Facebook prices at $38 in largest Internet IPO ever
The social network raises $16 billion. Trading is set to start at 11 a.m. and may be frenzied. But questions remain.
Facebook, the social networking site that lets hundreds of millions of people trade messages, pictures and videos every day, raised $16 billion for its original stockholders and investors when 421.2 million shares were priced at $38 a share late Thursday.
The price makes this the largest Internet IPO ever. It values the company at $104.1 billion, making Facebook the 40th-most-valuable company in the world, ahead of Amazon.com (AMZN) and Qualcomm (QCOM) but just behind PepsiCo (PEP). It makes founder and CEO Mark Zuckerberg worth $19.1 billion on the basis of his Facebook holdings alone -- at just age 28.
The pricing, which is what Facebook and selling shareholders will get for their shares, came as the U.S. stock market slumped in late-day trading Thursday, with the Dow Jones industrials ($INDU) closing down 156 points.
The pricing is the last step before the stock can be traded on U.S. financial markets. Trading in Facebook shares is expected to start at 11 a.m. ET Friday on the Nasdaq system with the ticker FB. What cannot be known with certainty is where the stock will open, much less where it will close. But look for a lot of volatility.
Investor interest in the stock is enormous. Many brokerages marketing shares stopped taking orders Wednesday. Road shows -- the presentations the company put on around the country to explain the stock to potential investors -- were packed affairs.
And as much attention was focused on Mark Zuckerberg's wardrobe as the Palo Alto, Calif., company itself. Zuckerbook appeared at his first event, in New York City, wearing his trademark hoodie.
Facebook's rise is one of those mythical American success stories. Zuckerman founded the company in 2004 while he was a student at Harvard. The name comes from the books colleges give incoming freshmen to help them identify their classmates.
The company grossed $382,000 that year. In 2011, revenue hit $3.7 billion, with net income reaching $1 billion, according to the company's prospectus. Its reach in the United States, Canada, Latin America and Europe is enormous. The company estimates 526 million people used the service every day as of March 31.
With success and a ridiculously visible IPO comes scrutiny. When the stock starts to trade on Friday, the debate will become more heated, especially if the stock really soars. At $50, John Cassidy of The New Yorker magazine noted Wednesday, the company would be worth nearly $137 billion. And after that, who knows?
Of course, Google (GOOG) went public at $85 a share in August 2004 and closed at $100 at the end of its first day of trading.
The debate over whether Facebook is worth $38 a share centers around several issues that won't be resolved for some time:
The valuation issue: At $38 a share and $1 billion in profit, Facebook is selling at 100 times trailing earnings. That's pricey.
At $628.93, Google's close on Wednesday, the shares were selling at 24 times trailing earnings and 14 times projected earnings.
Apple (AAPL) is selling at 13 times earnings and 10 times forward earnings.
The growth issue: As Facebook gets older, its revenue growth will necessarily shrink. It's shrinking already. 2011 revenue grew 88% over 2010 to $3.7 billion. In the first quarter of this year, the growth rate dropped to 33%.
The business-model quandary: About 85% of Facebook's revenue comes from advertising, and there's a question about whether the advertising works. With the Internet, advertisers think of it roughly in these terms: How many people click on an ad? How many of them actually buy something via the ad?
General Motors (GM), in fact, said it was going to stop buying ads on Facebook because the automaker didn't think the results justified the cost. GM has spent $10 million on ads on Facebook.
Rival Ford Motor (F) said it has generated plenty of leads via its advertising with Facebook.
There are two additional issues that will have to be resolved positively for Facebook's stock to thrive.
First, it needs to find a way to generate large gobs of revenue from its mobile traffic. Smartphones are generating roughly half of its traffic, but the advertising is modest at best.
Second, Asia is one of the biggest sources of growth. Ask Apple, which now gets 40% of revenue from China. But Facebook has a relatively small presence there and none in China.
Wow. Our education system has completely failed.
"Zuckerbook" appeared at his first event, in New York City, wearing his trademark hoodie."
"Zuckerman" founded the company in 2004 while he was a student at Harvard."
It's Zuckerberg. Idiots.
MENLO PARK, CA. – On the eve of Facebook’s IPO, Founder and CEO Mark Zuckerberg published the following letter to potential investors:
Dear Potential Investor:
For years, you've wasted your time on Facebook. Now here’s your chance to waste your money on it, too.
Tomorrow is Facebook’s IPO, and I know what some of you are thinking. How will Facebook be any different from the dot-com bubble of the early 2000’s?
For one thing, those bad dot-com stocks were all speculation and hype, and weren’t based on real businesses. Facebook, on the other hand, is based on a solid foundation of angry birds and imaginary sheep.
Second, Facebook is the most successful social network in the world, enabling millions to share information of no interest with people they barely know.
Third, every time someone clicks on a Facebook ad, Facebook makes money. And while no one has ever done this on purpose, millions have done it by mistake while drunk. We totally stole this idea from iTunes.
Finally, if you invest in Facebook, you’ll be far from alone. As a result of using Facebook for the past few years, over 900 million people in the world have suffered mild to moderate brain damage, impairing their ability to make reasoned judgments. These will be your fellow Facebook investors.
With your help, if all goes as planned tomorrow, Facebook’s IPO will net $100 billion. To put that number in context, it would take JP Morgan four or five trades to lose that much money.
One last thing: what will, I, Mark Zuckerberg, do with the $18 billion I’m expected to earn from Facebook’s IPO? Well, I’m considering buying Greece, but that would still leave me with $18 billion. LOL.
Check it out. Facebook is moving along nicely, everyone is happy telling the world what they're doing, where they are, where they're going, where they've been, yada yada yada... everybody knows what everyone is doing. Then one day, BAM! Facebook decides to change to a cluttered and disfunctional timeline layout. Pretty much all the users hate it. (I don't know a single person that likes it) Facebook knows how unhappy the users are with it but do they change it? No. Do they give you the option of using the original format? No. Why is that? Advertising.
Wrap your heads around this. Everyone is telling everyone about their lifestyle- where they go, what they do, how they're spending their time and money. Facebook sees this as an advertising tool so they create timeline. Companies and businesses can now see trends- where people have been, what people have been there, and when they went. There's so much info on Facebook and now it's all neat and tidy so the advertisers can see trends.
Facebook doesn't care about it's users anymore. It's changing from a social networking site to something different- a marketing company? I don't know. Facebook has sold out, and is now cashing out. It's going to start going downhill because now it has to make market share and shareholders top priority.
Answer...........POP, (bubble breaking on VIRTUAL business)!
This facebook offering may be one of the greatest heists of all time. The robbers don't even have to wear a mask, it's all legal.
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