When investors and analysts were trying to value Twitter's stock for its November 7, 2013 IPO, they used a shorthand multiple in which each user of a social network was worth around $100. This estimate was premised on previously calculated multiples. For example, each Facebook user was worth slightly more than $98 each (taking their total stock market capitalization, divided by their number of active users ($117 billion, divided by 1.19 billion active users)), and LinkedIn users were worth about $93 each ($24 billion, divided by 259 million active users). A few hours after its IPO launched, Twitter was trading at a valuation that indicated the market valued each of its 232 million active users around $110. What are the good and bad aspects of using multiples to value Twitter?

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Using multiples to value a company like Twitter has both good and bad aspects Good aspects 1 Simple ... View the full answer