Published On: Fri, May 11th, 2012

Facebook Going IPO

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Facebook Going IPO

Facebook, founded in 2004, and since then Mark Zuckerberg ‘’the mad scientist’’ of Facebook Inc. has gone pro. Beginning of this year, nobody really knew the current valuation of the company. It’s financial worth has certainly grown over the years and everybody is looking to see if it will pass the rumored $100 billion mark. In short the only official number we had was $50 billion. Investments have made valuing the company around the $70 billion mark while sales on secondary markets have priced it in the $80 billion range. The expected valuation is anywhere between $75 billion to $100 billion and there a lot of time for that to even change.
These were the latest updates in February 2012. Now that Facebook has filed their IPO documentation we have gotten to know the real worth of the company.

What could go wrong when Facebook goes public?

When Facebook filed their IPO documentation on the 1st Feb 2012 they had many pages of risks factors, this was Facebook’s explanation on what could derail or slow down the Facebook train. Risk factors including Growth rate, 145 million monthly active users. Facebook says that it ‘’ doesn’t know how much faster this rate can grow’’, they weren’t to penetrate in the worlds market. After the much success of MySpace and then its sudden downfall, Facebook could be the next one to crash. Mark States in his 2000 word letter attached to this IPO documentation ‘’ Facebook was set up for its users, first and not as a business, Going public won’t change us’’.

Facebook seeks to raise $5 billion in IPO (Initial public offering) by going public in comparison to Google going public it raised to $1.9 billion. Facebook revenue doubled last year to $3.7 billion with making a profit of $1 billion. 12% of its profits came from zynga the gaming giant behind Farmville. Facebook has 845 million users and each is worth $4.39 in revenue a year. Each day 483 million users log into Facebook. CEO Mark Zuckerberg annual current salary is $500,000 and will drop it to $1 a year from the beginning of the next year because his stake in Facebook stock could be worth $28.4 billion dollars if Facebook is valued at $100 billion.

Mark Zuckerberg has the most shares of Facebook of 28.4%; he also controls 56.9% of the voting power of shares. There could be risks which company talked about, Google Plus could be a stronger competitor in the future, but the filing also said that mobile users pose a threat to the bottom line. There were more than 425 million people that log into Facebook from a phone or tablet. Facebook says it doesn’t directly generate any meaningful revenue from those mobile users.

Why did Zuckerberg decide to go public now, after 8 years of keeping Facebook private?
The reason why Mark Zuckerberg decided to go public was simply, because Facebook surpassed the number of investors to remain a private company. Facebook does want to expand future for that they had to go public.

In our opinion , Facebook has nearly half a billion people logging in everyday, as compared to twitter with only 140 million (registered users) At the scale Facebook has reached, it doesn’t even need to grow further. It just needs to find more ways to help the existing users get more value out of the platform, which it is doing. For the first time a company has made it big with a focus on ‘people’ rather than material.




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