I am always interested in stories of start ups and how they progress. This week I read about the instant messaging start up Snapchat. This nifty little application allows users to set a time limit on how long a message be it text, video or image is viewable for. It then deletes the message from the users account – very handy if you don’t want to be caught with embarrassing photos on your phone. You can see why this would be popular.
On 14 November Facebook offered them $3 billion for the company a day later it is reported that Google trumped this by offering $4 billion. Both offers were knocked back as being too low.
WTF?
It is good to have a healthy sense of self and what you create might be worth but the capacity to knock back offers of such staggering money is remarkable but not without precedent. When Rupert Murdoch bought MySpace for $580 million he boasted that he could have sold it for $6 billion a month later but didn’t. He eventually sold it for $35 million. Groupon the social media buying group were offered a staggering $7 billion but rejected it – the company is now worth two-tenths of stuff all.
There is a parallel for traders – whilst I am all for letting profits run for as long as you can but sometimes a deal is too good to pass up.
Very true –
if something cost you $1000 and someone offers you a million – take it
If it costs you $1000 and it’s growing at 1% a week – keep it
When you are between the two it’s harder to know what to do – buy BGA for $4 and a week later it’s $5 because they are making a take over (i,e, they aren’t the target) – then what?
Personal example – many many years ago i was involved in an IPO and I got quite a successful friend involved. The IPO flew and after awhile I began to exit and suggest he should to. But he insisted that the company was going to $50 – where he got that number is anyones guess. He ended up leaving $14 million on the table and never emotionally recovered.
Ouch!