Facebook Incorporation: Initial Public Offering
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Transcript of Facebook Incorporation: Initial Public Offering
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Facebook Incorporation
The Initial Public
Offering
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Introduction
The entire market is waiting for the emergence of
Facebook as a publicly traded company, said JonathanMcNeil, Lead analyst at CXT Technology Fund.
Basically Facebook is an online social networkingservice founded by Mark Zuckerberg and hisroommates. Facebook held its initial public offering (IPO)on Friday, May 18, 2012. The IPO was one of thebiggest in technology, and the biggest in Internet history,
with a peak market capitalization of over $104 billion.Media exparts called it a "cultural touchstone
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Company History and Overview
Facebook was not originally created to be acompany. It was built to accomplish a social missionto make the world more open and connected. Wethink its important that everyone who invests in
facebook understands what this mission means tous, how we make decisions and we do things we do.Most great people care primarily about building andbeing a part of great things, but they want to make
moneysimply put: we dont build services tomake money; we make money to build betterservices.
- Mark Zuckerberg
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Company History and Overview
Facebook was launched in February 2004 by MarkZuckerberg and his four roommates at HarvardUniversity. It was designed as a social utility to allowfriends to connect to each other over internet. After an
initial run-in with the university administration, theHarvard site took off, leading Zuckerberg to expand toother US and Canadian universities. By mid-2004 haddropped out of Harvard, incorporated Facebook and
moved operation to Palo Alto, Califonia, where thecompany first attracted its first investor, PayPal co-founder Peter Thiel.
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Company History and Overview
In March 2006, Zuckerberg declined an offer tosell the company for $750 million, arguing it wasworth $2 billion. His optimism was confirmed in
October 2007 when Microsoft bought a 1.6percent for $240 million, valuing Facebook at $15 billion. Facebook continued its rapid growthas it was getting more active users.
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Company History and Overview
Facebook Timeline, showing active users and revenue:
Year Active Users Revenue
2004 1 million $ 382,000
2005 6 million $ 9 million2006 12 million $ 272 million
2007 58 million $ 153 million
2008 145 million $ 272 million
2009 360 million $ 777 million
2010 608 million $ 1,974 million
2011 845 million $ 3,711 million
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Statement of Problem
Facebook is an online social networking serviceand a new company in stock exchange. Theproblem is to make decision whether to invest or
not to invest in FacebooksIPO considering theimpact of dot-com bubble of 1990s.
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Findings and Analysis
FacebooksBusiness Model:
Advertizing
Payment Business
User Categories and revenue per user:
MAUs
DAUsARPU
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Findings and Analysis
Competitive Landscape:
Myspace
Google+Twitter
Linkedln
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Findings and Analysis
Economic and Market Conditions:
Potential performance of FacebooksIPO in the
perspective of global economic environment.
Performance of competitors IPO in the perspective of
global economic environment.
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Findings and Analysis
Capitalizing and Selling Stockholders
Dual-class Share Structure
Sales by Current ShareholdersFees Payable to Underwriters
Pricing of Shares
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Evaluation
Evaluation proceeds by using the perception of-
DamodaransAssumption
Forcasting of Cost of CapitalCompetitive Threats.
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Recommendation
CXTs investment committee is still confused
whether they should invest on FacebooksIPOor not. However, I believe Facebook has more
opportunities to grow. They should invest onFacebooksIPO although there are somecompetitive threats. In my point of viewcompetitive threat can be overcome as there are
lot of people are still to come to the Facebooknetwork.
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