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Ever since Facebook announced they'd IPO, a lot of articles cite their estimated valuation to be about $100bn. This isn't something that's in their S-1, is it? Just curious where this number came from / who came up with it, as much as this can be narrowed down. I'm guessing there must have been some consensus originating from some group whose opinion mattered.

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Facebook has shares already trading in a private market. The $100 billon valuation is based on the trading price of those shares:

http://www.businessweek.com/news/2012-02-13/facebook-value-tops-100-billion-in-private-market-trading.html

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I'd also like to add that companies usually sell a percentage of the whole company in an IPO (called the float). Usually 5%-10% of the company. So when facebook goes public... the market cap of the public shares should be worth approximately 5-10 billion at a 100 billion valuation – Matt Phillips Apr 13 '12 at 13:30
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Companies which do not have active trading in private markets may also receive venture capital. This is essentially a trade - give money, get stock - and the company will have to agree on a valuation with the venture capitalists. That's why people say that Instagram was "valued at 500 million" just a few weeks before Facebook bought them for 1 billion: they sold an N% stake in the company at a price which implied a $500 million valuation for the whole thing. – fennec Apr 13 '12 at 17:35
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Pre-IPO one way the valuation was estimated was to compare it to other internet companies, and try to make adjustments based on estimated sales, and numbers of users.

A second way was to look at the announced investments and to just use simple math. Investor X invested $Y for Z%.

These two methods were then used to recalculate the estimate on a regular basis. If the value last quarter was X and the number of accounts went up 10% the valuation should go up 10%.

Now that the IPO was announced, the valuation is on more solid ground. They are trying to raise a certain amount of money, by selling a specific number of shares, which represents a portion of the company.

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Facebook will pass one billion users in 2012. One of the methods of valuation derives to an approximate valuation of $100 per user. This Spreadsheet reflects an analysis done a few years back, and adds other factors as well. Keep in mind, the number is not an exact science, and the market will quickly decide on the exact multiplier it will offer.

Edit - For what it's worth, and for the record, Facebook went public at $38, traded as high as $45, but closed at $38.23 and ending the day sporting a market cap of $104.63B. If nothing else, it shows the market agreed with what the underwriters said the company is worth. When an IPO opens "up 100%," this is really not good, in the sense that shares were sold at then than they might have been. Closing the day within 1% of the IPO price means it was priced correctly.

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I'm pretty sure this is not how the valuation was arrived at! Source? – xyz Apr 12 '12 at 10:15

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