Wed February 1, 2012
Status Updated: Facebook Files Papers For IPO
Let the clever social media-related headlines and ledes begin:
"Facebook made a much-anticipated status update Wednesday: The Internet social network is going public eight years after its computer-hacking CEO Mark Zuckerberg started the service at Harvard University." (The Associated Press)
The wire service adds that:
"In its regulatory filing with the Securities and Exchange Commission, Facebook Inc. indicated it hopes to raise $5 billion in its IPO. That would be the most for an Internet IPO since Google Inc. and its early backers raised $1.9 billion in 2004. The final amount will likely change as Facebook's bankers gauge the investor demand."
That SEC filing, by the way, is posted here.
Wired wonders whether shares will live up to the initial hype:
"The company's relative maturity [it's 8 years old] means that most of the millions — or billions — that could be made from buying public shares have probably already been made. This could mean Facebook's IPO will meet a fate similar to that of this year's other high-profile tech IPOs. Both Zynga and Groupon actually sank below their IPO share price — right out of the gate — a sign of failure on Wall Street. "The tech class of 2011 has underperformed," said Paul Kedrosky, a prominent financial blogger and senior fellow at the Kauffman Foundation, in an interview. "Because of secondary markets, that post-IPO balance happened pre-IPO. My expectation is, Facebook will see a very similar phenomenon."
On All Things Considered, NPR's Steve Henn said trading in Facebook stock probably won't start until sometime in the second quarter of this year. Since the company will likely be valued around $100 billion, he says, it's obviously only selling "a slice" of itself. The money it raises, according to Steve, may help it start buying up other firms.
Update at 6:10 p.m. ET. Among The Risks: "We cannot assure you that we will effectively manage our growth."
There's interesting reading in the Facebook filing, including that quote and this explanation:
"Our employee headcount and the scope and complexity of our business have increased significantly, with the number of full-time employees increasing from 2,127 as of December 31, 2010, to 3,200 as of December 31, 2011, and we expect headcount growth to continue for the foreseeable future. The growth and expansion of our business and products create significant challenges for our management, operational, and financial resources, including managing multiple relations with users, advertisers, Platform developers, and other third parties. In the event of continued growth of our operations or in the number of our third-party relationships, our information technology systems or our internal controls and procedures may not be adequate to support our operations.
"In addition, some members of our management do not have significant experience managing a large global business operation, so our management may not be able to manage such growth effectively. To effectively manage our growth, we must continue to improve our operational, financial, and management processes and systems and to effectively expand, train, and manage our employee base. As our organization continues to grow, and we are required to implement more complex organizational management structures, we may find it increasingly difficult to maintain the benefits of our corporate culture, including our ability to quickly develop and launch new and innovative products. This could negatively affect our business performance."
Update at 5:50 p.m. ET. Revenue, Income Figures:
In its filing, Facebook says it had revenue of $3.7 billion in 2011 and net income of $1 billion. And it reports that "the substantial majority of our revenue is currently generated from third parties advertising on Facebook. In 2009, 2010, and 2011, advertising accounted for 98%, 95%, and 85%, respectively, of our revenue."
Update at 5:45 p.m. ET. "Investors Will Get To Friend Facebook":
NPR.org goes with the "friend" approach with its headline on a story from Marilyn Geewax, who writes that the $5 billion target "was about half what many analysts had projected earlier. But the company said the $5 billion is a place marker that could change. Even if it doesn't, Facebook, based in Menlo Park, Calif., already has so much cash that it doesn't need much more from an IPO."