Long-awaited Facebook IPO looms in New Year

January 1, 2012 by Charlotte Raab
Facebook CEO Mark Zuckerberg announces Timeline as he delivers a keynote address during the Facebook f8 conference in September in San Francisco, California. Zuckerberg has deflected talk of going public for years but it looks like it is finally going to happen in 2012

Facebook co-founder and chief executive Mark Zuckerberg has deflected talk of going public for years but it looks like it is finally going to happen in 2012.

"The Facebook IPO will be the biggest financial event in the tech industry for 2012," Forrester Josh Bernoff said, and one of the biggest ever in the .

Nick Einhorn, an analyst at Renaissance Capital, said he expects Facebook to file its IPO with the US (SEC) in the and start trading on later in the year.

With an expected deal size of $10 billion, Facebook would slip into sixth place on the list of largest US IPOs between AT&T Wireless Group ($10.62 billion) and Kraft Foods ($8.68 billion), according to Renaissance Capital.

A market capitalization of $100 billion would put Facebook on a par with McDonald's ($103 billion), well ahead of Boeing ($54 billion) but behind Apple ($376 billion) and another Internet giant, Google ($209 billion).

Facebook's current annual revenue, mostly from online advertising, is estimated to be around $5 billion compared to $108 billion for Apple and $36 billion for Google.

Valuing the social network giant will be difficult, Einhorn said, just as it was for several other Internet companies that went public in 2011.

Career-oriented social network LinkedIn was undervalued while online daily deals site Groupon and social games titan Zynga have both been trading at or below their list price.

"I think Facebook is still a fairly young company in a lot of ways," Einhorn said. "But it's certainly established, and it's a significant company. Investors will recognize that."

Zuckerberg, who co-founded Facebook in his Harvard University dorm room eight years ago and has seen it grow to more than 800 million members, recently seemed to bow to the inevitability of going public.

In an interview with Charlie Rose of PBS television, Zuckerberg said an IPO was "not something I spend a lot of time on a day-to-day basis thinking about."

But, he added, "a big part of being a technology company is getting the best engineers and designers and talented people around the world.

"And one of the ways that you can do that is you compensate people with equity or options," Zuckerberg said. "At some point we're going to make that equity worth something publicly and liquidly."

Bernoff said that for Facebook, going public is less about raising funds -- the Gawker website reported that Facebook had $3.5 billion in cash on hand at the end of September -- than it is for "respectability."

"The purpose of this is not so much to raise revenue, as it is to put in a position where it is seen as a public company, one that reports its financial results, and does all the other things that public companies do," he said.

The analyst said he does not expect going public to shake up the innovative culture of a company which has said it plans to hire thousands more employees over the next year.

"You can bet that the strategy from the top will continue to come from Zuckerberg," Bernoff said. "And in contrast to a few years ago, he's shown a lot more maturity in the way that he presents himself.

"He's also surrounded himself with very good people to manage the company and that helps," he said. "I think that if you look out four years from now Zuckerberg will still be the CEO.

"The managers around him might shift some, but his position there is similar to Bill Gates's position at Microsoft," he said. "And that lasted a very long time."

Explore further: Facebook in no rush to go public: Zuckerberg

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4 / 5 (4) Jan 01, 2012
I closed my Facebook page a while ago (it's in suspended animation) for several reasons. Facebook's management would like us to believe it's a social experiment first, and a business enterprise afterward. I applaud Zuckerberg's philanthropy (100 million to the city of Newark) and other charitable programs, but once shareholders are involved, the original "family" business will find itself bowing to their pressure, and Zuckerberg himself could eventually be ousted. Advertising on Facebook comes with the advantage that members are aglow with feelings of kinship toward strangers who are friends of friends, so the trust factor for products is probably higher. I'm skeptical about the future of revenue when the Facebook site acquires the malodorous feel of a purely commercial website. The IPO will likely be a huge success, but I think will ultimately be a bubble that may splatter on investors' Faces.
1 / 5 (1) Jan 02, 2012
Could not agree more. Hopefully Facebook will go the way of Myspace, in terms of popularity. It is a short-term craze that will die off soon enough.
1 / 5 (1) Jan 02, 2012
" . . . "The purpose of this IPO is not so much to raise revenue, as it is to put Facebook in a position where it is seen as a public company, . . . "
Mr. Mark Zuckerberg,
Please 'Consider' The Users of Facebook, and include Your Users FIRST for the 'purpose of this IPO'!
Mr. Zuckerberg, Make 'Facebook' a 'Truly' (public company) by Offering Shares to 'Facebook Users' FIRST!
Make Facebook's(Initial Public Offering), Truly an IPO,, that actually offers 'Shares' to the Public, of the Company which Your Customers have Built!
Mr. Zuckerberg, You have the 'Clout' to Alter the Structure of 'IPOs' with 'Public Financing', and Garner enormous Admiration at the same time!
Mr. Zuckerberg, 'Think again' outside-the-Box, Put Your Supporters/Customers in FIRST POSITION!

Roy J Stewart,
Phoenix AZ

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