Valuation By Hindsight: MySpace Founder Says Company Was Sold Via Fraud

from the he's-baack dept

Now that billion-dollar price tags are being bandied about for sites like YouTube and Facebook, a lot of people would say that News Corp. got a pretty good price on MySpace when it acquired the social networking site last year for $580 million. Just its deal with Google makes up for much of the site’s difficulties in monetizing its base. From the very beginning, one of Intermix’s (the parent company of MySpace) founders, Brad Greenspan, insisted that MySpace sold out for too little, and that the deal defrauded shareholders. Greenspan has been quiet for some time, but he’s now back with the release of a lengthy report that purports to detail the alleged fraud, arguing the company should have been valued at $20 billion at the time. And he’s hoping that when everyone sees his side of the story, MySpace will be unwound from News Corp., and once again be an independent company. Notwithstanding the implausibility of undoing a merger, there are some major problems with his argument right off the bat. For one thing, Intermix was a public company, and at the time the market was valuing the company below what News Corp paid. You don’t find many instances when the market misjudges the present value of the company by such a staggering factor ($580 million vs. $20 billion). Even if the public markets got it way wrong, his argument presupposes that insiders knew the real value was closer to $20 billion. This argument might sound alright in retrospect — particularly since Wall St. analysts have come close to corroborating this number — but as they say, hindsight is 20/20. The heads of the company saw what had recently happened to Friendster, how quickly it fell from graces, and knew the same thing could quickly happen to them. Just because it hasn’t (yet) seen the same fate doesn’t make them criminals or even idiots for selling the company. Greenspan’s argument is further undermined by the fact that serious analysts, looking into the question of how to value social networking sites, say it’s a virtually impossible task at this point. Too little is known about how sites like this fare over the long term for anyone to attach much confidence to a number. The fact that Greenspan is so sure on the valuation, only makes his argument seem less serious.

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Comments on “Valuation By Hindsight: MySpace Founder Says Company Was Sold Via Fraud”

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thinlizzy151 (user link) says:

anyone see a pattern here?

I’ve always enjoyed the comments you’ve posted about various articles, until now. I really hope it’s not what it seems – crass anti-semitism. You’ve always come across as someone with an open mind and more than an average amount of insight. Might you have a reply by way of explaining what you were getting at with that post?

Gimmieabreak says:

That much huh?

20 BILLION??? You gotta be joking right?

An online site full of fake profiles and web-cam whores? For 20 Billion? I thought we outlawed crack years ago!

As far as greed and corruption, it’s in both parties. Either demos or repubs are OWNED by Corps. NEITHER has the interest of the people at heart, and NEITHER cares what they do for the people. They are BOTH in it for the money. So, don’t act all high and mighty, pretending your party is without fault, because it’s not. Not until the people decide to start electing our officials based on facts instead of biased opinions will anything change.

As is we keep electing TOOLS to speak for us, and they never really do speak for us. This is how it’s been for many many presidents that have gone through office now.

Anonymous Coward says:

Not Another Anonymous Coward !

MySpace is a great place to advertise for Burger King. I know that the only time I’m on MySpace is when I’m drunk and a well placed Burger King ad would have me *walking* to the nearest one.

Seriously though, the only thing I use Myspace for is trying to see what my ex-girlfriend is up to. Granted, stalking is easier on Facebook, but I’m established on MySpace and I can post funny videos of people getting hit in the head with a shovel so I’m sticking to it.

So, to all you Myspace haters out there, have you tried it drunk/high? Don’t talk crap till you have!

wolff000 says:

Yea Right

20 billion? What an over blown number. I think what News Corp paid was fair and they should be happy with it.

As for myspace being a time waster isn’t that what the majority of web activity is? Like WOW is such a great thing it wastes just as much time and accomplishes just as much. I’m not saying your all playing WOW, it was just a comparison. You can insert what ever entertainment you get from the net in place of WOW.

Myspace is filled with juveniles and fake profiles but so is the rest of the web. any chatroom or online game is just as bad. well other than most games don’t get ads and bots.

TEB says:

My Space 50/50

Let’s look at this in an analytical view. $20 Billion is alot of money. Far more than most companies are purchased for, even those that have brick and mortar store fronts with actual assets that don’t include someone from a foriegn coutry posting webpage updates to US sites. My Space should is worth what it was purchased for, and any more would be an injustice to those companies that actually sell something other than avdertising space. The site has grown to the point of being obnoxious.

INIT_6 says:

Mix feeling about myspace.

I found out my girl friend was about to cheat on me because of myspace.

However if myspace wasn’t there then she would have never done that because she meet the guy on mySpace.

However I started to date her because I found her on myspace.

I am going with Damn myspace. I hope it fails in the near furture and gets shut down.

oh noes. says:

Me thinks that once he realized the US is in a big, biiiig recession, he wants top dollar for his “beloved site” – so he can life comfortably. 580 mil in this day and age ain’t nothin’ to a greedy man. He’ll buy a few yachts, throw a few boat parties, and possess ownership of the San Diego Zoo, Sure, but he won’t be designing his own private jet plane, or buying a house in Tahiti with 1400 windows and bullet-proof walls. And what attracts greed by money better than, I don’t know, money?

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