Wednesday, 30 November 2011

Facebook Ipo

Reacting to yesterday’s Wall Street Journal scoop that Facebook was looking at the April to June 2012 timeframe to raise $10 billion in an IPO, reporters and analysts were quick to point out their lack of surprise.

As many noted, Facebook is required to file financial reports with the Securities and Exchange Commission when the number of private shareholders tops 500. Facebook has indicated that it will exceed that number by the end of the 2011 calendar year, meaning that the company would have to file with the SEC by April 30, 2012, whether it is public or not.

Yet even after citing this fact, the tech media has lifted Facebook’s IPO talk to “cacophonous levels,” in the words of VentureBeat.

It could be the IPO offering amount cited by The Journal: $10 billion. An offering of that size would raise more money than any other technology IPO, says Bloomberg, which lists the current record holder, Infineon Technologies AG, at the comparatively puny amount of $5.23 billion in 1999. Facebook rival Google raised $1.67 billion in its 2004 IPO.

That IPO offering would be based on a $100 billion valuation, more than Cisco, Disney and Amazon, but less than Intel, which is worth $119 billion, according to ZDNet. The Journal’s Geoffrey A. Fowler writes with that type of valuation, Facebook CEO Mark Zuckerberg would be worth $24 billion, richer than Google founders Larry Page and Sergey Brin.

Also blame part of the “cacophonous levels” on the current Wall Street challenges endured lately by Groupon and LinkedIn. In the past five days Groupon shares have fallen 42%. LinkedIn shares are also sagging. After reporting excessively about the public debuts of these two social networking companies, tech reporters are dying to find out what happens when the big kahuna finally goes public.

Bloomberg talks to Chicago-based analyst Josef Schuster who says that Groupon’s decline may be behind Facebook’s intended move. “Groupon has lost a lot of steam and I believe bankers are saying, ‘The market is still hot so let’s do it right now,’” he said.

Stock will allow Facebook to attract more engineering talent, writes The Guardian, “who might have been attracted to the company in earlier days when it was growing faster but now perhaps might be attracted to other companies.”

The IPO would also make it possible to work on new projects, says Erly.com’s Eric Feng, such as a netbook or the rumored-Facebook phone.

Flush with IPO cash, the company could go on a buying spree of small and medium-sized startups, the blog writes. Meanwhile early Facebook employees, now loaded with millions of dollars in shares, could start to fund their own start-ups, taking on a role similar to that of some PayPal investors, aka the “PayPal Mafia,” who are credited with helping spawn Web 2.0 companies earlier in the decade.

Facebook is successful because it tends to think in the long term, pushing products that can take months or years for users to warm up to, TechCrunch argues. It also refrains from cluttering up its pages with advertising.

“But outside stockholders could detract from Facebook’s vision and momentum. They could push for faster returns, and pressure the company to display more ads, turn mobile into a direct revenue stream, and play it safe with product.”

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Republican leaders said they would join Democrats in supporting an extension of the 2011 payroll-tax cut, virtually assuring that American wage-earners will continue to receive the benefit next year.

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