Thisarticle was originally published by GuruFocus
By Sarfaraz A. Khan
February 28, 2014
A couple of days ago, the social networking site Facebook Inc. (FB) made global headlines when it decided to purchase the mobile messaging app WhatsApp for a whopping $19 billion. The price tag is lofty by any measure. In fact, this is the biggest internet acquisition in more than 10 years.
According to the terms of the deal, Facebook will pay $12 billion in stock, $4 billion in cash and $3 billion in restriction shares which will be granted to WhatsApp’s founders and employees over the next 4 years. According to data compiled by WSJ, this is extremely hefty for a company with just 55 employees. In another article, Bloomberg reported that WhatsApp’s enormous price tag shows that Marck Zuckerberg has valued the messaging app developer like a company that makes “life-saving drugs” (since such pharmaceutical companies trade at extraordinary multiples of sales).
Reason # 1
However, this also indicates that Facebook’s founder and CEO Marck Zuckerberg will stop at nothing to keep his company growing by buying out the competition. WhatsApp competes with some of the biggest mobile messaging apps such as Tencent’s WeChat and Facebook’s own Facebook messenger.
With this kind of aggressive attitude, Facebook’s shareholders should be glad that Mark Zuckerberg is at the helm of the affairs.