for making such an exclusive opportunity available to them. On top of it all, there is the increased likelihood that Goldman will get to manage a good portion of the $12 billion fortune belonging to Mark Zuckerberg, Facebook’s founder, for yet more fees.

Seriously, we bailed out those contemptible f%$#s for this?!?!?

By way of perspective, DC at the by invitation only Stellar Parthenon BBS noted:

• Facebook is worth more than, Starbucks ($25 billion market cap)
• Facebook is worth more than United, American, Delta, JetBlue, and Southwest Airlines combined (About $32 billion combined market cap)
• Facebook is worth about 25 times more than the New York Times Company
• Facebook is bigger than Target's market cap ($43 billion)
• Facebook is worth about twice as much as Dell ($26.5 billion market cap)
• Facebook is worth more than Viacom, which owns MTV and Comedy Central ($28 billion market cap)
• Facebook is worth more than Campbell Soup and General Mills combined ($34.4 billion combined market cap)
• Facebook is worth more than Boeing ($48.7 billion market cap)
• Facebook is worth five times more than Netflix, the stock darling of 2010 ($9.3 billion market cap)
• Facebook is worth more than Nokia, the world's biggest cellphone company ($39.5 billion market cap)

All this for a company that doesn't really sell anything, and has a revenue stream that is rather opaque.

Facebook is still privately held, which implies that they really don't want people to look under the hood until someone really stupid hands them a lot of money.

^*Alas, I cannot claim credit for the bon mot describing Goldman Sachs as a, "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." This was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.