In light of Facebook’s eventual IPO plans and the valuations being thrown around by analysts, I asked our friend Lorenzo Carver at Liquid Scenarios to run some estimates on how Facebook’s investors might make out if the company IPOs next year.
First of all, Carver notes that the $30 to $40 billion market cap that the Wall Street Journal’s sources estimated is a lot higher than veteran financial analyst Michael Moe's "more reasonable" estimates. In November, Moe's firm, Next Up Research, pegged the company at $5.07 to $6.5 billion. “To justify the higher numbers using standard valuation metrics, Facebook needs to have triple digit revenue growth for each of the next 5 years or achieve some astonishing EBITDA margins,” Carver says.
Assuming a value somewhere between Moe's and the WSJ's estimates, the initial angel investors, Peter Thiel and Reid Hoffman, would stand to make a pretty penny if the company IPOs next year. Assuming they were 50/50 on the initial $500 k angel investment, they could expect $700 million each if the company IPOd at $20 billion, and just under $1.4 billion if it made it to the higher $40 billion value.
Russian firm DST, which only invested in May of last year, would be looking at a 4.5X return at a $20 billion valuation (assuming they were able to buy the $100 million worth of options they sought in the buy-back deal from shareholders). That's not bad for a two-year old investment.
Below are some charts for financial junkies
Source: Liquid Scenarios Search2Model preliminary estimates.