1

FACEBOOK
IPO

Presented by:

NAYANA. N.P
KIRUTHIKA.N
 Company Description 2

The firm was launched in 2004 by Harvardstudent Mark

Zuckerberg as an online version of the Harvard Facebook.

Facebook lets users share information, post photos and

videos,play games, and otherwise connect with one another
through online profiles.

Facebook has about 850 million total users andabout 480

million daily users.

the company had 3,200 full-time employees as of December

Financial information 3
4
 Financial information 5

crossed the line into profitability in 2009,

Facebook earned $229 million that year on sales of
$777 million, and has remained profitable ever since.
 How Facebook makes money
6
1. Advertising :
85% of Facebook's 2011 revenue, almost
$3.2 billion, comes from advertising.

Facebook has grown by grabbing market

share from Google and Yahoo. Last year

2. Apps and games:

Facebook allows outside developers to
buildapps that integrate with Facebook.
Revenue from Zynga, which makes
FarmVille and other games played on
Facebook, represented 12% of Facebook's
total revenue in 2012.
Facebook IPO 7
Facebook IPO 8
 Face book's Strategy
9
a) IPO Document Statement

In the IPO document, Facebook describes its strategy as follows :

We are in the early days of pursuing our mission to make the world
more open and connected. We believe that we have a significant
opportunity to further enhance the value we deliver to users,
developers, and advertisers. Key elements of our strategy are:
Expand Our Global User Community.
Build Great Social Products to Increase Engagement

Provide Users with the Most Compelling Experience

Build Engaging Mobile Experiences

Enable Developers to Build Great Social Products Using the Face book
Platform.
Improve Ad Products for Advertisers and Users
 10

The early start up and expansion of face book was funded in the years
from 2004 by:
Zuckerberg and Savarin

injections of cash by various venture capital funds such as Accel partners

funding from various corporations and Microsoft who purchased 1.6% of Face
books stock for$240 million in 2007
funding from private individuals such as Hong Kong billionaire Li Ka Shing who
invested $60 million in November 2007
 11

Sale of MySpace to News corp. in July 2005

Rumors about possible sale of face book to

Yahoo in Sept 2006
Did not happen since Face book board valued it
to $8 billion
 12

Initial Public Offering in 1st February 2012

Seeking to raise $5 billion

The company document announced

845 million active users

2.7 million daily likes and comments

After IPO, Zuckerberg will retain 22% ownership share in

face book and will own 57% of the voting shares.
 13

Underwriters values shares at $38 each, pricing the

company at $5 billion largest valuation to a newly
public company
16th May-FB announced it would sell 25% more shares.

IPO raised to $16 million

18th May trading began NASDAQ started with some

technical delay, but stock struggled to stay above IPO
price most of the day
25th May- stock ended its full week of trading at $31.91 ,
16% decline
 14

22nd May Wall streets Financial Regulatory

Authority investigate-banks underwriting FB
had improperly shared info with selected clients
Allegations sparked and law suits were filed
claiming $ 2.5 million losses due to IPO
Bloomberg estimated- retail investors lost $
630 million
 15
Conclusion :
reasons to not 'like' Facebook's IPO

1- Slowing growth? Already?

Facebook's sales increased suddenly for the past few years.
Revenue rose by more than 150% in 2010. Sales were up
nearly 90% last year. But in the first quarter of 2012,
revenue was up just 45% from the same period a year ago
Facebook's first quarter sales fell 6% from the fourth
quarter of 2011
 16
Conclusion :
reasons to not 'like' Facebook's IPO

2- Rising expenses

Facebook says in its IPO filing:

Building great things means taking risks. This can be scary and prevents most
companies from doing the bold things they should. However, in a world that's
changing so quickly, you're guaranteed to fail if you don't take any risks.

It can be seen :
Net income fell 12% in the first quarter as costs and expenses doubled from a
year ago

IT means:
Facebook investors should be prepared for the company to make more big
purchases; Facebook admitted as much in its IPO filing
 17
Conclusion :
reasons to not 'like' Facebook's IPO

3- Facebook is a media company

Facebook generates most of its money from advertising
AND
That is a changeable and inconsistent business

- ARPU (average revenue per user ):

Facebook : $1.21 in the first quarter of 2012
EBay : $12 in the first quarter of 2011
 18
Conclusion :
reasons to not 'like' Facebook's IPO

4- Everybody is gunning for Facebook

- Facebook will not remain the undisputed leader in social forever.

Competitor and risks:

- Twitter
- Google+ (a company that has $49.3 billion in cash .That's almost 13
times the amount Facebook has.)
- if Facebook does decide to bulk up in China, it will face intense
competition (Tencent, Sina and Renren )
- LinkedIn (professionals are using that site, and not Facebook)
 19

THANK
YOU