Facebook IPO Analysis Essay - 2041 Words

Facebook, Inc: The Initial Public Offering 1. How does Facebook make money? What are the value drivers of its business? What is its comparative advantage relative to other social networking companies? (1) Facebook makes money from the following three main fields First is the advertising. According to the case, we know that the major revenue of Facebook is advertising, which took up 98 percent in 2009, 95 percent in 2010 and 85 percent in 2011. Facebook uses all information uploaded by users to become the property of the firm. By analyzing database, Facebook provides advertisers target customized services and products based on users’ preferences and connections. In its view, the advertising which based on social†¦show more content†¦Second, by going public, Facebook can raise funds from a broader base of investors. With much money, the company can have enough resources to develop new products and invest in their business, which make the company become more competitive. Meanwhile, it’s a good opportunity for the shareholders to gain the best possible value for their own stakes in a long term. Third, for the further development, Facebook raises its reputation and amplifies its brand value. More people get to know the company and join in the Facebook. That is to say, Facebook attracts more users and expands the market share. (2) According to the case, proceeds from the offering will be used for working capital and other general corporate purposes. Facebook didn’t say more about the use of proceeds in details. 3. What was transpiring in the US IPO market prior to Facebook’s offering? What has been the performance of recent IPO’s (during the lead-up to the Facebook offering)? (1) According to the case, global IPO activity during the first quarter of 2012 fell to $14.3 billion, which was dramatically down from $46.6 billion during the first quarter of 2011. In addition, we can see in Exhibit 5 that IPO activity in US have dropped sharply since the second quarter of 2011. Number of deals dropped from 383 in the second quarter of 2011 to 157 in the first quarter of 2012.Show MoreRelatedThe Intrinsic Value Of Facebook974 Words   |  4 Pagesis the intrinsic value of a Facebook share? How does this valuation compare to the price talk from underwriters? The intrinsic value of Facebook stock was very difficult to find, since the company is relatively new and has been growing at an extreme rate. Based on the most recent sale of Facebook stock via a private transaction the per share price was $44 in March. However, based on the DCF analysis by professor Aswath Damodaran the intrinsic value of a single Facebook share would be $32.44. 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