Facebook: Did Facebook overpay for Oculus?; Needham says no
Needham argues that FB didn't overpay, based on: When FB bought Instagram for $1B in 2012, investors believed FB had overpaid. But as teen usage of FB has waned, Instagram's has grown, allowing FB's valuation to rise (despite little rev from Instagram); FB paid $400 mln in cash for Oculus Rift, plus 23 mln shares (i.e., $1.5B) of FB stock plus an additional $300 mln earn-out in cash and stock if certain metrics are achieved over time. With FB valued at 13x sales, we'd prefer FB to issue more shares (less cash), from a valuation viewpoint; Press reported that several co's had tried to buy Oculus, demanding a premium price to get the deal done quickly, similar to WhatsApp. Oculus gives FB an answer to GOOG glass.