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Math in the News: 1/5/12
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  1. 1. 1 FACEBOOK IPO Presented by: NAYANA. N.P KIRUTHIKA.N
  2. 2. 2Company Description • The firm was launched in 2004 by Harvard student Mark Zuckerberg as an online version of the Harvard Facebook. • Facebook lets users share information, post photos and videos, play games, and otherwise connect with one another through online profiles. • Facebook has about 850 million total users and about 480 million daily users. • the company had 3,200 full-time employees as of December 31, 2011.
  3. 3. 3Financial information
  4. 4. 4
  5. 5. 5 • crossed the line into profitability in 2009, • Facebook earned $229 million that year on sales of $777 million, and has remained profitable ever since. Financial information
  6. 6. 6 How Facebook makes money 1. Advertising : • 85% of Facebook's 2011 revenue, almost $3.2 billion, comes from advertising. • Facebook has grown by grabbing market share from Google and Yahoo. Last year 2. Apps and games: • Facebook allows outside developers to build apps that integrate with Facebook. • Revenue from Zynga, which makes FarmVille and other games played on Facebook, represented 12% of Facebook's total revenue in 2012.
  7. 7. 7Facebook IPO
  8. 8. 8Facebook IPO
  9. 9. 9 Face book's Strategy • a) IPO Document Statement • In the IPO document, Facebook describes its strategy as follows : • “We are in the early days of pursuing our mission to make the world more open and connected. We believe that we have a significant opportunity to further enhance the value we deliver to users, developers, and advertisers. Key elements of our strategy are: – Expand Our Global User Community. – Build Great Social Products to Increase Engagement – Provide Users with the Most Compelling Experience – Build Engaging Mobile Experiences – Enable Developers to Build Great Social Products Using the Face book Platform. – Improve Ad Products for Advertisers and Users
  10. 10. 10 The early start up and expansion of face book was funded in the years from 2004 by: – Zuckerberg and Savarin – injections of cash by various venture capital funds such as Accel partners – funding from various corporations and Microsoft who purchased 1.6% of Face book’s stock for$240 million in 2007 – funding from private individuals such as Hong Kong billionaire Li Ka Shing who invested $60 million in November 2007
  11. 11. 11 • Sale of MySpace to News corp. in July 2005 • Rumors about possible sale of face book to Yahoo in Sept 2006 • Did not happen since Face book board valued it to $8 billion
  12. 12. 12 • Initial Public Offering in 1st February 2012 • Seeking to raise $5 billion • The company document announced – 845 million active users – 2.7 million daily likes and comments • After IPO, Zuckerberg will retain 22% ownership share in face book and will own 57% of the voting shares.
  13. 13. 13 • Underwriters values shares at $38 each, pricing the company at $5 billion – largest valuation to a newly public company • 16th May-FB announced it would sell 25% more shares. • IPO raised to $16 million • 18th May trading began –NASDAQ started with some technical delay, but stock struggled to stay above IPO price most of the day • 25th May- stock ended its full week of trading at $31.91 ,16% decline
  14. 14. 14 • 22nd May – Wall streets Financial Regulatory Authority –investigate-banks underwriting FB had improperly shared info with selected clients • Allegations sparked and law suits were filed claiming $ 2.5 million losses due to IPO • Bloomberg estimated- retail investors lost $ 630 million
  15. 15. 15 Conclusion : reasons to not 'like' Facebook's IPO 1- Slowing growth? Already? • Facebook's sales increased suddenly for the past few years. • Revenue rose by more than 150% in 2010. Sales were up nearly 90% last year. But in the first quarter of 2012, revenue was up just 45% from the same period a year ago • Facebook's first quarter sales fell 6% from the fourth quarter of 2011
  16. 16. 16 2- Rising expenses • Facebook says in its IPO filing: – “Building great things means taking risks. This can be scary and prevents most companies from doing the bold things they should. However, in a world that's changing so quickly, you're guaranteed to fail if you don't take any risks.“ It can be seen : – Net income fell 12% in the first quarter as costs and expenses doubled from a year ago IT means: Facebook investors should be prepared for the company to make more big purchases; Facebook admitted as much in its IPO filing Conclusion : reasons to not 'like' Facebook's IPO
  17. 17. 17 3- Facebook is a media company Facebook generates most of its money from advertising AND That is a changeable and inconsistent business - ARPU (average revenue per user ): Facebook : $1.21 in the first quarter of 2012 EBay : $12 in the first quarter of 2011 Conclusion : reasons to not 'like' Facebook's IPO
  18. 18. 18 4- Everybody is gunning for Facebook - Facebook will not remain the undisputed leader in social forever. Competitor and risks: - Twitter - Google+ (a company that has $49.3 billion in cash .That's almost 13 times the amount Facebook has.) - if Facebook does decide to bulk up in China, it will face intense competition (Tencent, Sina and Renren ) - LinkedIn (professionals are using that site, and not Facebook) Conclusion : reasons to not 'like' Facebook's IPO
  19. 19. 19 THANK YOU

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