This presentation provides an analysis of Facebook's performance following its IPO and estimates for future performance. It discusses significant developments since the IPO, a range of analyst estimates and price targets, considerations around upcoming lockup expirations, patterns seen in other companies, and an intrinsic valuation analysis. The presentation concludes that Facebook's fundamentals have been good in recent months, its stock may follow similar post-IPO trading patterns as other companies, and the shares could be attractive if the price drops to the high teens around the lockup expiration.

1. WE WILL START AT 11:05

2. Sizing up a post-IPO Facebook
November 1, 2012
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3. Kris Tuttle
1970’s
Company Advisory Building Microcomputers
Research & Analysis 1980’s
IPO Coverage Applied AI, CMU, IBM
Funding, M&A 1990’s
Equity Research, Banking
2000’s
Angel Investing, Entrepreneur
2010’s
Building out SoundView
3

4. Agenda
• Quick look at FB performance and analysis of the IPO.
• Significant developments post the IPO.
• A range of estimates and price targets on the street.
• Facing up to the lockup expirations.
• Are there patterns that we may see again in FB trading?
• What’s the Intrinsic Valuation of FB?
• Wrap up and Q&A.
© SoundView Technology Group 2012 4

5. A Few Charts
Facebook FB LinkedIn LNKD
Yelp YELP NetSuite N
5

6. IPO Marketing Questions
LIFE AFTER SATURATION
How will FB increase ARPU?
What kind of M&A path will FB take?
- Video: Natural extension of photos.
- Tumblr: Micro-blogging fits well.
- Mobile Commerce: Huge profit potential.
- Social Search: Very high ROIC.
- Music: Murky model but natural extension.
Wildcard Ideas:
- Sports: Yahoo owns it but it could be on FB.
- Security: Real identity + ties in to mobile.
- Geneology: Too late! Missed ACOM already.
© SoundView Technology Group 2012 6

7. Post-IPO Considerations
[See IPO Marketing Questions] PLUS:
- Does FB really care about relationships with institutional investors?
- Post-Instagram deals have not offered a strong directional signal from mgmt.
- Mobile is the new conundrum for FB in the ARPU area.
Some meaningful datapoints:
- Solidified role as the standard:
1. Apple moved FB deeper into their ecosystem in terms of integration.
2. Microsoft has done the same in their recent announcements.
3. Google+ is another swing and a miss for GOOG
- There have been some mistakes: Games, Answers
- LinkedIn remains the “Facebook for business”
A few considerations on mobile and ARPU:
- Larger/better screens devices on phones and tablets will help FB.
- Local is a good opportunity for FB when tied to social search.
Long term: Will FB turn out to be a real development platform and ecosystem?
© SoundView Technology Group 2012 7

8. Brokers Ranges & Targets
Revenues High Low Median
2013 $6.9B $5.6B $6.4B Rating # Analysts
2014 $9.2B $6.5B $8.1B
Buy 14
2015 $11.9B $7.35B $10.0B
Outperform 11
EPS High Low Median
2013 $0.85 $0.45 $0.64 Hold 10
2014 $1.13 $0.50 $0.81
Underperform 1
2015 $1.26 $0.54 $1.14
Sell 1
High Low Median
Price Target $41 $16 $29
© SoundView Technology Group 2012 8

9. The Lock Up Expiration
Lots of stock will be coming into the float so investors should be wary of selling
pressure in both Q4 and Q1 2013 (for tax reasons.)
However - It’s hard to say how much hedging has gone on in both listed options
and OTC derivatives. This can lead to surprises.
Investors should focus on *both* timing, trading and valuation in the next few
months. Institutions will be thinking about 2013.
© SoundView Technology Group 2012 9

10. FB LNKD N Overlay
FB IV = $32 Netsuite N
LNKD IV = $123
10

11. Valuation
© SoundView Technology Group 2012 11

12. Conclusions
So far FB stock is down sharply from the IPO and overall expectations have
declined by approximately 10%. Fundamentals have been pretty good in the last
few months and look encouraging.
We have seen this type of trading pattern in the IPO market before with stocks like
LNKD and N. FB may do something similar.
There are no reliable rules around a major lockup expiration. However it wouldn’t
be surprising if the shares traded at 50% of our IV or $16/share. Nobody knows
what will happen though.
Based on our $32 IV the shares are attractive now and would be pretty compelling
in the high-teens.
Individuals will be thinking about taxes, institutions will be thinking about 2013
performance. That means lots of shares changing hands from November to January.
© SoundView Technology Group 2012 12

13. Closing/Contact Slide
To discuss SoundView Technology Group services, or for any questions, requests
or comments please contact me:
kris@soundviewadvisory.com or call 617-934-1877.
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