Facebook set for stock market floatation

Posted on February 12, 2012

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written by Robert Pollard for New Statesman

Social networking site unveils plans for $5bn IPO.

Facebook, the world’s largest and most popular social networking site, has announced it will sell shares that value the company at $100bn. The Initial Public Offering (IPO) is expected to be the largest since Google’s in 2004.

Twenty-seven-year-old Mark Zuckerberg, who created and launched the site whilst studying at Harvard University, is set have a $28bn stake. The site currently has 845m users and announced a profit of $1bn last year, a 65 per cent ($606m) increase on the previous year’s figures.

Already there have been suggestions that around 1,000 current and former employees could become millionaires once the process is complete.

The site filed for floatation on Wednesday after the US stock markets ceased trading. A document submitted to the Securities and Exchange Commission revealed some interesting facts. Zuckerberg has a 28.4 per cent share of Facebook, and of its 845m users, a massive 443m use the site daily. It also showed that the site’s revenue increased 88 per cent between 2010 and 2011.

The document also showed that Sheryl Sandberg, the former Google executive who is now Facebook’s chief operating officer, earned a salary $295,833 in 2011, with a further $30.8m of stock awards. The former chief of staff to the US Treasury is now widely expected to become Facebook’s public face on Wall Street.

Zuckerberg released a letter to the public ahead of the sale which said:

We don’t build services to make money; we make money to build better services

These days I think more and more people want to use services from companies that believe in something beyond simply maximizing profits.

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.

The estimated $100bn value of Facebook is comparable to that of Amazon and McDonald’s, however still falls short of online giants Google and Yahoo.

The batch of millionaires set to be created by the sale of Facebook includes Dustin Moskovitz, co-founder of the site, and 7.6 per cent stakeholder. Sean Parker, the founding president, will also become a millionaire with his 4 per cent share. Parker also launched Napster, a music downloading site that ran into legal difficulties over claims of copyright infringement. U2 frontman Bono will also reap financial rewards thanks to his stake in Elevation Partners, which has $120m worth of shares in Facebook.

Question marks remain over how Facebook plans to maintain growth. Peter Cohan, founder of Cohan associates, a management consultancy firm, has suggested long-term success is far less certain than some believe. “Quite simply, there is no other company out there that could pull off this valuation. People are dying to get into this company because they are on Facebook, it’s irrational if you look at the numbers”. He added that, “three months after the IPO, the first earnings report will be the key. If Facebook beats expectations, it will be fine. If it doesn’t, it will get trashed.”

The success of Facebook is further evidence as to the power of the internet in terms of social and political change. Eight years have passed since its creation and the site has been responsible for a Hollywood film, the coining of new verb phrases, and used as a tool for the uprising in Egypt. Facebook’s decision to float on the stock market has now also created the world’s youngest billionaire and proves that social networking is a potentially lucrative sector of the internet.

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Posted in: Business