Trade Me now worth $1.62 billion – and Sam’s okay with that

A new Morgan Stanley assessment, based on the value of comparable companies, says Trade Me is now worth between $A1 billion ($NZ1.24 billion) and $A1.3 billion ($NZ1.62 billion).

The auction site, founded by Sam Morgan, was sold to Australian media company Fairfax in 2006, for $NZ700 million (plus earn-out bonuses of up to $NZ50 million).

Like others, Morgan Stanley’s analyst division was dubious about the price at the time.

But with 20/20 hindsight, it now considers Trade Me could actually have been worth a “premium” over $NZ720 million, given its market dominance.

The investment bank admitted it failed to anticipate Trade Me's potential to expand into automotive, employment and real estate listings.

As Trade Me’s largest shareholder at the time of the deal, is Mr Morgan now kicking himself that he didn’t hold old for more?

Not at all.

“A good deal is one where you leave value on the table for the next guy,” he told Keallhauled.

“Trade Me sold in early 2006 - nearly five years ago - so one would hope that it had increased in value.

“Fairfax has left it alone to flourish and reach its potential, so I'm very happy.” (Mr Morgan joined the media company's board, which will presumably help this cause.)

Back in 2006, Lance Wiggs played a key support role in negotiations with (then) Fairfax chief executive David Kirk, on behalf of Trade Me shareholders.

He still sees $720 million as a good price.

“While it was clear at the time that it could be worth more, it was at the time worth what someone was willing to pay,” he told Keallhauled this morning.

“The shareholders rationally took the certainty of what was offered, and the current valuation is entirely consistent with the sale price,” Mr Wiggs said.

As well as illustrating the truism. it’s easier to bet on yesterday’s horse race, Morgan Stanley’s reassessment may bolster the reputation of David Kirk, who had to take on debt to fund the deal, and was eventually pushed out during the recession.

Buying TradeMe now looks like a smart way of compensating for traditional newspapers’ evaporating classified advertising revenue.