Investor: Facebook Valuation Stood In Way Of Twitter Deal
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By Jemima Kiss: So Facebook did indeed try to buy Twitter, we learn today. Investor Peter Thiel told Business Week the two sides could not agree on price or the structure of the company when they discussed a deal in the fall.
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That price issue was down to the value being paid in Facebook stock, and that meant agreeing on what Facebook was worth; Microsoft’s proposal just over one year ago might have valued the firm at $15 billion, but Facebook’s own internal valuation was $3.7 billion. Thiel said: “It became pretty clear it wasn’t going to happen. The deal would have to be done with Facebook stock. And then you have to figure out how much the stock is worth.”
More after the jump
The Twitter deal was reported at $500 million. They also offered $100 million in cash and the rest in stock—but based on Facebook’s own valuation of $8 billion to $9 billion. No wonder Twitter backed off. One source at Twitter said Facebook was obviously interested but “didn’t have much conviction.”
Could it still happen? Thiel said he thinks Twitter is worth more than people think, and the company itself is adamant that it has a long way to go before it reaches its full potential. And the two still talk, though without any serious discussions.
While Twitter’s money-making potential has been under closer scrutiny, Facebook too is focused on “improving its product” rather than “doing a MySpace” and flooding the site with ads. If Facebook “turned on all the dials” with ads, Thiel said, it could make as much as $1 billion a year from advertising.
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