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The Facebook IPO will be the IPO (Initial Public Offering) to end all IPOs, or at least that’s what you would think based on the hype surrounding it, and now May 17 is the day on which it is scheduled to occur, according to dozens of news sources. Over-hyped or not, the Facebook IPO is definitely a big deal – it very well could be the biggest Internet IPO in history, although this depends on what Facebook is worth (or what it is perceived to be worth by investors on the day the company’s stock goes on sale). Regardless, it will almost certainly make several Facebook employees, especially founder Mark Zuckerberg, very, very rich. It will also be constantly speculated about before the IPO happens, and endlessly discussed thereafter. Now is as good a time as any to join the chorus.
Facebook is, as most people already know, the largest social networking site in the world. There are roughly two billion internet users, and just under half of them (around 850 million) are active users of Facebook, although it is not clear what constitutes an “active user.” In its seven years of existence, the company has amassed a staggering amount of personal data, personal data that is for the most part freely given by the users of the site. Facebook’s value lies primarily in this information, as it can be used to attract advertisers who are increasingly interested in creating ads catered to finely defined demographics. (The NBA would rather have their ads for merchandise seen by, say, 25-year-old men than 75-year-old women. And Facebook knows vastly more about their users than merely their age and gender.)
Advertising is how Facebook makes money, and lots of companies want to advertise on the site. There are reports indicating that there is more demand to advertise on Facebook than the site can accommodate, which is a wonderful problem to have, especially given Facebook’s ceaseless expansion efforts.
All of this points to why there is such intense interest in Facebook’s IPO. Many speculated that Facebook would go public this year, and these speculations were confirmed when Facebook filed the necessary paperwork in early February with the Securities and Exchange Commission (SEC) for an Initial Public Offering. Since then, information about the date of the actual IPO has been obsessively pursued, but evidently the pursuit is over: May 17 is the day.
According to the forms that Facebook filed with the SEC, the company is seeking to raise five billion dollars. Based on this amount, analysts place the value of Facebook between 75 to 100 billion dollars. (As an interesting and topical side note, the possible value of Facebook was an obvious factor in the company’s recent acquisition of Instagram. Facebook bought the company for one billion dollars, but 70 percent of this was paid in stock, according to news reports. The more Facebook stock is worth after the IPO, the more Instagram made in its deal with Facebook.)
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If Facebook successfully raises five billion dollars after the IPO, it will be the biggest Internet IPO ever. In fact, the Facebook IPO would be significantly larger than the second biggest Internet IPO, Google’s. When Google went public, it yielded the company a mere 1.4 billion dollars.
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