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http://www.economist.com/blogs/schumpeter/2012/05/facebooks-flotation-0
[SOURCE]
Facebook's flotation
The final countdown
May 16th 2012, 17:24 by M.G.| SAN FRANCISCO
“ZUCKERBERG’S rocket, ready for lift-off” was the title of our article about Facebook’s upcoming initial public offering (IPO) that ran in last week's issue of The Economist. As the first day of trading in its shares, expected to be May 18th, approaches, the rocket’s payload is getting bigger. On May 16th the social network revealed it was boosting the number of shares available by 25%, to 421m, on the back of increased demand. Its bold move is a sign that investors’ hunger for Facebook’s equity could turn its IPO into one of the biggest in American corporate history.
The fact that Facebook’s offering is already said to be heavily oversubscribed is remarkable for a couple of reasons. One is that it is taking place against the backdrop of a turbulent global economy, with chaos in the euro-zone helping to depress stockmarkets almost everywhere. The other is that doubts continue to be raised about the company’s ability to generate huge growth in its core online advertising business, which accounts for more than four-fifths of its revenues. Yet this will be essential if the firm is to justify a valuation that could hit $104 billion if the company achieves a price for its shares at the top of the $34-38 range it has set. (This range could still be increased further before the IPO process is formally closed.)
The bullish case for Facebook, whose offering could raise almost $16 billion, rests on the belief that the company can hit a mother-lode of ad dollars by finding new advertising formats in the same way that, say, Google has minted money from text ads placed alongside search results. But some companies are clearly not convinced by the social network’s efforts so far. On May 15th a report in the Wall Street Journal revealed that General Motors (GM), one of the biggest advertisers in America, had decided to stop advertising with the service because the advertisements the car maker had run were having insufficient impact on consumers.
Interestingly, GM intends to keep promoting itself via its own pages on Facebook, which it does not pay for. Some advertising-industry insiders say this is a common trend. Firms buy some ads on the social network to promote their presence there, but once they have convinced enough people to become “fans” of their pages through such activity, they shut off the ad spigot and concentrate their efforts on creating content for their existing fan-base.
The GM news, which could not have come at a worse time for Facebook, follows on the heels of a study which shows that click-through rates on Facebook's display ads are still way below those run on Google. Worse, according to a new poll commissioned by AP and CNBC, more than half (57 percent) of Facebook users surveyed said they never click on ads or other sponsored content when they use the site.
If the social network wants to boost revenues it may be tempted to use more persuasive—and potentially more invasive—ad formats. But that could alienate its users. A think-piece just published by the World Economic Forum, in collaboration with the Boston Consulting Group, is a salutary reminder that concerns over privacy threaten to hold back the growth of an emerging online economy.
Such concerns do not seem to have deterred institutional investors, who will dominate the IPO. Many are no doubt planning to offload some of their shares to keen retail investors after trading begins, giving a boost to Facebook’s share price in early trading. A similar "pop" has occurred in a number of high-profile web IPOs over the past year.
Taking advantage of the hype around the IPO, many of Facebook’s backers are already planning to part with more shares than originally planned. For instance, Peter Thiel, a well-known Silicon Valley financier, is offering 16.8m shares, more than twice the amount of stock he had initially intended to sell. Some big investment companies, such as Russia’s DST Global and Accel Partners, an American venture-capital firm, have also boosted the number of shares they are willing to part with. Those who buy them will have to hope that once it has left its IPO launch-pad, Facebook can quickly come up with a business model that justifies a stratospheric share price.
SPERMINATOR:
From looking at the world's first largest IPO EVER in human history, do you think FACEBOOK, a 8 year old company is worth USD 104 Billion or about USD 38 for 421 Million Shares IPO listing?
Please state your views and opinions in all angles, from the financial point of view (facebook's financial statements), from the user point of view, from the potential growth point of view, from the customer base point of view, from the sales point of view.
As a Singaporean Investor, would YOU, invest in Facebook? If yes, why, and if no, why.
We are all witnessing one of the largest listing in Human History! Mark Zuckerberg really prove that it is POSSIBLE to be a instant Billionaire in 8 years time! I am personally awed and impressed by this feat...
[SOURCE]
Facebook's flotation
The final countdown
May 16th 2012, 17:24 by M.G.| SAN FRANCISCO
“ZUCKERBERG’S rocket, ready for lift-off” was the title of our article about Facebook’s upcoming initial public offering (IPO) that ran in last week's issue of The Economist. As the first day of trading in its shares, expected to be May 18th, approaches, the rocket’s payload is getting bigger. On May 16th the social network revealed it was boosting the number of shares available by 25%, to 421m, on the back of increased demand. Its bold move is a sign that investors’ hunger for Facebook’s equity could turn its IPO into one of the biggest in American corporate history.
The fact that Facebook’s offering is already said to be heavily oversubscribed is remarkable for a couple of reasons. One is that it is taking place against the backdrop of a turbulent global economy, with chaos in the euro-zone helping to depress stockmarkets almost everywhere. The other is that doubts continue to be raised about the company’s ability to generate huge growth in its core online advertising business, which accounts for more than four-fifths of its revenues. Yet this will be essential if the firm is to justify a valuation that could hit $104 billion if the company achieves a price for its shares at the top of the $34-38 range it has set. (This range could still be increased further before the IPO process is formally closed.)
The bullish case for Facebook, whose offering could raise almost $16 billion, rests on the belief that the company can hit a mother-lode of ad dollars by finding new advertising formats in the same way that, say, Google has minted money from text ads placed alongside search results. But some companies are clearly not convinced by the social network’s efforts so far. On May 15th a report in the Wall Street Journal revealed that General Motors (GM), one of the biggest advertisers in America, had decided to stop advertising with the service because the advertisements the car maker had run were having insufficient impact on consumers.
Interestingly, GM intends to keep promoting itself via its own pages on Facebook, which it does not pay for. Some advertising-industry insiders say this is a common trend. Firms buy some ads on the social network to promote their presence there, but once they have convinced enough people to become “fans” of their pages through such activity, they shut off the ad spigot and concentrate their efforts on creating content for their existing fan-base.
The GM news, which could not have come at a worse time for Facebook, follows on the heels of a study which shows that click-through rates on Facebook's display ads are still way below those run on Google. Worse, according to a new poll commissioned by AP and CNBC, more than half (57 percent) of Facebook users surveyed said they never click on ads or other sponsored content when they use the site.
If the social network wants to boost revenues it may be tempted to use more persuasive—and potentially more invasive—ad formats. But that could alienate its users. A think-piece just published by the World Economic Forum, in collaboration with the Boston Consulting Group, is a salutary reminder that concerns over privacy threaten to hold back the growth of an emerging online economy.
Such concerns do not seem to have deterred institutional investors, who will dominate the IPO. Many are no doubt planning to offload some of their shares to keen retail investors after trading begins, giving a boost to Facebook’s share price in early trading. A similar "pop" has occurred in a number of high-profile web IPOs over the past year.
Taking advantage of the hype around the IPO, many of Facebook’s backers are already planning to part with more shares than originally planned. For instance, Peter Thiel, a well-known Silicon Valley financier, is offering 16.8m shares, more than twice the amount of stock he had initially intended to sell. Some big investment companies, such as Russia’s DST Global and Accel Partners, an American venture-capital firm, have also boosted the number of shares they are willing to part with. Those who buy them will have to hope that once it has left its IPO launch-pad, Facebook can quickly come up with a business model that justifies a stratospheric share price.
SPERMINATOR:
From looking at the world's first largest IPO EVER in human history, do you think FACEBOOK, a 8 year old company is worth USD 104 Billion or about USD 38 for 421 Million Shares IPO listing?
Please state your views and opinions in all angles, from the financial point of view (facebook's financial statements), from the user point of view, from the potential growth point of view, from the customer base point of view, from the sales point of view.
As a Singaporean Investor, would YOU, invest in Facebook? If yes, why, and if no, why.
We are all witnessing one of the largest listing in Human History! Mark Zuckerberg really prove that it is POSSIBLE to be a instant Billionaire in 8 years time! I am personally awed and impressed by this feat...
