Facebook has always been in the news but its decision to go public has made recent waves. Well, the obvious question is – why does a company like Facebook need to go public?
As a matter of fact, Facebook is not going totally public. An estimated 5% of the company is up for sale and it’s almost like it’s being forced to. How? Well, Facebook is unofficially worth close to a whopping $100 billion and all this money came from private stakeholders. And by worth, I mean market value – the potential of the company as considered by investors. Currently, Facebook has 500 such private shareholders and by law if the figure crosses 500, then you need to make financial disclosures. As a result, Facebook was pedantically instructed to disclose financial statements every quarter as is the case with all public companies. However, Facebook decided to go partially public and raise some funds via an Initial Public Offering(IPO) and this partial stake of the company is worth $5 billion. This is by far the biggest IPO for any technology company !
So what does Facebook plan to do with this big pile of cash? Facebook is already rich and popular. It has loads of money available for its expansion plans and is growing at a rapid rate. It already has 800 million users and through user focused advertisements, it is generating its revenue. Today, they reported a billion dollar worth of profit against a $3.7 billion revenue which is a remarkable figure for any company. Anyways, this huge pile of cash from the IPO will present Facebook with additional opportunities in terms of buying hot startups and generating new ideas and products. It will aid compete with rivals by quickly adopting new technologies and innovating marketing tactics.
The IPO was supposed to be announced this week, but no news yet – potential investors are keeping fingers crossed and waiting to plunge. Is it worth plunging? Not sure, since Facebook has already grown drastically. Under-writers are going to evaluate the stock and then come up with a value figure. Analysts, however, feel that Facebook has to grow at an amazing rate of 30% year on year to make this investment really worth. Is it possible? It surely is tough, but not impossible. Tough because when the company is so large, 30% growth on revenue is a mountainous task. Regardless of that, sentiments & speculations mean a lot in the stock market arena and Facebook is definitely the hottest, the fastest, the coolest company on the block. Well only time will tell if the investors get lucky!
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