Let’s say you own a small company with about a dozen employees. You make absolutely no revenue and then one day Mark Zuckerberg walks through your door offering to buy you out for $3 billion, what do you do?
The obvious answer is you take the money. And yet…there are those who won’t. Call it hubris, call it greed, call it whatever…this is exactly what happened this week when the WSJ reported that Snapchat, which “specializes in ephemeral mobile messages,” rebuffed a purchase offer from Facebook that would have made the group incomprehensively wealthy.
I’m not going to pretend to know the conversations between Snapchat and Facebook, or riff on the motivations of the parties allegedly involved. I can only comment from personal experiences, and my trading experience tells me it is much better to take the meat of a major trend in the market then to try and pick market tops and bottoms. Thinking about today’s market hysteria around social networking platforms, we are in the midst of a great bull market for all things social. Facebook is taking care of business and Twitter’s IPO got off to a hot start last week.
Many luminaries in the technology-finance industrial complex completely agree with the power move from Snapchat CEO Evan Spiegel. Many cite the fact that Instagram, which sold last year for a mere $1 billion to Facebook, could now be worth $15 billion. WHAT A DISASTER!!! Please…
The situation is analogous to Mark Cuban’s billion-dollar deal with Yahoo! more than a decade ago. From Business Insider:
Mark Cuban once sold a company to Yahoo for stock. He sold the stock as soon as he was able. Then the stock went up some more. The next time he was on CNBC, an anchor asked him: “Don’t you feel dumb that you cashed out your Yahoo (YHOO) stock at $200 and now it’s trading at over $230?”
Cuban’s answer: “Well, it’s hard to feel dumb when you’re flying around in your G-5.”
Don’t Get Too Greedy
Whether you are trying to sell your company, your tickets to the Super Bowl or closing out the trade of a lifetime, it is better to take a good deal when you have it than to hope for more gains. Sure, you may miss out on some profits, but at least you will actually get to keep most of the winnings before they vanish.
The Cubes sold his company to Yahoo! in April 1999. Today that same Yahoo! stock is worth about a third of its peak value achieved roughly 8 months later. CNBC anchor person, do you still think Mark is dumb?