How much is Facebook worth? Instagram deal offers new clue
With Facebook's IPO on the near horizon, potential investors are looking for clues to just how much the social network might be valued at.
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Paul Sloan is editor in chief of CNET News. Before joining CNET, he had been a San Francisco-based correspondent for Fortune magazine, an editor at large for Business 2.0 magazine, and a senior producer for CNN. When his fingers aren't on a keyboard, they're usually on a guitar. Email him here.
Plenty of speculation is going on in Silicon Valley about just how much Facebook's purchase of Instagram will end up being worth.
When Facebook made the purchase last week, it said it was paying $1 billion in cash and stock. What it didn't say was how much was cash and how much is stock.
The New York Times, citing people briefed on the terms, is reporting that the deal is is roughly 30 percent cash and 70 percent stock, which would value Facebook at more than $75 billion.
But that's just a starting point, according to the Times.
During the negotiations with Instagram, the parties framed the deal around a logical assumption: Facebook could soon trade publicly at a much higher market value. As part of the talks, the companies discussed a potential value of about $104 billion for Facebook, the people briefed on the negotiations said. Instagram's co-founder Kevin Systrom first broached the number, one of the people said.
That also would put Facebook's valuation in line with where shares of Facebook were trading on the private markets, such as SecondMarket.