Facebook goes public, worth over $100 billion

By: AP Email
By: AP Email

NEW YORK (AP) - Facebook updated its status to "public
company" on Friday.

After an anxiety-filled half-hour delay, its stock began trading
on the Nasdaq Stock Market for the first time as investors were
finally able to put a dollar value on the company that turned
online social networking into a global cultural phenomenon.

By early afternoon, the stock was trading at around $41, an 8
percent increase for the day. That means Facebook is worth about
$112 billion, more than Amazon.com, McDonalds and storied Silicon
Valley icons Hewlett-Packard and Cisco.

But as many people looked for a big first-day pop in Facebook's
share price, the single-digit increase was somewhat of a letdown.

"It wasn't quite as exciting as it could have been," said Nick
Einhorn, an analyst with IPO advisory firm Renaissance Capital.
"But I don't think we should view it as a failure."

Indeed, the small jump in price could be seen as an indication
that Facebook and the investment banks that arranged the initial
public offering priced the stock in an appropriate range.

It's also a supply and demand issue. Facebook offered nearly 20
percent of its available stock in the IPO, so there was enough to
meet demand. In comparison, Google offered just 7.2 percent of its
stock when it went public in 2004.

To IPOdesktop's Francis Gaskins, it means mom-and-pop investors
are becoming "much more educated and careful" about not buying
into hype. And he said that the banks taking Facebook public have
learned from the 10 IPOs of social media companies in the past year
and are better able to gauge how much stock to make available in an
initial offering. He said a rise of 5 percent to 8 percent in this
"tough market" is a success.

It might not have been possible for the social network to live
up to the hype that led up to its IPO. It's Facebook, after all, a
place where people are emotionally invested in endless online
diversions and rekindled friendships, an endless depository of baby
photos, favorite songs and fleeting memories.

"It's probably one of the first times there has been an IPO
where everyone sort of has a stake in the outcome," said Gartner
analyst Brian Blau. While most Facebook users won't see a penny
from the offering, they are all intimately familiar with the
company.

Earlier Friday, the company's 28-year-old CEO, Mark Zuckerberg,
smiled as he rang the opening bell from Facebook's headquarters in
Menlo Park, Calif. Surrounded by cheering Facebook employees and
wearing his signature hoodie, he pushed the button that signals the
opening of the stock market in New York. The morning's events
followed an all-night "hackathon" at the company, where engineers
stayed up coding software and conjuring up new ideas for Facebook
and its 900 million users.

"Right now this all seems like a big deal. Going public is an
important milestone in our history. But here's the thing, our
mission isn't to be a public company. Our mission is to make the
world more open and connected," Zuckerberg said. "In the past
eight years, all of you out there have built the largest community
in the history of the world. You've done amazing things that we
never would have dreamed of and I can't wait to see what you guys
all do going forward."

Afterward, employees tried to get back to business as usual,
building the company under immense new pressure to meet
shareholders' expectations. To remind everyone not to get caught up
in the hoopla, Facebook's 2,000 employees were given t-shirts that
read "Stay focused & keep hacking."

On Thursday, Facebook and the investment bankers settled on a
price of $38 per share. The company and its early investors raised
$16 billion in the offering, which valued Facebook at $104 billion.
That makes Facebook the most valuable U.S. company to ever go
public.

Now, the stock market will assign a dollar value to Facebook
that will rise and fall with investor whims. It will be subject to
broad economic forces and held accountable for profit it earns -or
loses- from one quarter to the next.

But Facebook is one a rare companies whose IPO transcends Wall
Street's money lust. It is a cultural touchstone for the way
technology reshapes our lives. Since its start as a scrappy network
for college students, Facebook has come to define social networking
by getting people around the world to share everything from photos
of their pets to their deepest thoughts.

It has done so while becoming one of the few profitable Internet
companies to go public recently. It had net income of $205 million
in the first three months of 2012, on revenue of $1.06 billion. In
all of 2011, it earned $1 billion, up from $606 million a year
earlier. That's a far cry from 2007, when it posted a net loss of
$138 million and revenue of $153 million. The company makes most of its money from advertising. It also takes a cut from the money
people spend on virtual items in Facebook games such as
"FarmVille."

Facebook's public debut marks a new milestone in the history of
the Internet. In 1995, Netscape Communications' IPO gave people
their first chance to invest in a company whose graphical Web
browser made the Internet more engaging and easier to navigate. Its
hotly anticipated IPO lit the fuse that ignited the dot-com boom.

That explosion of entrepreneurial activity and investment
culminated five years later in a devastating bust that obliterated
the notion that the Internet had hatched a "new economy".

It took Google Inc.'s IPO in 2004 to prove that an Internet
company with a disruptive idea could be profitable. In the process,
the Internet search leader is forcing other industries to adapt to
a new order where people have come to expect to be able to find
just about anything they want by entering a few words into a box on
any device with an Internet connection.

Facebook's IPO heralds a new phase of the Internet's evolution.
This social era makes connections among people as important as
Google's massive index of Web links. Still, the IPO will raise new
pressures for Facebook to generate more revenue, perhaps by digging further into the trove of revealing information that people share
on the network to sell even more targeted ads.

Facebook's IPO almost certainly will enrich other up-and-coming
entrepreneurs as Zuckerberg uses the company's cash and stock to
buy other startups in an effort to being in other talented engineers and promising technology. That's what has been doing for years. Since it went public in 2004, Google has spent $10.2 billion
buying nearly 200 other companies. Those figures don't include
Google's still-pending $12.5 billion acquisition of cellphone maker
Motorola Mobility Holdings Inc., which is still awaiting regulatory
approval in China.

Zuckerberg's biggest deal so far came when he agreed to buy
Instagram, a maker of a popular mobile app for photos, for $1
billion. Because most of the deal is being paid for in stock,
Instagram is already getting richer. Based on Facebook's IPO price
of $38 per share, Instagram is in line to receive nearly $1.2
billion.

Though Zuckerberg rang the Nasdaq opening bell from California,
people outside the stock market in Times Square snapped photos of a big blue Facebook sign that lit up the building. Some of them used
their smart phones to check in to the Nasdaq on Facebook. Frederick
Nolde, who was visiting from Richmond, Va., said he bought 100
shares through the online brokerage eTrade.

He thinks the company is worth $100 billion. "I think Google is
a good comparison and it's worth $200 to 300 billion. The real
question is how they do in mobile. If they can figure that out
they'll do well."


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