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Facebook has captured the attention of the world as the company has progressed from a small social media phenomenon to one of the world’s biggest companies all in the span of eight years leading up to its IPO. In this article we will take a look at the history leading up to the Facebook challenge of public listing (IPO) on the stock market on May 18, 2012.
The Rapid Growth of Facebook
Facebook began as the brainchild of a twenty-one year old student dabbling in social media and soon it became one of the biggest web phenomena to ever hit. Within eight years Facebook has grown to such extreme proportions that it now has some of the world’s most significant investors knocking at its door. Everyone knows that this rapidly growing company is still hotter than ever, but can Facebook stay the hottest thing as it becomes a publicly listed company?
Facebook Floats on the Stock Market
The recent decision to put Facebook on the stock market has many people wondering whether this young company has what it takes to survive this dramatic shift. Facebook is still considered by many to be a company in its infancy and yet this new move will most certainly jar it in to adulthood. What does this new move mean for Facebook? Moving Facebook on to the stock market means that this once private company will now become public in every sense of the word. As a publicly listed company, Facebook will now face more scrutiny than ever before. Where Facebook may have succeeded to date, the question is whether it can survive the picking apart that it is sure to face as it makes a move in to Wall Street.
What Does this New Change Mean for the Future of Facebook?
Aside from meaning that Facebook will come under fire of Wall Street big wigs, the new changes for Facebook also mean that the dynamics are soon to change. Mark Zuckerberg, creator of Facebook, insists that the transition from private to public will not shift the focus of the social network. Experts on marketing and social media hold a different point of view however, and insist that the change will shift the focus of Facebook from users to the shareholders.
Why has it taken so long to get Facebook in the Market?
So why did it take so long for Zuckerberg and the Facebook social networking phenomenon to make an appearance on the stock market? Zuckerberg initially resisted the stock market launch but with the constant growth of the social network it seemed like the next logical step for the company to make. According to many who have an interest in Facebook the stock market listing of the company was inevitable. With so many shareholders having a piece of the pie and so many of them wanting to take advantage of their investment in the social networking company there seems that there was no other option than to go public.
Just how big will Facebook’s IPO Be?
Just what will the IPO mean for Facebook and its founder? There is no telling just yet but there is no doubt that the IPO is going to be huge. Even the Wall Street Journal has taken notice of the “next Big Kahuna of Stock Listings.” The decision to float Facebook in the stock market is surprising to some though, not in the fact that the company went public, but in the amount that the company sought to raise from the floatation. Facebook sold just a small segment of available shares to raise five billion dollars, but according to experts they had expected that the company would seek around ten billion from the floatation. Is the five billion set in stone? The financial advisers for Facebook will need to take a look at the demand for Facebook shares before they can actually determine how much they will raise through the stock market floatation.
The Valuation of Facebook
There are still some analysts who believe that the floatation will give Facebook a valuation of around one hundred billion dollars. Where does this put Facebook in terms of other large companies? Well there is no doubt that it sets Facebook up with the big league players but there’s a long way to go before they are playing with the likes of Apple. To put things in to perspective the valuation of Apple currently stands at four hundred and twenty-five billion dollars, Ford sits at around forty-seven billion dollars and Citigroup sits at eighty-nine billion dollars. This high valuation of the social networking company has raised quite a few eyebrows though as many others believe that the “hype” of Facebook is causing valuations to be higher than they actually will be.
When Facebook opened for public trading on May 18, 2012, it was priced at $38 per share. Its market capitalization at its peak was more than $104 billion.
Why is Facebook So Successful and Why Does it Have Such High Valuations?
There is no doubt that Facebook has been a significant player for a while now but just why is this company receiving such high valuations? In short it is because Facebook has an internet marketing capability that many other companies have failed to harness. According to the numbers Facebook’s revenue doubled to around 3.7 billion in 2011 and Facebook’s share of the US online display ad market grew 6.9 percent in the same year. These incredible numbers are only expected to grow as Facebook is expected to add more users to its already insanely large user database in the coming years and increasing numbers of advertising firms are expected to realize the power of online marketing. Why is Facebook such a great resource for online marketing and advertising? Aside from the sheer number of users that the social network is able to reach through its database of users, Facebook is also able to offer advertising at rates that are significantly lower than other advertising mediums.
So Will Facebook Continue to Grow?
So what many people want to know is whether Facebook will be able to continue growing even after it goes public. Experts believe that the social network will inevitably continue to grow as more users join the global network. Will that growth continue along such a sharp upward spike? This is questionable, but there is no doubt that Facebook is not expected to stop growing any time soon.