Capital is a necessary element for any business for its continuous
operation. A business may raise money by selling share. That is the way that
Facebook- the world’s largest social networking site has already used. Achievement
of the organization is clear with totals 845 million members. They have shared
more than 100 petabytes (100 quadrillion bytes) of photos and videos with
Facebook a day.
Therefore, Facebook filed paper an initial public offering (OPI) to
raise $5 billion is the hottest event. The event as well opens a new phase for
the organization history.
It is said that Facebook is a successful business with the total revenue
up to $3.7 billion and $1 billion profit last year. The data is much higher
than Google- another famous network site was when it debuted on public market.
Many people are filled with the
aspiration to the success of the organization. I- Spy, which used to send
nearly all of its clients' marketing budgets in Google's direction, is now putting
about 10% on Facebook, and expects that to grow. Jim Brigden, I-Spy's CEO, also
showed his belief in the success of the firm.
Lawrence Summers, the former
secretary of the Treasury thought “it is a major sign of maturation”. He
recognized that would be Mark Zuckerberg’s remarkable achievement as Zuckerberg
just built a global institution in a very short time.
Facebook’s IPO could not be the biggest IPO in America history but it is
definitely the biggest ones in Internet and technology’s history, said by David
Kirkpatrick, author of "The Facebook Effect."
However, Facebook IPO- is it
really a good news???
There are some obstacles
available for Facebook’s Board of Management while doing OPI.
Firstly, regulation under SEC
requires the firm to provide fully information about certain financial
position. It means the firm cannot keep its finances private anymore. “By going
public, Facebook loses some of is mystery and cool, having to declare profits
and losses and answer to shareholders every quarter”.
On the other hand, with the
target to raise $5 billion and the company’ stock market valuation is in the
expectation $75 billion to $100 billions, it means “that only 5 to 7 percent of
the company’s shares will be available to public investors”. I think that it
will be a challenge for the firm to create an amazing, incredibly change,
especially in short time.
Additionally, with previous
achievements, the public has the rights to expect more in the performance of
the firm.
Company was reported with doubled
$1.6 billion revenue as well as $500 million net income. It is a nice result
but parties like Wall Street still want to see another thing different.
“Can Facebook
continue to grow its fast? That is the question”, said Michael A. Yoshikami,
chief executive of wealth management firm YCMNET Advisor.
What is Facebook going to do for
sustainability and growth?
There are two main activities for
Facebook to earn profit. One of them is advertising. Trip Chowdhry, an analyst
at Global Equities stated that “much of its potential advertising revenue is
dependent on the frequency of sharing”. However, IPOs are not always
successful. Look back the history, case of Zillow is an example, in which the
company priced its IPO at $20 per share, with the stock ending its first day at
$35.77. Another case is Pandora offered its shares at $16 when it went public
in June. Now, the stock trades around $13.
Deciding to become a public
company, Facebook must put more effort to gain more profit.
It is
calculated that, although Facebook IPO is an interesting topic, it still cannot
excite people due to its threat.
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