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

from the he's-baack dept

Thu, Oct 5th 2006 11:31am — Joseph Weisenthal

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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23 Comments

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anonymous coward, 5 Oct 2006 @ 11:44am

i want some of what Brad's smoking!
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DittoBox, 5 Oct 2006 @ 12:10pm

$580 Mill eh?
For the internet cess pool? WTF is wrong with that? I wouldn't pay more than a dollar for it.
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SPR, 5 Oct 2006 @ 12:11pm

Re: anyone see the pattern here?
So says Ayatolah Anonymous Coward
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AMP, 5 Oct 2006 @ 12:12pm

Re: anyone see the pattern here?
Seriously?! "These people"???
You are a fucking idiot! And don't be such a pussy, if you are going to make ignorant comments like that, sign you name.
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Not an anonymous coward, 5 Oct 2006 @ 12:12pm

You should be shot and pissed on for what you just wrote....
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robbinsjr, 5 Oct 2006 @ 12:12pm

Re: anyone see the pattern here?
it's a good thing you are an anonymous coward or else der fuhrer might decide that your stupidity shows that you are no longer essential to ze var effort...you racist piece of shit.
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thinlizzy151, 5 Oct 2006 @ 12:13pm

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?
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Dude, 5 Oct 2006 @ 12:14pm

You Are A Moron!!!!
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Gimmieabreak, 5 Oct 2006 @ 12:14pm

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.
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Anonymous Coward, 5 Oct 2006 @ 12:16pm

they offer 580m and you accept. were's the fraud?
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Skippyboy, 5 Oct 2006 @ 12:25pm

Cess Pool...
At least cess pools have a valid use. Myspace should be renamed TotalWaste as in time, effort, value...

Gahh - I hate myspace.

Flame wars - COMMENCE!
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ScaredOfTheMan, 5 Oct 2006 @ 12:27pm

He is setting himself up for his next venture, so he can ask investors for lots AND lots of money.....cause the next one....That one will be sold for $20 Billion.................... ;)
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Webmanga, 5 Oct 2006 @ 12:41pm

crap site
MySpace is a waste of time, terrible layouts, over burddening with ads...and idiots
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Webmanga, 5 Oct 2006 @ 12:42pm

crap site
MySpace is a waste of time, terrible layouts, over burddening with ads...and idiots
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Anonymous Coward, 5 Oct 2006 @ 1:00pm

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!
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wolff000, 5 Oct 2006 @ 1:22pm

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.
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Anonymous Coward, 5 Oct 2006 @ 1:23pm

TECHDIRT SUCKS!
You are all idiots!

TECHDIRT SUCKS AS BAD AS MYSPACE!
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Bad Mark, 5 Oct 2006 @ 1:57pm

'Tis a tangled web we weave
$20 Billion, that is absolutely ridiculous! Yes it generates revenue through advertising, but it has NO business model! It'll cause more therapy bills in the future for all those dough-eyed teens getting scammed into doing God knows what!
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TEB, 5 Oct 2006 @ 2:06pm

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.
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Anonymous Coward, 5 Oct 2006 @ 6:31pm

Re: TECHDIRT SUCKS!
Then please don't post here again...
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INIT_6, 9 Oct 2006 @ 5:50am

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.
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Groszek, 18 Oct 2006 @ 5:13am

ups chyba pomylilem forum ;];];] f.is
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oh noes., 13 Feb 2009 @ 12:58pm

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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