The most anticipated tech IPO since Google went public in August 2004, Facebook, the world’s largest social-networking service, is likely to file papers with SEC for its initial public offering (IPO) this week.
The expected market valuation of the company is around $100 billion.
Facebook is founded by Mark Zuckerberg with his college roommates - Eduardo Saverin, Dustin Moskovitz and Chris Hughes. The Web site's membership was initially limited to Harvard students, but was expanded to other colleges in the Boston area, the Ivy League, and Stanford University. It gradually added support for students at various other universities before opening to high school students, and eventually to anyone aged 13 and over.
Revenue
Most of Facebook's revenue comes from advertising. Microsoft is Facebook's exclusive partner for serving banner advertising, and therefore Facebook serves only advertisements that exist in Microsoft's advertisement inventory.
| Revenues | ||
| Year | Revenue | Growth |
| 2006 | $52 | — |
| 2007 | $150 | 188% |
| 2008 | $280 | 87% |
| 2009 | $775 | 177% |
| 2010 | $2,000 | 158% |
| 2011 | $4,270 | 114% |
Facebook generally has a lower click through rate (CTR) for advertisements than most major Web sites. According to Business Week.com, banner advertisements on Facebook have generally received one-fifth the number of clicks compared to those on the Web as a whole, although specific comparisons can reveal a much larger disparity.
For 2012, Facebook is expected to post $5.78 billion in ad revenue globally.
Facebook's reported valuation of $US75 billion to $US100 billion compares with about $US100 billion for McDonald's Corp, $90 billion for Citigroup Inc and Amazon.com Inc and $US75 billion for Bank of America Corp. It would exceed the market cap of $US55 billion for Hewlett-Packard Co, one of the world's largest technology companies by revenue.
Both Facebook and Google earn most of their money from advertising and are now competing to gain as much information as possible about their users to help advertisers target niche audiences.
Even with Facebook's heady growth rate, Google had ad revenue last year of more than five times what Facebook is expected to get in 2013. Yet it is Google that is mimicking Facebook in building a rival social network called Plus.
OBJECTS OF THE IPO
The IPO funds are intended to be used for its expansion and fend off competition from rivals such as Google and Twitter.
LEAD ARRANGERS / MANAGERS
Morgan Stanley and Goldman Sachs Group are the lead managers.
The targeted amount would slot it among the world's 15 largest IPOs.
At the reported price, Facebook's IPO would be the biggest for a US Internet company - topping the debut of one of its main rivals, Google Inc.
VALUATION:
- FB is grossly over-valued. On a price/sales basis, Facebook would trade at 19.7 — that’s 497 percent higher than Apple at 3.3 and 294 percent above Google’s P/S of 5. Facebook’s P/E of 80 is far higher than Google’s 19 or Apple’s 12.7. This means that Facebook’s stock might not hold up after the first-day IPO pop.
- FB’s revenues represent a mere 1 percent of the world’s $507 billion in total ad spending and its IPO would not lead to a major change in the trajectory of corporate spend.
Sir, can an indian investor invest in facebook IPO ?
ReplyDeleteReply to Harish - NO.
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