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Valve Worth $3B?

Forbes declares Valve's Gabe Newell "The Newest Video Game Billionaire" in an article on the success of Valve and Steam. They admit that they can't know the true financial state of Valve, which is privately owned, but they offer a "conservative" estimate that's pretty eye-popping: "Even the most conservative estimates put Valve’s enterprise value at more than $3 billion, and since Newell owns more than 50% of the company, that means he’s worth at least $1.5 billion."

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44. Re: Valve Worth $3B? Mar 8, 2012, 19:14 killer_roach
Creston wrote on Mar 8, 2012, 16:32:
If Steam had a billion dollars worth of revenue last year, there's no way Valve is valued at "just" 3 billion. Any way, it's still an incredible number


Depends on what their profit margin is. Assuming they're still growing at a relatively brisk pace, a $3 billion valuation would assume they have profits of around anywhere from $75-150 million. If their revenues are actually $1 billion (nobody knows for sure - some say it was around there, others put their profit numbers in that territory), assuming an Apple-like profit margin (about 25%), that would put profits around $250 million, and, applying a pretty standard P/E ratio of 30-40 for growth companies, that would put them around $7.5-$10 billion in total market capitalization. (Obviously, if the "$1B profit" number was right, then Valve could be stupid huge, possibly in the $30-40 billion range, which would effectively make them larger than Sony.)

Of course, if Valve went public, I'd assume that the practice of employee bonuses would likely be handled through distributing preferred stock to existing personnel, which could both a) depress the perceived value of any offered shares and b) cause a significant run-up in the stock upon IPO due to a relatively small amount of the company being up for offer (if Valve went public, I'd assume they do something similar to what Zynga did, and only offer for sale public shares amounting to a small percentage of the company - Zynga's IPO was 10% of the total share base).
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