TLDR; Snapchat is probably worth more to Facebook than it would be to other players in the market or to acquirers simply interested in cash flows to equity.
So it would appear from the comments and from the article that there is a bit of misunderstanding in valuation theory and how it might apply to the valuations in the media. Hopefully this will help clarify some things.
1. FMV of equity is not 100% of the enterprise value of a given company. The enterprise value (EV) of a company is comprised of its equity value plus its net debt (total debt less cash).
2. The FMV of a given share will vary based on (as mentioned) the liquidation preference, any dividends and will also be affected by many other possible factors such as redemption/retraction, cumulative vs non-cumulative, ability to control/vote, etc...
Knowing this, it seems that what the author is trying to say is that it is misleading to suggest that the the value offered for a share of class A can be generalized across all classes of shares to provide a valuation. This is a valid and important point. Now, with respect to the valuation of Snapchat, I haven't seen the details of the offer to be able to question the basis for the valuation. Typically, a potential acquirer will have a valuation in mind when an offer is made. This may or may not be in line with the valuation that the media publishes.
Another issue that I see with what people are saying in the comments here is the confusion of price and value.
In the world of business valuation, the only time when price == value is the time when an acquisition offer is made that eventually closes at substantially the same terms. At any other time, we rely on the concept of fair market value as imagined using a hypothetical buyer and seller (there is a very specific definition). We may rely on past transactions as they given an indication of price/value at a moment in time to try to come up with a value at another date.
Now, none of this talks about the concept of special purchaser premiums, or the additional value that may accrue to a buyer for buyer-specific reasons. It may very well be that Snapchat is worth much less than $3b to most players in the market, however, part of the difinition of FMV is the hist and best price. This means that if Facebook is willing to pay a significant premium over others, then that premium should be considered as an indication of value.
Comments
TLDR; Snapchat is probably worth more to Facebook than it would be to other players in the market or to acquirers simply interested in cash flows to equity.
So it would appear from the comments and from the article that there is a bit of misunderstanding in valuation theory and how it might apply to the valuations in the media. Hopefully this will help clarify some things.
1. FMV of equity is not 100% of the enterprise value of a given company. The enterprise value (EV) of a company is comprised of its equity value plus its net debt (total debt less cash).
2. The FMV of a given share will vary based on (as mentioned) the liquidation preference, any dividends and will also be affected by many other possible factors such as redemption/retraction, cumulative vs non-cumulative, ability to control/vote, etc...
Knowing this, it seems that what the author is trying to say is that it is misleading to suggest that the the value offered for a share of class A can be generalized across all classes of shares to provide a valuation. This is a valid and important point. Now, with respect to the valuation of Snapchat, I haven't seen the details of the offer to be able to question the basis for the valuation. Typically, a potential acquirer will have a valuation in mind when an offer is made. This may or may not be in line with the valuation that the media publishes.
Another issue that I see with what people are saying in the comments here is the confusion of price and value.
In the world of business valuation, the only time when price == value is the time when an acquisition offer is made that eventually closes at substantially the same terms. At any other time, we rely on the concept of fair market value as imagined using a hypothetical buyer and seller (there is a very specific definition). We may rely on past transactions as they given an indication of price/value at a moment in time to try to come up with a value at another date.
Now, none of this talks about the concept of special purchaser premiums, or the additional value that may accrue to a buyer for buyer-specific reasons. It may very well be that Snapchat is worth much less than $3b to most players in the market, however, part of the difinition of FMV is the hist and best price. This means that if Facebook is willing to pay a significant premium over others, then that premium should be considered as an indication of value.