facebook incorporation: initial public offering

7/22/2019 Facebook Incorporation: Initial Public Offering

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Facebook Incorporation

The Initial Public

Offering


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Introduction

The entire market is waiting for the emergence of

Facebook as a publicly traded company, said JonathanMcNeil, Lead analyst at CXT Technology Fund.

Basically Facebook is an online social networkingservice founded by Mark Zuckerberg and hisroommates. Facebook held its initial public offering (IPO)on Friday, May 18, 2012. The IPO was one of thebiggest in technology, and the biggest in Internet history,

with a peak market capitalization of over $104 billion.Media exparts called it a "cultural touchstone


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Company History and Overview

Facebook was not originally created to be acompany. It was built to accomplish a social missionto make the world more open and connected. Wethink its important that everyone who invests in

facebook understands what this mission means tous, how we make decisions and we do things we do.Most great people care primarily about building andbeing a part of great things, but they want to make

moneysimply put: we dont build services tomake money; we make money to build betterservices.

- Mark Zuckerberg


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Facebook was launched in February 2004 by MarkZuckerberg and his four roommates at HarvardUniversity. It was designed as a social utility to allowfriends to connect to each other over internet. After an

initial run-in with the university administration, theHarvard site took off, leading Zuckerberg to expand toother US and Canadian universities. By mid-2004 haddropped out of Harvard, incorporated Facebook and

moved operation to Palo Alto, Califonia, where thecompany first attracted its first investor, PayPal co-founder Peter Thiel.


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In March 2006, Zuckerberg declined an offer tosell the company for $750 million, arguing it wasworth $2 billion. His optimism was confirmed in

October 2007 when Microsoft bought a 1.6percent for $240 million, valuing Facebook at $15 billion. Facebook continued its rapid growthas it was getting more active users.


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Facebook Timeline, showing active users and revenue:

Year Active Users Revenue

2004 1 million $ 382,000

2005 6 million $ 9 million2006 12 million $ 272 million

2007 58 million $ 153 million



2010 608 million $ 1,974 million

2011 845 million $ 3,711 million


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Statement of Problem

Facebook is an online social networking serviceand a new company in stock exchange. Theproblem is to make decision whether to invest or

not to invest in FacebooksIPO considering theimpact of dot-com bubble of 1990s.


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Findings and Analysis

FacebooksBusiness Model:

Advertizing

Payment Business

User Categories and revenue per user:

MAUs

DAUsARPU


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Competitive Landscape:

Myspace

Google+Twitter

Linkedln


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Economic and Market Conditions:

Potential performance of FacebooksIPO in the

perspective of global economic environment.

Performance of competitors IPO in the perspective of

global economic environment.


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Capitalizing and Selling Stockholders

Dual-class Share Structure

Sales by Current ShareholdersFees Payable to Underwriters

Pricing of Shares


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Evaluation

Evaluation proceeds by using the perception of-

DamodaransAssumption

Forcasting of Cost of CapitalCompetitive Threats.


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Recommendation

CXTs investment committee is still confused

whether they should invest on FacebooksIPOor not. However, I believe Facebook has more

opportunities to grow. They should invest onFacebooksIPO although there are somecompetitive threats. In my point of viewcompetitive threat can be overcome as there are

lot of people are still to come to the Facebooknetwork.


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facebook incorporation: initial public offering

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