[ablanton]

I left facebook for this exact reason. the platform has diminished so greatly that it's now virtually unusable to me.I'm really not sure what to equate the experience to, it feels like trying to read a newspaper that is all ads. It's all vapid useless sales instead of meaningful interpersonal connections over long distances... the way it started. I fear twitter is not far behind.

[argonaut]

Yes. I totally hope Twitter follows in the footsteps of the $200B+ Facebook.

[blorgle]

First of all, market capitalisation is only the measure of the number of outstanding shares multiplied by the current price. You are absolutely kidding yourself if you think that all the FB shares in existence could be sold at the current NASDAQ closing price.

Secondly, to achieve the current $296Bn market capitalisation, investors are rating the company at sixty-six times 2015 earnings. That means that FB better be growing at an obscene rate for the very long term, because as we say in the market, FB is "priced for perfection". Any hiccups in earnings or signs of faltering growth and investors will be just as quick to de-rate the FB price as they have been for TWTR. So it can be "worth" $296Bn one day and significantly less than that the next.

[hollerith]

Suppose your claim is true. Suppose in other words that it would be impossible to sell all the FB shares at the current closing price. How would that be an argument against the usefulness of comparing Twitter's market cap to FB's?

No one has ever bought a company whose market cap is as big as FB's currently is -- let alone bought one for cash. But publicly-traded companies with caps in the billions have been bought in all-cash transactions, and the experience there is that the buyer usually ends up paying more than the market cap right before the investing public starts to become aware of the attempt to buy the company. But even if that were not true, what relevance would it have for whether or not it is a good idea to use market-cap data to compare publicly-traded companies and their products and strategies?

Does market cap not remain a good estimate of the future expected earnings of the company?

[blorgle]

I would first point out that it is not really a claim but a simply observable fact for anyone with a brokerage account, check the available market depth at any given price to see how many shares can be sold into the available bid before having to sell at the next lowest available bid in the auction.

The parent did not make a claim that comparing the market cap of TWTR to that of FB is useful, nor am I attempting to make an "argument" in the opposite direction. The goal was to point out that measuring success by an extremely volatile marginal price which rates the stock at sixty-six times earnings is neither accurate nor useful. A little surprised that my attempt to provide useful information earned a handful of downvotes compared to the parents throwaway sentence.

If one honestly believes that market cap data is useful for comparing publicly traded companies in anything but the broadest sense, then one must believe that yesterday TWTR was "worth" 2.5% more of FB than today (judging by daily fluctuations in the TWTR:FB ratio). That is observably not the case, the only difference between that day and the previous is that the company made some information public, no facts at the coalface actually changed. Value of equity is decided over the very long term life of that equity.

As for your final question, one need only look back in history to see that the aggregate marginal daily price and hence market capitalisation is often (and especially in tech) not a good estimate of future expected earnings of a company. The market almost always overshoots, both to the upside and downside, largely depending on available liquidity.