Monday, February 6, 2012
Facebook IPO is Coming Soon
You have probably heard about the social media juggernaut Facebook "going public" and having an upcoming IPO or initial public offering. Is it worth it to invest in this company? Some will say yes, some will say no, but there are various factors to consider. We'll have to see how much the price per share is. A part of me thinks that Facebook's most significant growth is in the past. So, why invest in a stock if you think that growth has already happened? Good question. Past growth is great, but future growth is the main factor when evaluating stocks. Buying a stock is an investment in the future, not the past. If it has a dividend, that could entice investors, but many tech stocks do not offer dividends. Facebook is no doubt constantly thinking about how to re-invent the service to keep it fresh and to avoid becoming the next My Space.
Founded in 2004, Facebook has 845 million active users as of the end of 2011. 3200 people are employed by Facebook and it is available in over 70 languages. If Facebook would have started issuing stock in 2004 or even a couple years later, then investors could have witnessed meteoric growth. When it started, Facebook was not used by the public, it was only used by college students at select universities. At the end of 2004, they hit one million users. Growth from 1 million users to 845 million users in less than ten years is staggering.
Considering the amount of information that people put on Facebook, it's a dream site for companies seeking to target consumers. From a marketing standpoint, it is an amazing warehouse of information where people share their preferences when it comes to movies, music, TV shows, politics, current events and even what brands they like. Of course, the downside to having a site that is so popular is that it has become a frequent focus for hackers and identity thieves.
We'd all like to be part of the next Google (GOOG) type of IPO, where we buy a stock at $100 per share in 2004 and it rises to over $700 per share in three years, but every IPO is not like Google. Groupon (GRPN) had an IPO late last year and has ranged between $15 and $26 per share. Zynga (ZNGA), the company behind online games such as Facebook's Farmville has ranged between $8 and $13 per share. Facebook is hoping to launch under the symbol FB sometime in May. If it's less than $100 per share, it might be worth it to buy a few shares and see what happens, but I'm not going to bet the farm on it. Many Facebook employees will become instant millionaires since they have been acquiring shares at a low price. Founder Mark Zuckerberg owns nearly 534 million shares. The Facebook IPO will be the biggest internet IPO in history, raising $5 billion, surpassing Google by $3.1 billion. It might be a good short term investment, we'll have to gauge the volatility. But, then again, I have been wrong before. After all, I bought Toyota (TM) stock a few years ago when it was above $100 per share, and I am patiently waiting for it to rebound. It's been a long wait.
***Some information from http://newsroom.fb.com/default.aspx, www.google.com/finance and http://money.msn.com/business-news/article.aspx?feed=AP&date=20120201&id=14751191