Facebook filed its hotly anticipated initial public offering Wednesday afternoon, but for the average investor, the news that shares of the company will soon hit the market doesn't mean much.
The filing signals that the world's largest social networking site is looking to raise $5 billion. Those who want to buy shares will have to get in line: Morgan Stanley and other big banks working on the sale will be first to get their hands on Facebook shares. These banks are involved due to their ability to sell the highly anticipated stock to institutional investors, like money managers. Chances are that shares will go quickly, according to Gizmodo.
Who stands to gain from the offering? Facebook's early investors currently own stake in the company and the value of these shares will be determined by the IPO. In its IPO filing, Facebook will put a sticker price on itself -- estimating the net worth of its assets (including its gargantuan trove of personal data) and projecting future growth for the company.
It's the job of the Securities and Exchange Commission to scrutinize this data and determine the legitimacy of Facebook's valuation. Then, it will likely be three to four months until shares of Facebook begin trading on the stock market.
Last January, an investment by Goldman Sachs' valued the company at $50 billion. According to the New York Times, Facebook -- which brought in $3.7 billion in revenue in 2011, according to Wednesday's announcement -- is expected to be valued at $100 billion when its IPO is made.
If Facebook is in fact valued at $100 billion, original shareholders will see their ownership value double what it was in January 2011. Early investors can choose to cash out on their shares when Facebook stock is sold on the market.
Buying shares of Facebook after the IPO will mean making a bet on the future performance of the company.
History says don't buy in. Most IPOs lose money, studies show, which makes sense, because they represent a highly informed class of investors deciding to sell. And most of last year's dotcom IPOs -- including LinkedIn(LNKD), Groupon (GRPN), Zynga(ZNGA) -- sit solidly below their first-day opening prices.
Of course, this logic doesn't hold true for Google, which has seen its share price continually increase since its IPO in August 2004. Today, shares of Google are worth five times more than they were when they initially hit the market.
At the end of the day, Facebook's IPO filing has few takeaways for users and interested investors. By filing with the SEC, Facebook will have to be more transparent about its finances. However, the company will be under increased pressure to maximize profits, and in turn, "the use of personal data is likely to increase, only raising privacy concerns," according to The Guardian.
Also on HuffPost:
Zynga: $1 Billion
Social gaming company Zynga raised $1 billion in its IPO in December, 2011, the biggest web-related IPO since Google, <a href="http://www.huffingtonpost.com/2011/12/16/znga-ipo-nasdaq_n_1153518.html?ref=technology" target="_hplink">according to the Associated Press</a>.
Zynga had a valuation of $7 billion before it began trading on the Nasdaq on December 16.
RenRen: $743 Million
RenRen, the Chinese social networking site, raised $743 million in its IPO in May 2011, <a href="http://www.reuters.com/article/2011/05/04/us-renren-ipo-idUSTRE7433HI20110504" target="_hplink">according to Reuters</a>.
At the end of its first day of trading, the company had a market value of $7.4 billion.
As of December 16, 2011, RenRen's market capitalization stood at $1.34 billion.
Groupon: $700 Million
The daily deals site <a href="http://www.huffingtonpost.com/2011/11/04/groupon-ipo-biggest-since-google_n_1075374.html" target="_hplink">raised $700 million in its IPO</a> in November 2011, valuing the company at nearly $13 billion.
As of December 16, 2011, Groupon's value was $14.4 billion.
LinkedIn: $352 Million
LinkedIn, the professional social network, <a href="http://www.huffingtonpost.com/2011/05/23/linkedins-linkedin_n_865406.html" target="_hplink">raised $352 million</a> in its IPO in May 2011.
According to Reuters, the company was worth $9 billon after its first day of trading on the public market.
As of December 16, 2011, <a href="http://www.dailyfinance.com/quote/nyse/linkedin-corp/lnkd" target="_hplink">LinkedIn's value had dropped</a> to $6.35 billion.
Pandora: $234 Million
Internet radio site Pandora raised $234 million when it went public in June 2011, valuing the company at $2.56 billion, <a href="http://blogs.wsj.com/venturecapital/2011/06/14/pandora-ipo-prices-at-16-well-above-range/" target="_hplink">according to <em>The Wall Street Journal</em></a>.
As of December 16, 2011, the company had a market value of $1.71 billion.
HomeAway: $216 Million
HomeAway.com, a vacation home rental site, raised $216 million in its IPO in June 2011, <a href="http://www.marketwatch.com/story/homeaway-ipo-raises-216-million-2011-06-29" target="_hplink">according to MarketWatch</a>.
In its first day of trading, <a href="http://techcrunch.com/2011/06/29/homeaway-ipo-shares-pop-39-percent-market-cap-reaches-3-billion/" target="_hplink">reports TechCrunch</a>, the company had reached a valuation as high as $3 billion.
As of December 2011, <a href="http://www.dailyfinance.com/quote/nasdaq/homeaway/away" target="_hplink">HomeAway had a market cap</a> of $1.89 billion.
Demand Media: $151 Million
Demand Media, a web content company, or "content farm," <a href="http://www.huffingtonpost.com/2011/10/10/2011-ipos-are-underwater_n_976291.html" target="_hplink">raised $151 million</a> in January 2011. <a href="http://blogs.wsj.com/venturecapital/2011/01/26/demand-medias-14b-ipo-post-value-ranks-highly/" target="_hplink"><em>The Wall Street Journal</em> reports</a> that the company was worth a whopping $1.78 billion after its first day on the New York Stock Exchange.
As of December 16, 2011, <a href="http://www.dailyfinance.com/quote/nyse/demand-media-inc/dmd" target="_hplink">the company's market cap</a> had fallen to $593 million.
In the photo above, Richard Rosenblatt, Chairman and CEO of Demand Media, joins Tyra Banks at the New York Stock Exchange on March 15, 2011.
Angie's List: $130 Million
Angie's List, a site where members can review doctors, contractors and more, raised $130 million in its November 2011 IPO, <a href="http://venturebeat.com/2011/11/17/angies-list-ipo-performance/" target="_hplink">according to VentureBeat</a>.
The AP notes that at the end of the first day of trading, the company was valued at $904 million.
As of December 16, 2011, <a href="http://www.dailyfinance.com/quote/nasdaq/angies-list-inc/angi" target="_hplink">the site had a market cap</a> of $886 million.
Zillow: $69 Million
<a href="http://techcrunch.com/2011/07/20/zillow-soars-200-percent-in-first-trade-with-over-1-billion-valuation/" target="_hplink">According to TechCrunch</a>, the real estate website Zillow raised about $69 million in its July 2011 IPO. The value of the company <a href="http://www.huffingtonpost.com/huff-wires/20110720/us-zillow-ipo/" target="_hplink">rose to as high as $1.6 billion</a> on the first day of trading but dropped to $950 million at market close.
As of December 16, 2011, <a href="http://www.dailyfinance.com/quote/nasdaq/zillow-inc/z" target="_hplink">Zillow's market valuation</a> was $657 million.
Facebook filed its hotly anticipated initial public offering Wednesday afternoon, but for the average investor, the news that shares of the company will soon hit the market doesn't mean much.
The f...
Facebook filed its hotly anticipated initial public offering Wednesday afternoon, but for the average investor, the news that shares of the company will soon hit the market doesn't mean much.
The f...
Apple is valued more than 500 billion with 2011 revenue of 100 billion and they value Facebook that has a measly 3.7 billion in revenue at 100 billion, 20% the value of Apple?? Their revenue doesn't even make up 3% of apples'... i don't get it...
WebLogEarth: Apple is valued more than 500 billion with 2011 revenue
Its sort of weird that companies such as Facebook that do not contribute much to the general economy such as buying raw material or having a large employment base can be worth as much as a mid size industrial company such as GE or US Steel. A 100 billion for an idea, strange times.
dontomas: Its sort of weird that companies such as Facebook that
These comments are so ridiculously inaccurate and just plain ignorant. Facebook has been around for a while now...it's not going anywhere. People threaten to quit, unsubscribe and leave on a daily basis. No one does...they hang around to complain about it. They can't leave because it's the only place they have to complain and if there's one thing I know for sure, people effing LOVE to complain. Facebook is safe.
Barb_Hatfield: These comments are so ridiculously inaccurate and just plain ignorant.
The wealthy (CEO's) get first dibs on the IPO's so they can operate their insider trading strategy on the rest. After what Greenspan got away with lying to their customers, short selling right out from under them acting as a Market Maker? With them being the control you can put a large percentage on them controlling the market on all levels. Creating huge drops and buying huge ups. This stock will be oversold by Greenspan becuase they are the best at doing it and hold the most shares.
peoplepersons: The wealthy (CEO's) get first dibs on the IPO's so
Ok--I can only afford to buy a few shares.. Grandma Facebooker here. Why do some of you think that my shares --even tho a few would not bring me a return? People are saying only Mark Z.'s friends will profit---why not me? If I left my shares in there where they could grow--what do I have to lose?
whudmel: Ok--I can only afford to buy a few shares.. Grandma
With 845 million users generating 2.7 billion Likes and comments a day, last year alone Facebook made over $3.71 billions.
These are some huge numbers! But still Facebook will be a highly risky investment, I mean that for the average joe. Facebook will still make a lot of money, but for the special few ;)
Did you know that some banks will look at your facebook account when you apply for a loan ? They'll check to see if you are a risk by the people you associate with. Time to say bye to facebook and theres not a loan out there worth taking out with these conditions. If theres something you want, save and work for it.
sjoberdix: Did you know that some banks will look at your
google is a search engine. Facebook is an engine that invades your privacy on all levels. A lot are moving away from something the FBI and CIA scans with robots looking for keywords to investigate you with. Diaspora will be the next google. Facebook will fall like Netflix and Myspace.
peoplepersons: google is a search engine. Facebook is an engine that
Any economist would tell you 5 billion dollars raised for something that doesn't produce anything is speculation at it's finest. We've seen the manufacturing of a goods economy give way to a service economy. Who would have thought the service economy would give way to a virtual economy that does little other than glue millions to a monitor of advertisements and a regurgitation of what I did yesterday. Go figure.
sking007: Any economist would tell you 5 billion dollars raised for
I'll agree these days are numbered, but for the next year or two FB is probably going to be a winner since so many people are trying to make $ on their investments....tough to do when interest rates are zero....kinda forces your hand doesn't it.
Areyoukiddingg: I'll agree these days are numbered, but for the next
It produces revenue. Over a billion last year. It creates efficiency of information and networking. People thought the way you thought about the web and email. Facebook I believe is the next form of web.
Napoleon3: It produces revenue. Over a billion last year. It creates
Er. I suppose all the big players who got a chunk of the stock who can sell it fast while it's rising will do alright. Everyone else... well. Remember Groupon? haha.
jcaunter: Er. I suppose all the big players who got a
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First Posted: 02/ 1/2012 4:45 pm Updated: 02/ 1/2012 5:19 pm