Various sources are reporting that Social Network supergiant, Facebook, will file for an Initial Public Offering next week.
Wall St. Journal (WSJ), the BBC, and others suggest that shares will be offered to raise $10 billion, and valuing the company at a cool $100bn. Compare that to Google’s 2004 IPO which saw them raise $1.9bn.
At last (public) count, Facebook has 750 million active users. By “active”, they mean users that have logged in within the past 30 days. Compare that to Google who claim 90 million “registered” users, but wont say how many of those log in each month, and have also made Google+ registration mandatory for Over-18s. Which doesn’t seem fair. But enough whinging about the Mountain View Chocolate Factory.
A $100bn valuation means each user (the “product”, in any advertisement-driven web business) is worth $133.33 to the Menlo Park, California, based social network.
That seems a little steep, and goes beyond the adage of “a penny for your thoughts [and likes and photos]”, which would in fact value Facebook at a mere $7.5m…
In 2010, documents leaked by that darling of the US financial industry, Goldman Sachs, quoted revenues for the first 9 months of 2010 of $1.2bn and profits of $355m. That doesn’t really add up to a $100bn value.
The Real Story
Facebook CEO, Mark Zuckerberg, and COO, Sheryl Sandberg, both say that the reason for the IPO is to properly remunerate their engineers and staff who have been given stock options, however, this is not the entire story.
Facebook has been through several phases of private investor recruitment. The rules in the US clearly state that once you reach 500 private investors, it is time to float on the public stock market.
It is very likely that Facebook has reached this milestone, or is very near to doing so shortly, so the choice has been taken out of their hands.