Facebook IPO
A Profile Of The Facebook IPO
Financial experts say the Facebook IPO (Initial Public Offering) is expected to break all prior records for a company’s debut on the United States stock market. When the company filed for its IPO in early February of 2012, its financial statements were made public. They revealed phenomenal figures.
During 2011, the company earned a profit of one billion dollars from its 3.71 billion-dollar revenue stream. The majority of its revenues (85 percent) are acquired from advertising. The remainder is from social gaming and miscellaneous fees.
Since its founding in 2004, this social networking platform has gained 845 million global users. During April of 2010, Social Media Today estimated more than four in 10 people in the United States have active accounts. Users of this multi-lingual platform communicate with their friends, play games, circulate petitions, and share political news. In addition, users swap about 250 million images each day.
The History of Facebook
The evolution of this social network began during 2003 when Harvard University sophomore, Mark Zuckerberg, developed its predecessor, Facemash. Zuckerberg was studying computer science. According to the daily student newspaper, “The Harvard Crimson, ” Facemash was a Hot or Not interactive program. It featured side-by-side images of students which were compiled from nine campus Houses. Users voted for the hotter person. During the first four hours it was online, it attracted 450 visitors who viewed 22K photos. Later in the semester, the site was expanded to become an art history study tool.
During January of 2004, Zuckerberg began developing code for a new site. This project was known as “Thefacebook.” By February, it was online and accessible to students at Harvard. Its homepage declared it was a social network which connected individuals through social networks at colleges. It was a tool to search for people within a school, find out who was registered for specific classes, look up friend’s friends, and access a visualisation of each user’s social network. Within 24 hours of its launch, it had nearly 1.5K registered users. By the end of the first month, more than half the university’s undergraduate population was registered on the site.
Six months after the project’s launch, Zuckerberg moved its base of operations to Palo Alto, California. Throughout 2004, the site continued to expand, and became accessible to students in many universities throughout the U. S. And Canada. The following year, the website’s name was changed, and the Facebook.com domain was purchased. By October of 2005, the social network was accessible to users in many global locations.
Who is Behind Facebook
Mark Zuckerberg is responsible for developing the initial code which evolved into Facebook. During April of 2004, he formed a partnership with some fellow students. Eduardo Saverin became responsible for the business aspects. Dustin Moskovitz joined the team to assist with programming. In addition, Andrew McCollum took over the role of graphic designer, and Chris Hughes served as spokesman.
Throughout the early stages of the site’s evolution, entrepreneur and technology businessman, Sean Parker, had been providing Zuckerburg with guidance. In mid-2004, the company was formally incorporated. At that time, Parker was named the company’s first president.
The Value of Facebook IPO
According to financial experts, when Facebook’s offering goes public during the spring, it is expected to be phenomenal. Company officials hope to raise about 10 billion dollars from selling shares to members of the public. The existing internet IPO record was set by Google during 2004. It raised nearly two billion dollars, with a valuation of 23 billion. Among all the companies in the United States, only three have held offerings in excess of 10 billion dollars. They are Visa, AT&T Wireless, and General Motors.
Profitability of Facebook IPO
Unlike many other web companies which have gone public, Facebook is profitable. During 2011, its estimated revenue was 4.27 billion dollars. Its profits from that year increased by 65 percent over the prior year.
Online advertising drives the company’s profits. Between 2010 and 2011, the number of ads which were delivered by the site grew by 42 percent. The average price for each ad grew by 18 percent. Officials say these increases are due to technology which allows advertisers to market their goods and services to specific groups of individuals. Users can be screened by many demographic factors, including age, location, specific interests, work history, education, and gender.
Although it continues to be profitable, its growth has been costly. In 2011, research and development expenses grew to 114 million dollars, which was a 105 million-dollar increase over 2010. The majority of its expenses are due to revenue compensation and employee head-count. As of December 2011, it employed 3,200 individuals, an increase of 1,028 over the prior year.
Facebook IPO Private Placement
Goldman Sachs is expected to exclude private investors in the United States from acquiring shares in Facebook prior to its IPO. According to company representatives, the intensity of media coverage could interfere with the appropriate completion of private placement under federal law. Its high-profile private placement is expected to raise 1.5 billion dollars from its wealthiest global clients. Officials expect this offering to be very successful. It has already invested 450 million dollars in Facebook.
The United States SEC (Securities Exchange Commission) has been scrutinising the secondary trading of shares in the privately held Facebook. The investigation has been highly publicised. Some financial analysts believe this is the impetus for the Goldman Sachs decision not to offer private placement to American investors. When more than 500 shareholders own private shares in a company, the federal securities law requires official registration and public disclosure statements.
Conclusion
In a recent press release, Zuckerburg says he plans to continue developing products, rather than focusing on business growth. He says the company’s philosophy is not to build services in order to earn money. Rather, its intent is to raise money so better services can be developed. He says this approach tends to appeal to an increasing number of global users who wish to interact with companies which are not solely focused on maximising profits.
There is much anticipation and speculation about the upcoming Facebook IPO. Eager and enthusiastic investors are expected to respond to the company’s spring public offering debut. As of January 2012, this phenomenal social networking platform had nearly 152 million members who were based in the United States, 44 million in India, 43 million in Indonesia, 40 million in Brazil, and 32 million in Mexico. Those top five countries account for nearly 39 percent of the world’s users.
