Facebook IPO

Facebook goes to Nasdaq

In early February, 2012, Facebook, the world’s largest social networking website announced its IPO plans. It had originally planned to raise nearly $5 billion which could make it the biggest internet company.

Facebook started just 8 years ago, and in this short time it went on from being a network of a coule of hundred Harvard University students to 845 million global users, out of which 443 million use it daily. Last year alone, Facebook recorded net profit of $1 billion, an increase of 65% over last year’s income. The famed owner of Facebook, Mr Mark Zuckerberg owns 28.4% of the company with more than 50% of voting rights.

This month, Facebook announced its share price at $28 - $35 per share, making the company valuation at $85 - $95 billion, nearly 4 times more than Google’s IPO valuation of $23 billion in 2004. Facebook will be listed under “FB” at Nasdaq and will rival Amazon and Cisco. Actual trading is expected to start from Friday 18^th May.

Earlier, several analysts had expected Facebook to raise approximately $2.5 billion through IPO, then, as mentioned earlier, the company revealed it would try to raise approximately $5 billion.It has now revised the expectations to $12 billion, almost $9.5 billion more than originally expected, by selling 10% of its shares. In 2004, Google raised $1.67 billion by selling 7% of its business through IPO. Mark Zuckerberg will retain more the 50% voting rights after the IPO.

Comparison of Facebook

With its current valuation, Facebook ranks fourth among the top 6 internet giants. This is illustrated in the diagram below.

Apple is the market leader with a company valuation of $422 billion which is followed by Microsoft with $248 billion. 

Apple has recently reported its first quarter income for 2012 which stood at $11.6 billion. Facebook on the other hand reported $1 billion in profits in 2011. In other words, Apple makes about 11 times more in 4 months than Facebook makes in a year, but it has taken Apple more than 3 decades to get where it is now.

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