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Facebook Said to Plan IPO at $100B Valuation
By Douglas MacMillan and Brian Womack

Nov 29, 2011

Facebook Inc. is considering raising about $10 billion in an initial public offering that would value the world’s largest social-networking site at more than $100 billion, a person with knowledge of the matter said.

The company may file for the IPO before the end of the year, said the person, who asked not to be identified because the deliberations are private. Exact timing for the filing hasn’t been determined, the person said.

Facebook’s $100 billion valuation would be twice as high as it was in January, when the company announced a $1.5 billion investment from Goldman Sachs Group Inc. (GS) and other backers. Facebook aims to capitalize on strong demand for social- networking IPOs, said Josef Schuster, founder of Chicago-based IPOX Schuster LLC.

“It’s obviously a very steep valuation,” said Schuster, whose firm invests in IPOs and oversees about $2.5 billion in assets. “They are realizing their window of opportunity, and they want to do it sooner rather than later.”

At $10 billion, the offering would raise more money than any other technology IPO, a sign Facebook expects investors to clamor for a piece of the social-networking company. The amount would dwarf that of the previous record holder, Infineon Technologies AG, which generated $5.23 billion in its 1999 debut. Agere Systems Inc. raised $4.14 billion in 2000, putting it second.

Hard to Predict
Facebook’s IPO is far enough away that the details may change, said Lise Buyer, principal of the Class V Group, an IPO advisory firm.

“It’s far too early to accurately predict where the valuation will be on deal day,” she said.

Facebook expects to be required by U.S. regulators to disclose financial results by April 30, 2012, if it doesn’t go public by then, the company said in January. Facebook decided to wait until 2012 for its IPO to give Chief Executive Officer Mark Zuckerberg more time to gain users and boost sales, people familiar with the matter said last year.

Facebook, which boasts more than 800 million users, also is increasing its focus on mobile technology, aiming to take advantage of the shift to smartphones and tablets. The company expects its next 1 billion users to come mainly from mobile devices, rather than desktop computers.

Jonathan Thaw, a spokesman for Palo Alto, California-based Facebook, declined to comment on the IPO plans.

Google’s IPO
Google Inc., one of Facebook’s chief rivals in the Internet advertising market, raised $1.67 billion in its IPO in 2004. It is now valued (GOOG) at $190.4 billion.

Facebook’s valuation is currently pegged at $66.6 billion by SharesPost Inc., which handles trading of privately held companies. The Wall Street Journal reported earlier yesterday that Facebook was considering the $10 billion IPO with a valuation of more than $100 billion. The company aims to go public between April and June, the Journal said.

Demand for technology IPOs reignited in November after a summer lull, setting the stage for Groupon Inc. and Angie’s List Inc. to go public. Groupon, the largest provider of online coupons, has lost 24 percent of its value since its debut at $20 earlier this month.

Groupon’s decline may be spurring other companies to pursue IPOs before they lose the chance, Schuster said.

“Groupon has lost a lot of steam and I believe bankers are saying, ‘The market is still hot so let’s do it right now,’” he said.

I hope this will lead to other tech IPO in the future, we just about overdue for a tech boom Tongue

but privately if you ask me, I think facebook is just a big money guzzling hole not worth an iota Big Grin

if you think facebook is worth anything look at what happened to myspace. Started by a team of programmers, rose to popularity bought out by newcorp for USD580mil was thought by cheer leaders and analysts to be potentially worth billions, then overtook by the upstart "facebook" and in the end when it all came crashing down sold to justin timberlake for a mere USD35mil. Confused
(30-11-2011, 10:09 AM)sgd Wrote: [ -> ]if you think facebook is worth anything look at what happened to myspace. Started by a team of programmers, rose to popularity bought out by newcorp for USD580mil was thought by cheer leaders and analysts to be potentially worth billions, then overtook by the upstart "facebook" and in the end when it all came crashing down sold to justin timberlake for a mere USD35mil.

Ah, that's called "Hype". It certainly made the founder of MySpace very very rich, but dozens of other investors much poorer!

By the way, I also share your sentiments on Facebook. But let's see how things pan out - I am very interested to see FB's financial statements! Tongue
Business Times - 04 Feb 2012

Wealth managers staying sober at Facebook IPO party


Steep valuations, runaway hype make for dangerous waters for investors

(San Francisco)

IT'S the year's hottest initial public offering, but some wealth managers find themselves having a hard time recommending Facebook to their clients. The world's biggest social network is expected to seek a US$75 billion to US$100 billion valuation in its IPO, the most anticipated stock offering from Silicon Valley since Google Inc went public in 2004.

At Granite Investment Advisors in New Hampshire, chief investment officer Scott Schermerhorn has already been fielding queries from clients eager to get in on the action. 'We had some clients call and once we step them through the numbers, they sober up,' he said. 'The valuation is 100 times earnings in a stock market that is trading at 12.'

'At the end of the day, if you have a small amount of money that you are in a position to lose a chunk of it and you want to speculate on Facebook, go ahead,' he added. 'But don't use money that you really need to save to do it. I would put it in Microsoft, which is dirt cheap right now.'

To be sure, most technology analysts would argue that Facebook's growth potential far exceeds that of Microsoft Corp, whose stock has largely traded between US$20 and US$30 in the past decade. It is taking its first steps toward content streaming for instance, and has yet to make a serious overseas thrust.

And a US$100 billion valuation for Facebook at the top end - while huge in absolute terms - is not that out of whack in Silicon Valley IPO tradition. Facebook is seeking a multiple of up to 27 times annual revenue, or up to 100 times earnings.

Apple Inc - today, the world's most valuable technology corporation - went public at a valuation of just $1.19 billion in 1980, equivalent to 25 times revenue and 102 times earnings. Google - to which Facebook is most often measured against in terms of potential - was valued at US$23 billion at the time of its 2004 debut, or 218 times earnings. But the sheer size of Facebook's valuation means that it will have to become the world's first US$700 billion company if it is to replicate the gain in Google's stock.

'At these valuations, investors really need to set aside emotion ... and invest with their heads,' said Edward Reinhart, managing partner at Capital Advisors Wealth Management, who owns Facebook shares bought on private markets two years ago.

Mr Reinhart, who advises clients on retirement planning, warned that hype building up ahead of Facebook's IPO could mean 'dangerous waters for the retail investor'.

Facebook, led by 27-year-old Mark Zuckerberg, on Wednesday filed its IPO prospectus with the Securities and Exchange Commission, seeking to raise US$5 billion.

The anticipation surrounding the company and its growth potential recalls the hoopla that accompanied Apple's, Google's, and Amazon.com's stock debuts. All three companies have done the near-impossible - lived up to the hype.

There are many who believe Facebook will do the same, pointing to its 843 million users and the fact that the company is much bigger and more profitable than other recent Internet debuts, such as the loss-making Pandora Media Inc or Groupon Inc.

Social game company Zynga closed up nearly 17 per cent on Thursday in the first trading session after Facebook revealed it made 12 per cent of its revenue last year from the video game publisher.

'Facebook has the most potential,' said Greenwich, Connecticut-based investment manager Jeff Matthews, speaking about its business plan rather than its stock price. 'It's the next Google.'

While retail investors are still combing through the numbers and doing the math, institutional investors have quietly bought Facebook shares via private pre-IPO exchanges like SharesPost and SecondMarket.

About 50 equity funds of the 3,842 tracked by Morningstar disclosed holdings of Facebook stock, led by Morgan Stanley's institutional Opportunity H fund with 3.5 per cent of its US$242 million portfolio devoted to the social network. Other funds that have disclosed holdings included those managed by Fidelity, T Rowe Price, ING, Principal and MassMutual.

As with Apple and Google, consumers feel strong emotional connections to Facebook, which could make its stock vulnerable to wild swings if it attracts many retail investors. When the SEC released Facebook's IPO prospectus on Wednesday evening, its website slowed to a crawl as traffic increased 100 times. Facebook also made it into betting books - Irish bookmaker Paddy Power is taking bets on what the share price will be when the social network begins trading.

The odds are 7 to 2 so far that investors will be paying between US$25 and US$34.99 for a share, according to the bookmaker.

'The challenge is trying to keep individual investor enthusiasm in some sort of line with economic reality,' said Lise Buyer, an IPO adviser who worked at Google at the time of its IPO, but hasn't worked on the Facebook IPO.

Facebook 'has very strong prospects, but all companies have stock prices that at some point must correlate to fundamentals'. The social network's 2011 revenue rose 88 per cent to US$3.71 billion while net profit increased 65 per cent to US$1 billion in last year. Those are not stellar numbers when compared with Apple's 65 per cent growth in revenue to US$108.24 billion in fiscal 2011. Apple also outpaced Facebook in terms of income growth, with profit increasing 85 per cent to US$25.92 billion.

Despite this, Apple - with nearly US$100 billion in cash and securities - trades at a forward price-to-earnings ratio of 13 times, far lower than the 100 times historic P/E of Facebook's IPO, assuming the US$100 billion valuation.

Even Microsoft - which saw net income grow 23 per cent to US$23.1 billion and revenue rise 12 per cent to US$69.9 billion for fiscal 2011 - trades at 11 times future earnings. That's why Mr Schermerhorn, whose firm already owns Apple shares, said he preferred to invest in Microsoft over Facebook.

Amazon's shares trade at a relatively dear forward P/E of 131, while Google trades at 19.5.

'I know it is dominant in its space. Granted, the space is not growing as quickly as Facebook, but I am getting a nice dividend to wait,' he said of Microsoft. 'I don't have that with Facebook.' -- REUTERS

like to offer a slightly diff view here.
it seems like most of the commentaries I hv read, do nt believe fb can live up to the sky high valuations (which is actually similar to google) n hence a long term buy... personally, I m also sceptical as fb is on the front of a new frontier n hence there r many unknowns, which makes the risk adjusted gain highly unappealing.
but as the saying goes, when u realized u hv the same general consensus with the market, maybe it is time to stand away peroidically from it n assess diff view pts independently.
$104b. Ready for another dot com bust.
(05-02-2012, 08:40 AM)weijian Wrote: [ -> ]like to offer a slightly diff view here.
it seems like most of the commentaries I hv read, do nt believe fb can live up to the sky high valuations (which is actually similar to google) n hence a long term buy... personally, I m also sceptical as fb is on the front of a new frontier n hence there r many unknowns, which makes the risk adjusted gain highly unappealing.
but as the saying goes, when u realized u hv the same general consensus with the market, maybe it is time to stand away peroidically from it n assess diff view pts independently.

I have a differing point of view. I don't think it is advisable to be contrarian just the sake of being so. In fact, judging from the current ongoing IPO performance, we can't be exactly sure that the market's view of Facebook is generally thought to be unappealing.

One thing for sure, buying a company at around 100x P/E is too freaking expensive. But that alone, does not make certain that the stock price will NEVER rise. In the short term, 'animal spirit' can also mean that facebook is voted highly via mr Market's voting machine. But one thing for certain, at 100x P/E, the downside risk is very high (i.e. any setback can mean LOTS of room for stock price to fall) and with that, no matter how good the business is, I will have to think thrice.
My take is that Google and Facebook are at different stages of growth when they did their IPO.
Granted google had high valuations during IPO but they were small in absolute terms and they had much more space to grow.
Facebook on the other hand, is already having a few hundred million users before its IPO, we do not know how much bigger they can grow, my guess is, maybe not a lot more.

Also, there isn't a clear revenue stream. Advertising, yes, but is it as effective as search engine ads? I dont think so.
Google knows what you are looking for and will present the ads/search results according to your input.
Facebook will have a harder time trying do likewise. Not impossible but much harder.
BUt they will have more input/information to work on if they can figure out how.
If they are able to do that, advertisers will come flocking in and it may well become a more personal platform for advertisers.

Never easy to figure out these tech companies.
That's why Buffett bought See's candy sometime ago. Sweets, easy to understand.
(19-05-2012, 04:16 PM)shanrui_91 Wrote: [ -> ]Found this wonderful video

http://www.youtube.com/watch?feature=pla...92j3mTH3wo

Nice clip! I saw this video posted aptly by my friend in Facebook too.
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