After much speculation and a long anticipated wait, Facebook filed IPO
registration documents on 1 February 2012 with the Securities and
Exchange Commission. Facebook says it plans to raise $5 billion, but
funds raised could go up to $10 billion. This would make this biggest
IPO in Internet space ever.
Facebook’s IPO filing made it possible for the public market investors to examine the company’s books. Facebook said it earned $1 billion in profit on revenue of $3.7 billion in 2011.
How
does this valuation compare with valuation of other iconic tech giants
like Google and Apple? Facebook’s valuation is 100 times earnings or
27 times annual revenue, as against a stock market that is currently
trading at 12 times earnings. This seems over hyped and puts retail
investors at risk. Facebook users feel strong emotional connections to
Facebook, which could attracts many retail investors, who may fail to
evaluate the IPO diligently and unemotionally. Apple Inc went public
at a valuation of $1.19 billion in 1980, equivalent to 25 times revenue
and 102 times earnings. Google valued at $23 billion at the time of its
2004 debut, or 218 times earnings. Viewed against valuations of Google
and Apple’s IPO, Facebook’s does not seem overvalued.
The 100 times historic P/E of Facebook's IPO seems unrealistic, seen in context of Apple - with nearly $100 billion in cash and securities – trading at a forward price-to-earnings ratio of 13 times.
While retail investors are still crunching the numbers and doing due diligence, institutional investors have quietly bought Facebook shares through private pre-IPO exchanges like SharesPost and SecondMarket. About 50 equity funds of the 3,842 disclosed holdings of Facebook stock, led by Morgan Stanley's institutional Opportunity H fund with 3.5 per cent of its $242 million portfolio invested in Facebook.
Morgan Stanley is the lead book-runner for the IPO. Goldman Sachs. Bank of America Merrill Lynch, Barclays Capital and JP Morgan will also participate on the deal. Can their due diligence of this IPO be trusted. Recall that lead under-writer’s Morgan Stanley, Goldman Sachs and J.P. Morgan Chase and Bank of America were responsible for the US housing mortgage over-valuation racket worth over a trillion dollars for nearly two decades
A major risk factor is that Facebook founder, Mark Zuckerberg, owns 28.2% of Facebook shares, the largest single stake in the company Mark controls 57% of the voting shares after other shareholders granted their voting rights to him by irrevocable proxy. Directors and shareholders will have less sway over the company's direction.
ARTICLE SOURCE:WWW.NEWSPAMA.COM
Facebook’s IPO filing made it possible for the public market investors to examine the company’s books. Facebook said it earned $1 billion in profit on revenue of $3.7 billion in 2011.
How
does this valuation compare with valuation of other iconic tech giants
like Google and Apple? Facebook’s valuation is 100 times earnings or
27 times annual revenue, as against a stock market that is currently
trading at 12 times earnings. This seems over hyped and puts retail
investors at risk. Facebook users feel strong emotional connections to
Facebook, which could attracts many retail investors, who may fail to
evaluate the IPO diligently and unemotionally. Apple Inc went public
at a valuation of $1.19 billion in 1980, equivalent to 25 times revenue
and 102 times earnings. Google valued at $23 billion at the time of its
2004 debut, or 218 times earnings. Viewed against valuations of Google
and Apple’s IPO, Facebook’s does not seem overvalued.The 100 times historic P/E of Facebook's IPO seems unrealistic, seen in context of Apple - with nearly $100 billion in cash and securities – trading at a forward price-to-earnings ratio of 13 times.
While retail investors are still crunching the numbers and doing due diligence, institutional investors have quietly bought Facebook shares through private pre-IPO exchanges like SharesPost and SecondMarket. About 50 equity funds of the 3,842 disclosed holdings of Facebook stock, led by Morgan Stanley's institutional Opportunity H fund with 3.5 per cent of its $242 million portfolio invested in Facebook.
Morgan Stanley is the lead book-runner for the IPO. Goldman Sachs. Bank of America Merrill Lynch, Barclays Capital and JP Morgan will also participate on the deal. Can their due diligence of this IPO be trusted. Recall that lead under-writer’s Morgan Stanley, Goldman Sachs and J.P. Morgan Chase and Bank of America were responsible for the US housing mortgage over-valuation racket worth over a trillion dollars for nearly two decades
A major risk factor is that Facebook founder, Mark Zuckerberg, owns 28.2% of Facebook shares, the largest single stake in the company Mark controls 57% of the voting shares after other shareholders granted their voting rights to him by irrevocable proxy. Directors and shareholders will have less sway over the company's direction.
ARTICLE SOURCE:WWW.NEWSPAMA.COM
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