Facebook’s Value Is Decreasing

    July 1, 2008

If you’ve forgotten, just nine months ago, Microsoft purchased a 1.6% stake in Facebook for $240 million. Doing the math from that, the total value of Facebook last October was $15B.

But apparently this possibly-soon-to-be-recession-(though-technically-still-not,-people!) has really hurt the “social utility.” Rumors are circulating on Silicon Alley Insider and TechCrunch that Facebook’s current value is less than $5B—and as low as $3 or $4 billion.

SAI cites rumors appearing in their comments for weeks that Facebook’s value is plummeting—and, more importantly, a source who was offered a 0.25% stake for $12.5M just two months ago. Once again turning to our trusty, rusty algebra, that gives a more recent total value of $5B.

Even more damning, Mike Arrington says that Bill Dagley, the managing director of a fund of high value investors (you know, VCs), is rumored to be shopping around some discount Facebook shares as well:

We’ve been forwarded one email conversation from a source, where Dagley asks if they’d be interested in “buying shares of Facebook from current holder?” Another person who was approached said the asking price was $3-$4 billion. A third source says the total amount of stock being sold is around $30 million.

The seller was never disclosed, but it’s likely a current or ex-Facebook exec who wasn’t required to sign special agreements with investors during the venture rounds. That likely means they can theoretically sell their stock once it’s vested and paid for.

This news comes just days after a court ruled in the ConnectU settlement that the Microsoft deal valuation was “different than the valuation disclosed in the press release”—ie Facebook was never worth $15B.

While a valuation of $3-5B is a much more reasonable figure than $15B for a network that’s still struggling with monetization, it’s also still a pretty mind-boggling figure. What do you think? Is $5 billion asking too much for Facebook?