How Forbes turned $6.5 million into $20 billion

The web is getting ready for another bubble…

Forbes is reporting that Facebook’s Zuckerberg is now richer than the Google’s Sergey and Larry. How did that happen? By using the most naive form of financial extrapolation and calling it fact.

Here’s how the financial alchemy works: GSV Capital spent $6.5 million to buy 225,000 shares at ~$30/share. That amounts to buying about 0.01% of Facebook. They purchased these shares at a 40% premium over the last big valuation that put Facebook to be worth $50 billion.

So if you extrapolate that the premium paid for 0.01% of the company is the same premium someone else would pay for 100% of the company, you get that Facebook is now worth $70 billion.

More: Wizards of bullshit: How Forbes turned $6.5 million into $20 billion – (37signals)

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