Michael Hiltzik of The Washington Post looks at Facebook's purchase of WhatsApp and says that "if you didn't think Facebook was overvalued before--and there were plenty of investors who had convinced themselves it wasn't--it's hard to avoid that conclusion now."
You can make the argument that Facebook's potential is so great that its stratospheric multiple is justified, but let's hear the argument. And while you make it, adjust for the factor that one rationale for its hunger to acquire WhatsApp is that it's afraid its user base is migrating away from its home-grown Facebook functionality and toward things like WhatsApp.
What's unnerving about deals like this is that they're reminiscent of the dotcom era of the late 1990s, when overvalued shares were thrown around in the merger and acquisition space with inebriated abandon. The big numbers attached to these all-stock or mostly stock deals began to be interpreted as their own justification. ("If X is paying $Y for Z, it must make sense. Those X guys must be some kinda smart.")
Some of those deals worked out, and some were spectacular busts; but the price paid had nothing to do with how they turned out because the stated valuations already were divorced from reality. Gigaom has a partial look at the past here. In a suitably skeptical take, the incomparable Barry Ritholtz observes: "Social networking is forever. Facebook and Twitter may not be."
|Quit Facebook Day is May 31|
|Twitter hacked by 'Iranian Cyber Army'|
|why don't girls fart|
|Drop-kicker: Providing a Healthy Dose of Pessimism on Kickstarter Projects|
|“This conversation about how technology is hijacking people is really catching on.”|
|Japanese Create Ice Cream That Does Not Melt|
|Making a Movie Inside a Video Game|
|“Banning polluting cars in 2040 or 2050 doesn’t actually look like a very bold move.”|
|“Human and animal cells can be 3D printed into high-resolution tissue.”|
|“Our Internet handlers, not government, are using operant conditioning to modify our behaviour today.”|
|“During this phase of decline, the US was likely to go through a phase of reactionary 'fascism'.”|
|Google Map Shows You the Most Photographed Areas of the World|
|“That science fiction future where robots can do what people and animals do may be closer than you think.”|
|“Nobody is forcing the participants to stay, of course, but if they leave, they won’t be paid.”|
|“The shift from fuel and pistons to batteries and electric motors is unlikely to take that long.”|
|“We’re going to start to see chip implants get the same realm of acceptance as piercings and tattoos.”|