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Facebook ipo: after the hype, investors are betting on hope by 123wert sdfsf
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Facebook ipo: after the hype, investors are betting on hope |
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Business,Business News,Business Opportunities
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Eight years after launching Facebook in a Harvard dorm room, MarkZuckerberg is about to pull off one of the most valuable stockofferings in U.S. history — and the largest ever in tech— making him one of the world s richest men, worth nearly$20 billion. Thousands of employees and early investors will reapbillions more. But Facebook's IPO is about more than just bignumbers like the company's $100 billion valuation.
It'sabout the emergence of the Internet as a global social platformthat's disrupting entire industries. As Facebook ( FB ) stock begins trading this morning, here are a few things to keepin mind about this once-in-a-decade event. Facebook's IPO represents the triumph of hype and hope overfinancial analysis . This is the most-buzzed about IPO since Google went public in2004 — at about one-fifth Facebook's $100 billionvaluation. Fundamental factors are hard-pressed to justify thatprice at present, so Facebook investors are betting on steeprevenue and earnings growth over the next few years.
With $1billion in profit last year, the company has an extremely highprice-to-earnings ratio of 100-to-1, higher than Google s when the search titan went public in 2004. And by the time it wentpublic, Google had already built AdWords, the search ad feature that continues to drive its massiveprofits. Facebook's ad business is much less developed. ( More : With IPO Looming, Is Facebook s Ad Business Ready for Prime Time? ) Facebook's inherently social nature is a challenge for thecompany's ad business.
People primarily use social servicesto hang out with their friends, not search or shop. Google, bycontrast, is a site that people use — by definition —because they're searching for something — oftensomething to buy — so there's a natural opportunity topresent ads. When your goal is to share links and photos, ads canseem like a distraction. Meanwhile, Facebook users have given thecompany a treasure-trove of personal data ripe for targetedadvertising. Zuckerberg's challenge now is to use all thatdata to generate the kind of profit that will justifyFacebook's sky-high valuation.
Google paid off in spades forinvestors, but it's far too early to predict a similaroutcome for Facebook. From the beginning, Zuckerberg has prioritized his idealistic social mission ahead of profits . In the company's IPO prospectus, Zuckerberg wrote that hedidn't view his company first and foremost as abusiness – or even, really, as a company — butrather as a means of social transformation. "It was built toaccomplish a social mission — to make the world more open andconnected," he wrote, adding that Facebook makes money in theservice of accomplishing its mission. As co-owners of a publiccompany, investors are going to want Zuckerberg to makeFacebook's business the top priority in order to driveearnings growth.
The stock price will depend on it. But shareholders may have little recourse for action, due to acontroversial dual-class ownership structure that has beencriticized by corporate governance experts. Zuckerberg owns 55% ofthe company's voting control, meaning he will be imperviousto takeover attempts or activist shareholders. One can understandhow someone like Zuckerberg would want to maintain control of hiscreation, but by choosing to go public, he has taken on newco-owners, who may want to exercise some influence over theirinvestment. Moreover, this type of absolute control can be a recipefor trouble at big public companies.
(See News Corp.) ( More : Why Facebook s IPO Matters ) Facebook has become a symbol of the global Internet. It began as a start-up story. Then it became a venture capitalstory. Eventually it turned into one of the great business storiesin a generation. Today's IPO, however, is a milestone inthe history of the Internet itself as a tool for individualself-expression and collective organization.
It s also a dramaticexample of a generational shift taking place among theentrepreneurial class, one that elevates social change as apriority along with commercial success. As Facebook goes public, it's easy to get caught up by thehuge numbers, including the $9 billion that early investors andinsiders stand to gain. But Facebook's IPO is about more thana crew of newly-minted young millionaires buying big houses inSilicon Valley. Zuckerberg built an unprecedented platform on topof the Internet that's changing the media, entertainment andadvertising industries.
And he's become an icon, thepersonification of what a smart young person can accomplish usingthis new global platform. Today is the culmination of eight yearsof hard work for the 28-year-old. It's his big day. Hedeserves it. ( More : Even Pre-IPO, Facebook's Executives Were Richly Rewarded ). I am Gifts & Crafts writer, reports some information about printed name badges , imprinted name badges.
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