February 02, 2012

News of Facebook's IPO Catches the World's Attention as Did the Social Media Site


Wednesday’s announcement that Facebook has filed the required documents to begin selling its coveted stock in a few months has caught the attention of the world – as did the social media site itself.

The company is expected to raise somewhere between $5 billion and $10 billion from the initial public offering, which is likely to take place in May, according to news reports. The value of the world-changing site is predicted to be between $75 billion and $100 billion through the IPO, according to The Wall Street Journal.

And interest in the IPO was so intense that the Securities and Exchange Commission (SEC) website was either very slow or failed to provide access to every online visitor on Wednesday, The Journal reported.

Facebook traces its roots to an idea worked on by eventual CEO Mark Zuckerberg in 2004, while he was still a college student at Harvard. Since then, the company has skyrocketed to over 845 million active users who have used the social media site to make over 100 billion connections, according to ABC News.

The company has also been highly profitable. Last year, it earned some $1 billion in profits on sales of $3.7 billion, ABC News adds. The revenues come from ads, social games and fees, according to The Journal. The number of ads on Facebook jumped 42 percent between 2011 and 2010, The Journal adds, citing data including in the filing with the SEC.

In addition, the number of members, at 845 million, is 39 percent more than the prior year, The Journal said. ABC News notes that the rate of membership increase is slowing down in United States and in other Western nations, with growth instead now taking place in such rapidly developing nations as India and Brazil.

Under federal law, since Facebook has over 500 investors – as a private company – it has to release some of its key corporate information with an April deadline. As a public company, Facebook will become even more transparent. In addition, with the public offering of Facebook stock, a number of the company’s 3,000 employees could become millionaires.

In his letter to investors, Zuckerberg, a billionaire, claims that Facebook was “not originally created to be a company. It was built to accomplish a social mission -- to make the world more open and connected.” It was widely reported that Zuckerberg worries about what impact the IPO will have on the Facebook culture. For instance, he says in his letter, “We work hard at making Facebook the best place for great people to have a big impact on the world and learn from other great people. We have cultivated a unique culture and management approach that we call the Hacker Way.”

The company will use "FB" as a ticker symbol, says The Journal, and will trade on either the New York Stock Exchange or NASDAQ. Morgan Stanley will take part in the IPO, with lesser involvement by Goldman Sachs, Bank of America, Merrill Lynch, Barclays Capital and JP Morgan, news reports said.

Sources said the Facebook IPO was delayed previously, TechZone360 reported last year.

For purposes of comparison, Google’s IPO in 2004 was the biggest Internet IPO on record in the United States, earning $1.9 billion with a $23 billion company valuation, The Journal said.

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Ed Silverstein is a TechZone360 contributor. To read more of his articles, please visit his columnist page.

Edited by Rich Steeves



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