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Douglas_Knight comments on Open thread, 24-30 March 2014 - Less Wrong Discussion

6 Post author: Metus 25 March 2014 07:42AM

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Comment author: gwern 27 March 2014 02:54:51AM 3 points [-]

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?

Comment author: Douglas_Knight 29 March 2014 09:26:35PM 2 points [-]

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.

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