Market Update – 2nd February 2012
Facebook have announced plans to float on the stock market. It is looking to raise $5 billion in an IPO. It has filed its intention to list with the Securities and Exchange Commission.
It is valued at around $75 billion, less than the initial $100 billion figure that was quoted by many. However, some analysts think that this figure is still too high and the interest in the stock will mostly be driven by brand awareness and not by sound analysis of its potentials, risk and market development.
Facebook has been growing at a staggering rate but some people feel that it is reached its peak already. Around 480 million people log on every day, however, it does not seem to be gaining new clients (users) as quickly as it once did. However, it is now investing heavily in mobile and expects most new users to be solely mobile users.
Terms of the Facebook IPO
Facebook, Inc. is offering _____ shares of its Class A common stock and the selling stockholders are offering _____ shares of Class A common stock. We will not receive any proceeds from the sale of shares by the selling stockholders. This is our initial public offering and no public market currently exists for our shares of Class A common stock. We anticipate that the initial public offering price will be between $ _____ and $ _____ per share.
We have two classes of authorized common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share and is convertible at any time into one share of Class A common stock. Outstanding shares of Class B common stock will represent approximately _____ % of the voting power of our outstanding capital stock following this offering, and outstanding shares of Class A common stock and Class B common stock held by, or subject to voting control by, our founder, Chairman, and CEO, Mark Zuckerberg, will represent approximately _____ % of the voting power of our outstanding capital stock following this offering.
We intend to apply to list our Class A common stock on under the symbol “FB.”
There are a few blanks in there still to be completed.
When will Facebook Float?
“Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.”
It was not so long ago that Mark Zuckerberg said that he was not in any hurry to float Facebook. It’s cash flow is strong and there seemed little reason to raise capital through a stock market flotation. So the big question is why?
For Facebook to really grow and dominate they may need to look to make some constructive partnerships and even some aggressive acquisitions. Mobile is the hot trend at the moment and Facebook currently hardly involved at all. Their website is present on all mobile smartphones but Facebook do not provide their own mobile service. Advertising is hot too and currently Facebook struggle to provide any form of targeted adverts to its members on mobile devices. These are two areas that they could be looking to expand into.
Bigger than Yahoo!
Valued at $100 billion Facebook is currently bigger than Yahoo! Although to be fair, Yahoo! is not exactly growing at the moment, they continue to drop more products and some tech analysts fear that Yahoo! may eventually be merged into a multitude of competing businesses in the near future.
Facebook was founded in 2001 by Mark Zuckerberg while he was studying at Harvard University. It has quickly grown in the last 7 years to have over 800 million users. What is so striking about Facebook’ success is that it has always managed to stay on top of its growth. Many small websites would very quickly fail when experiencing such high demand, but Facebook has had next to no downtime during its lifetime. This is a great credit to the company and all those who manage its servers and infrastructure.
One of the Biggest IPOs in History
To date only 13 companies have been valued at over $10 billion on their IPO. The top American companies prior to Facebook were:
- Visa Inc. at $19.7 billion in 2008
- General Motors Co. at $18.1 billion in 2010
- AT&T Wireless Services Inc. at $10.6 billion in 2000
The largest IPO in the world so far was the Industrial & Commercial Bank of China, which released $21.9 billion of shares in 2006. It ended its first day valued at $148 billion.
How Much Does Mark Zuckerberg Earn?
According to the SEC registration statement Mark Zuckerberg had a basic salary of $500,000 in 2009, with a bonus of $220,500 and additional benefits worth $783,529 – a total of $1,487,362.
This is actually considerably less than the CEOs and Vice Presidents who all received stock awards:
- Sheryl K. Sandberg, Chief Operating Officer – $30,873,579
- David A. Ebersman, Chief Financial Officer – $18,676,918
- Mike Schroepfer, Vice President of Engineering – $24,727,128
- Theodore W. Ullyot, Vice President, General Counsel and Secretary – $6,958,544
More on the Facebook IPO story:
- Boot up: Facebook IPO ‘in Q2 2012’, inside Amazon.com, and more – Guardian.co.uk, Tuesday 29 November 2011
- Is Facebook worth $100bn? – Guardian.co.uk, Thursday 2 February 2012