May will be a busy month for Facebook as they prepare to sell shares in the company and splash cash on another App.
Just one month after the purchase of mobile photo-sharing App. Instagram, Facebook again went shopping and this time have acquired the location based tool Glancee. Glancee helps its users to find others in the same location and receive notifications from people with common friends and/or interests. Facebook shelled out a whopping $1 Billion on the purchase of Instagram while the fee paid for Glancee remains under wraps.
If that isn’t big news in itself – even bigger is the announcement that Facebook is to offer shares in what equates to over 10% of the business. The Initial Offer Price (IPO) is set at $28 – $35 per share valuing the company at $85bn-$95bn (£52bn-£59bn). The Initial Offer Price is when a company puts its shares on the market for the first time, then the market takes over and the price is then subject to demand/performance etc. The sale of the shares is said to raise around $12 Billion for the company.
Facebook which has been around for 8 years has 900 Million users and made a profit of $1 billion last year.
There is expected to be huge interest in the shares that are to go on offer although some investors have voiced concerns over the long term growth of Facebook – this was reported last week that this was Facebook’s first drop in revenue between quarters for two years. However, in a video presentation on Thursday, Facebook executives gave assurances that the mobile device area had a huge potential for growth and that future investments in that would be focused there to maintain growth.
$100 billion was the higher estimate that had been talked about for Facebook and the IPO still falls short of that. However, high demand for the shares could still push the value into that region.
Mark Zuckerburg will still retain control of the company after the shares go on the market as he still owns/controls 57.3% of the voting power through his own shareholding and through voting agreements with other shareowners/stockholders. He will own 31.5% of Facebook’s outstanding stock. At the higher valuation, this would make his ownership worth $17.6 billion. This valuation would put Mark Zuckerberg at number 33 on the Forbes list of the worlds richest people at a young age of only 27.
It is thought that the shares will go on offer under the FB symbol on the 18th of May 2012 although market analysts have said that this won’t happen in the present time. They predict that the floatation will be delayed while the market recovers from a recent hit that saw many tech companies lose value. Five of the most recent tech companies to public – Zipcar, Groupon, Zynga and Yelp have lost between 15 and 30 percent of their value in the last month, proving in itself that this is not a good time to take a huge financial risk.
What are your thoughts on the floatation of Facebook? Do you think that under the circumstances, it should be delayed? Will the market recover or will tech companies continue to go down? We would like to hear your thoughts, please comment in the box below.
