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Facebook to Make Its First IPO: Financial World Excited

Posted on the 01 February 2012 by Periscope @periscopepost

Facebook to make its first IPO: Financial world excited

Mark Zuckerberg, Facebook CEO. Photocredit: Robert Scoble http://www.flickr.com/photos/scobleizer/5179395448/sizes/z/in/photostream/

Facebook, the social networking site founded by Mark Zuckerberg at Harvard in 2004, is all set for its Initial Product Offering today. This will mean it can sell shares to the public. The IPO has been rumoured for some time. The website, reported The Daily Telegraph, has garnered 800 million users in less than a decade – and also come up against controversy with regard to its privacy policies. The IPO would mean Facebook could raise up to $10 billion, although other figures set it at $5 billion. The company itself could be valued at $100 billion. It’s the biggest social media IPO ever. And at least one person will be happy (apart from Zuckerberg): Bono, the Irish musician, who is an investor in a venture capital firm that has a 1.5 per cent stake in the company.

Morgan Stanley and four others will handle the IPO, reported Reuters. It has experience in the field, helping GroupOn and Zynga onto the market, beating Goldman Sachs for the coveted “lead-left” position.

Commentators are in a frenzy of speculation: some say that the firm will go nuclear; others that it will have to justify itself more under the public scrutiny. Still others are fearful for users’ privacy. One or two find the whole thing decidedly dull – but they’re in the minority.

“Pandemonium is what I expect in terms of demand for this stock,” says Scott Sweet, senior managing partner at IPO Boutique, an advisory firm. “I don’t think Wall Street would want to anger Facebook users,” quoted on Boston.com

Closer scrutiny. Whilst Zuckerberg will get a paper profit of several billion, said Richard Blackden on The Daily Telegraph, it will also mean that he’ll have to make sure Facebook meets Wall Street’s “expectations.” How it makes money out of its users will be put under ever closer scrutiny, and whilst investors are seeing more money put into online advertising, analysts say that it will put more pressure on the site, since it needs to weigh raising its advertising revenues against putting off its users. Mashable broke down the figures in a series of graphs; TechCrunch argued that stockholders will want faster returns, whereas Facebook has always worked longer term.

Should users be worried? Some analysts say that there will be more demand for the explotation of user data, which could lead to more privacy concerns, said Jeff MacArthur, the co-founder of MGImedia.ca, a social media consulting firm, quoted on The Chronicle Herald. A professor of media arts on the same site said that Facebook’s layout is unlikely to change – “in the short term” – but there will be “more targeted advertising.”

Where’s the money? Let’s put those numbers into perspective, said Dominic Basulto on The Washington Post. When Google went public, it raised $1.9 billion from investors, with a valuation of $23 billion. Google’s now worht $185 billion – so if you invested in it at the IPO, it would be worth ten times as much. Facebook’s $100 billion valuation is not set in stone – others estimate it at $75 billion. Facebook says it’s making its money by advertising – but this isn’t what Wall Street wants – “Advertising and page views have a way of drying up over time.” Wall Street wants a way of “monetizing” those 800 millino users. The real money comes in apps and gaming platforms.

Is it all pie in the sky? Look at Zynga and GroupOn, said Paul Carr on The Guardian. Zynga’s consistently traded below its $10 offer price – because “the market simply wasn’t sure how long the world will continue to buy imaginary tractors to tend digital crops.” And groupon was initially priced at $20 a share – but is now at $19.6. So will Facebook “crash and burn?” The answer is “probably not.” There isn’t “much chance” of it “going out of fashion.” Despite many people saying that it’s “over”, it “stubbornly refuses to become unpopular.” Whilst many people are set to get very rich over this, “for the rest of us there’s likely to be only one surprising thing about Facebook’s IPO. And that’s just how dull a $100 billion flotation can be.”


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