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Good points, Mathew.
\nThe one thing that I’d add is that with a private company with little float and a high perceived demand for shares there can be a scarcity premium.
\nIs Google worth $165B? Yes, IMO, because there are an abundance of investors in the open market who have invested at that value.
\nIs 1% of Facebook worth $330M? Apparently yes, because there have been enough private investors who have bought shares on the secondary market at that price. But, there’s no evidence that they would be able to sell 25% or 50% of the company at that valuation.
\nWhat are the reasons people have invested in Facebook either directly or in secondary markets? For companies like Microsoft, it could be strategic, where the relationship is worth more than the shares themselves. For Digital Sky it could be legitimacy. For others it may be ego – being able to own shares in the hot company carries some cache.
\nThat doesn’t suggest that Facebook isn’t worth $33B, but I think there is a definite premium being paid due to the scarcity of shares available.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\t