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."
|WiFi -- Why Are We All Still Paying for This?|
|'Is It Old?' Check Before You Share How Dead or Mad Fresh Your Link Is|
|What the World Wide Web Is|
|The Internet Makes Stupid People Stupider and Smart People Smarter|
|Convert Images Into Images Made of Random Letters|
|Google's Self-Driving Cars Giving Rides to the Public|
|"Academics who study basic income said the pilot gives a chance to see how the idea plays in a changed economy."|
|"It’s appealing to imagine a world where artificial wombs grow babies."|
|"You look in the mirror and see your body and your face and you think that’s you—but that’s really just the machine you’re riding in."|
|"This created a bubble, and like housing, that bubble has now burst."|
|Where AI is Currently At|
|"John Deere is the largest operator of autonomous vehicles."|
|"A spacecraft may be possible that could maintain a steady acceleration into and through interstellar space without the need to carry along propellants."|
|Religious Loophole to Turn Lights On and Off During Shabbat|
|"Super-detailed scans of actual human brains that run as models on computers"|
|The End of Doodling|