Facebook IPO

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For full text article go to : http://www.educorporatebridge.com/IPO/facebook-ipo/ Through this article Facebook IPO you will know about why did facebook went for an IPO, wat was the valuation at which Facebook launched its IPO, What went wrong with Facebook IPO etc.

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Facebook IPO

  1. 1. Facebook IPO
  2. 2. • Facebook issued 421 million shares at a price of $38. This price valued the company at $104 billion • With 845 million active users and 2.7 billion daily likes and comments in just 8 years Facebook IPO undoubtedly became one of the biggest in technology and in internet history with the value of issue of $16006.9 Million • Facebook is a place where people spend most of their time as compared to any other internet property • Facebook an online social networking site, founded on February 4 , 2004 by Mark Zuckerberg with his college roommates and fellow Harvard University students • Facebook held its initial public offering on 18 May 2012 Facebook IPO
  3. 3. According to the rule set by Securities and exchange commission (SEC), from 1964 any private company with more than "500 shareholders of record" must adhere to the same financial disclosure requirements that public companies do That means filing detailed quarterly and yearly financial reports, and dealing with all the scrutiny that comes with a powerful company opening its books Facebook growing big was crossing the shareholders requirements as per SEC i.e. 500 and this became the key reason for the Facebook to go public Why did go public?
  4. 4. Stock Price Graph • Facebook had issued its shares at $ 38 per share. But do you really think the stock traded at $38 per share? Facebook IPO was launched at stock price $ 38 but it did not trade at $38 till August 2013 • Looking at the graph you can see that from May 2012 till August 2013 stock price was trading below $38
  5. 5. What went wrong with IPO ?
  6. 6. 1 2 3 4 Bad Valuation • Facebook generates money in 2 ways ,  Advertising  Others • Facebook generates around 80% of the yearly revenue by giving ads on its site. Remaining 20% of the revenue is generated from other sources. i.e. companies who owns the game pay ,Facebook for their games to be shown on their site • As numerous experts have noted, the click-through rate on Facebook ads averages a dismal 0.051%, or roughly one click per 2,000 viewers • In other words, Dozens of other websites have discovered, customers respond poorly to online advertising, and prefer to shop via sites they find on their own
  7. 7. 1 2 3 4 Bad Valuation • Due to this many advertising company may withdraw their money from the Facebook site • General Motors announced to withdraw $ 10 million advertising buy from the site just before the IPO • The fact is that Facebook has not yet been able to find an ad model which generates revenue proportionate to its revenue • Facebook had sets its price at $28 – $35 per share. But just before the IPO is launched the company raised the price to $38 per share • After the negative disclosures and insider trading it became very clear that the facebook shares were not perfectly priced
  8. 8. 1 2 3 4 Bad Execution • Inspite the shares being over valued Facebook had increased the number of shares by 25% • When the quick profit failed to materialize a couple of the days after the IPO, The investors who received more shares than they wanted effectively became forced sellers • The timing of the key activities makes you wonder what signal the company was sending out • For example, the analyst handling IPO had cut the forecasts of the firm after the IPO filing update • At the same time Facebook leaders and their Investment Banking colleagues were pushing for sale at the top end of their price range
  9. 9. 1 2 3 4 Bad Timing and lawsuits faced • Facebook had faced a number of lawsuits following its IPO. Just prior to IPO , Morgan Stanley as well as many other analysts lowered the Facebook’s earnings expectations which were not disclosed in Facebook’s S – 1 filing • Many users had started using Facebook app in the mobile. • Facebook is finding it difficult to shift its ad sales to mobile platforms , a place the company admitted it does not currently generate any meaningful revenue • Facebook had repeatedly warned in the IPO filing about the challenges they were facing in the mobile advertising
  10. 10. 1 2 3 4 Bad Timing and lawsuits faced • Due to this challenges of mobile advertising just before the IPO, Facebook had realized that its 2Q 2012 revenue would be lower than previously estimated in its IPO statements • This was communicated verbally to the large investors , but small investors were kept in the dark • Due to this large investors made huge profits by betting against the company or many others avoided major losses by backing out of the IPO just in time, while small investors were left with overpriced shares • Since, 57% of the shares sold in the IPO came from Facebook insiders, investors had lacked confidence in the stock
  11. 11. 1 2 3 4 Technical Glitches • On the day of the trading, the stock opening was delayed due to technical glitches, as NASDAQ’s electronic trading platform was unable to handle the high volume of trades • Due to this some investors failed to sell their stock during the first day of trading while the stock price was falling—forcing them to incur bigger losses when their trades finally went through • Due to all this reasons Facebook was not trading at the price on which it had launched i.e. $38 per share
  12. 12. Stock Price Graph Only from 2nd August 2013 Facebook had started trading at a price of $38.05 From 2nd august 2013 till 22nd August 2013 Facebook was trading in the range from $38.05 – $38.55 After 22nd August 2013 the stock price of Facebook had started increasing and todays i.e. 15th April 2014 stock price of Facebook is $58.89 per share
  13. 13. Knowledge is like a line with no ends so To know more on this topic click on the link below http://www.educorporatebridge.co m/IPO/facebook-ipo/ For more Information
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