By Dominique Jacquet

Facebook stock closed on April 30 at almost $ 205 per share, its level at the end of 2019. Ultimately, COVID-19 will have had as little impact as Cambridge Analytica …

On April 22, the company announced a stake in Jio, the telecommunications subsidiary of the Indian conglomerate Reliance (owner of the oldest toy store in the world, Hamleys …), whose market value is around $ 115 billion.

Access to the Indian market

By investing 5.7 billion dollars in Jio Platforms, Facebook acquires 10% of the firm and, above all, access to the Indian market through a company very aggressive in terms of pricing and which has won nearly 400 million customers even if it started its activity only in the second half of 2016. In the Asia zone, difficult to break through, the quarterly ARPU (Average Revenue Per User) released by Facebook is $ 3, very meager compared to its equivalent in North America: $ 33…

Without taking into account any potential increase in ARPU, but by estimating that the investment of Facebook will allow it to increase its number of customers by, for example, half of Jio’s client capital, that would mean an additional 200 million Facebook users. With $ 3 in additional revenue per quarter, this represents an increase in sales of approximately $ 2.4 billion.

Ebitda increase of $ 1.2 billion

Facebook’s EBITDA rate was exactly 50% in 2019, so we can estimate that the equity investment generates a potential annual EBITDA increase of $ 1.2 billion, which reimburses it in 5 years of EBITDA… beyond, of course the value of the firm itself … Well, 5.7 billion, when you have 60 billion in cash …

On the announcement of the stake, the price of Facebook rose by $ 10.  A week later, Facebook published its accounts for the first quarter of 2020, showing a significant increase in the number of Monthly Average Users compared to Q1 2019 and an increase in turnover, but a drop in operating profit: 5.9 billion dollars compared to 6.3 billion (after restating a tax penalty of 3 billion) for the same reference period.

Concretely, this did not prevent the price from rising by $ 10, again, reaching, then, $ 194.

Each announcement brings in $ 10. What crisis?