THE WORLD’s largest social network announced its $5-billion initial public offering on February 1. It is the largest IPO on record for an internet company. The market capitalisation of Facebook could reach $75-100 billion.
Facebook Inc. is already trading like a public company as the US Securities and Exchange Commission rules enable insiders and investors with $1-million of net worth and a salary of more than $200,000 to qualify to buy stock on private marketplaces. Also, in an auction on SharesPost, Facebook stock traded for $42 in late February, valuing the company at $98 billion. In October 2011 the stock was bought for $30 to $31.
There are 50 to 100 investors in most companies when they go public. Facebook's shareholder base has already grown to 1,000-plus, Sam Hamadeh, head of research firm PrivCo, estimates.
Facebook's is the largest IPO for an internet company and it reflects the wealth created by the technology company’s entrance into the public markets. It has long been astonishing.
Mark Zuckerberg, the company’s co-founder, has 533.8 million shares, worth $28.4 billion, based on a company valuation of $100 billion, or $53 a share. He also has undisputed control of the company, a remarkable achievement since it has received financing from some of the world’s top business minds. He owns 28.4 percent of the company outright and controls 57 percent of the voting rights.
When Google went to market with its $1.67-billion IPO in 2004, hundreds of people became millionaires. Google’s co-founders, Larry Page and Sergey Brin, each owned about 15 percent of their company when it went public in 2004. Bill Gates controlled only 49.2 percent of Microsoft when it went public in 1986.
Two factors distinguish Facebook’s turn at going public. For one, the projected value of Facebook is enormous – the largest on record for an internet company, and several times greater than even Google’s at its IPO in 2004. And unlike Google’s public offering, much of the wealth tied to Facebook has already been realised, thanks to a thriving secondary market and eager investors.
Even if Facebook hits the low end of expectations for its offering, it will yield some of the greatest returns in venture capital history.
The size of the IPO, together with the sheer popularity of Facebook among users and advertisers alike, launched a wave of information load to the extent that Zuckerberg was prompted to warn Wall Street banks involved in the IPO to stop leaking juicy titbits to the media and to threaten them with being dropped from the process.
The California State Teachers’ Retirement System (CalSTRS), a powerful US pension fund which is an investor in Facebook through two of its private-equity managers, voiced concerns over governance issues at the largest social network.
Corporate governance experts said that Zuckerberg's majority control puts too much power in the hands of a single person.
The author works for WBP Online
12. Mar 2012 at 0:00 | Michal Darila