Monday, May 7, 2012

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 18th 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.

New post: What is an IPO?
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