BUSINESS

Winklevoss ‘Facebook twins’ bet $140m on one roll of the dice

TAGs: Mark Zuckerberg, Winklevoss twins

We told you about the deal between Goldman Sachs and Facebook that pegged the social network (and #1 US web destination) at a valuation of $50b. The deal has Facebook getting $500m from Goldman and a Russian investor in exchange for allowing Goldman to raise $1.5b from its clients. The trading would occur on secondary markets only, allowing Facebook to skirt public market regulations requiring companies to report pesky details like how much money they earn (or lose).

The deal has many critics. Some, when they hear of Goldman creating a financial ‘special purpose vehicle’ to facilitate the deal, recall the credit derivatives fiasco that contributed to the current economic slump. Other critics view it as dot-com bubble redux, a return (retreat?) to the heady days of pets.com and AOL being valued higher than Time Warner. On the other hand, we know of at least two people who would be quite willing, even eager, to accept Facebook’s $50b valuation as accurate.

A LITTLE HISTORY
facebook-twins-roll-diceYou may remember the Winklevoss twins from The Social Network flick. Strapping, square-jawed, tousle-haired Olympic rowers, Tyler and Cameron Winklevoss look like they come straight outta Central Casting, yet they are some of the sickest fucking gamblers around.

At the risk of boring you, the Winklevosses (Winklevi?) claim Facebook was their idea, that they’d hired fellow Harvard student Mark Zuckerburg to work on their software, but Zuckerburg stole the idea and ended up on the cover of Time. The twins sued and ultimately settled out of court in 2008 for a rumored $20m cash and $45m in Facebook shares.

For our purposes, it’s the share portion of that deal that matters. At the time of the settlement, Facebook pegged the value of its individual shares at $35.90, even though the company had privately endorsed an expert’s valuation of only $8.88. If you’re a Winklevoss, you now believe you paid $45m for about $11m worth of shares, so you want a judge to tear up the flawed settlement and re-open the civil case.

This move is not without risk. Tearing up the settlement means giving back the cash and the shares – and if Facebook’s $50b valuation is accurate, those shares are now worth about $140m. A pretty good return on a three-year investment. But hang on — that figure grows four-fold if you think you’re owed four times as many shares as you initially received. Hmm…

But — and like Kim Kardashian, this is a big but — there’s no guarantee that Facebook would be amenable to a second settlement. They might take the case to trial, and they might win. Which would leave the twins with nothing to show for the whole endeavor but happy memories. Or something.

THE PRICE OF A PINT
To our eyes, it appears that the boat the twins are rowing has sprung a leak. Facebook’s lawyers would likely be able to convince a court that the twins’ Harvard project was little more than a dating site when they enlisted Zuckerberg’s help. It was designed as a way for the twins to ‘meet’ more girls, not as a sweeping communications network. The lawyers will further claim that all the twins had was an idea. For the record, an idea and a five pound note will get you a pint at most pubs, but not at most nightclubs.

The twins aren’t stupid. At least, they shouldn’t be, what with their Ivy League educations. Yet they’re willing to risk $140m on a single roll of the dice. Frankly, we’re blown away by the enormity of their balls, but wouldn’t it be better to take the money already in the bank and parlay it into some fresh business success? You know, maybe do something to prove to the world that they aren’t just chancers, that maybe they do deserve credit for giving birth to this ever-encroaching part of modern life?

Fuck that. Let it ride, say the twins. To which we say, why aren’t problem gambling support groups reaching out to these two? Won’t someone think of the 29-year-old children?

Comments

views and opinions expressed are those of the author and do not necessarily reflect those of CalvinAyre.com