Facebook to Break Records with IPO

By: Kuljit Grewal  |   June 12th, 2012   |   News, Social Media

Come Friday May 18, 2012, history will most certainly be made as Facebook is scheduled to make its highly anticipated IPO to a great deal of fanfare and investor excitement. The social media giant is poised to earn an anticipated $13 billion from the IPO, based on an expected price of $28 to $35 a share. Currently, the offer will include 180 million Class A common shares along with current private shareholders (God bless secondary markets) poised to sell nearly as much on their own. This information comes from a May 3, 2012 filing with the SEC. Such numbers would create the largest initial public offering in US history.

 

As is customary with any large IPO, underwriters are busy earning their commissions, working to attract investors and create fervent demand for the soon to be public stock.  The offering is unique in that it represents the IPO of the largest social media company in the world at a time when the industry is more significant than it has ever been. For many however, such hysterics are a déjà vu of sorts to the tech bubble that burst over a decade ago due to the inability for an entire industry to keep up with unrealistic expectations and baseless valuations.

 

Facebook’s offering is set to take place on the Nasdaq exchange, and all indications are that it will represent a historic day on many fronts even though the company has seen their profits drop quarter of quarter for the first three months of the calendar year. None of that seems to matter at the moment, as with 900 million unique users on a monthly basis, Facebook is set to surpass Google as the web’s most visited website, rendering the site’s obvious impact and power undeniable.

 

As of yet, it has not been made clear what the company will elect to do with the sudden influx of cash, however it can only be assumed that they will expand carefully and aggressively to acquire new and exciting technologies that can be integrated into the site (a la Instgr.am). The other expansion to consider is how the company will act to leverage the data it is able to collect and the potential to earn income from its gargantuan list of users.

 

Although the Class A shares will be readily available, their trade is merely for the ability for shareholders to generate profit rather than have an impact on strategic decisions regarding the company. Class A shares represent one vote each, while Class B shares, currently held by those within the Facebook family come equipped with ten votes each.

 

Without question, the day of the IPO will mark a watershed moment for the internet and social media as an industry. If Facebook can use the funds it will earn to monetize their mobile applications, this could be the beginning of a valuable future for the estimated $100 billion dollar firm.