Open thread, 24-30 March 2014

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Open thread, 24-30 March 2014 — LessWrong

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Why not all of the above? We can see some rounding already; http://investor.fb.com/releasedetail.cfm?ReleaseID=835447 says

Facebook today announced that it has reached a definitive agreement to acquire Oculus VR, Inc., the leader in immersive virtual reality technology, for a total of approximately $2 billion. This includes $400 million in cash and 23.1 million shares of Facebook common stock (valued at $1.6 billion based on the average closing price of the 20 trading days preceding March 21, 2014 of $69.35 per share). The agreement also provides for an additional $300 million earn-out in cash and stock based on the achievement of certain milestones.

There's rounding right there (23.1m * 69.35 is not a round number). And there's plenty of uncertainty about how much they will actually pay: how can anyone know how much of that earn-out will ultimately be paid?

Douglas_Knight12y30

There's rounding right there (23.1m * 69.35 is not a round number).

That sounds backwards to me. It looks to me like they started at the round 2.0, set 20% in cash, 80% in stock, found that required 23.1m shares of facebook and rounded that to three digits to get within 2% of the 1.6 they wanted.

Also, the incentive pay of 300m is 15% of the fixed payment, less uncertainty than rounding to 1 significant figure.

0tgb12y

It absolutely could be all of the above! But see I write questions like this fairly frequently: I notice something surprising and don't have a good explanation for it. I then write down the question and pose a couple possible explanations which makes me think of more possible explanations. Frequently I realized that taken together the possibilities I thought of are enough to explain what I was surprised at and I don't even ask the question. Other times, like this one, I still feel like I'm missing something. So I ask the question. In this case it looks like the biggest thing I missed was how much these sales' values depend upon the moment-to-moment stock prices of the parties involved and so that not rounding them hardly even makes sense, as you and bramflakes point out. Thanks!

See in context

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Open thread, 24-30 March 2014

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Open thread, 24-30 March 2014

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