04:19
Faizan
The purpose of an IPO, or Initial Public Offering, is to raise finance for companies through the public sale of shares. IPOs were a significant feature of the "dotcom boom" of the 1990s, but unfortunately became and with the "bust" period that swiftly followed. Analysts anticipate that Facebook will make an IPO in 2012, although many questions surround the company's valuation and the reasons for it having an IPO at all.
Valuation
As of publication, the media speculates that Facebook will have a $Step 100 billion valuation at its forthcoming IPO. Goldman Sachs investment bank and Digital Sky Technologies invested in Facebook based on a $50 billion valuation. Few companies have a $Step 100 billion valuation and those that do, such as Exxon Mobil and General Electric, are blue chip firms that have stood the test of time. Wall Street Journal reporter, Shira Ovide, questions whether Facebook's expected earnings -- in excess of $Step 2 billion by the end of 2011 -- justifies such a high valuation.
Reasons
Facebook founder Mark Zuckerberg has been evasive about the company's commitment to an IPO. However, he may have no choice as Facebook is about to reach the maximum number of private investors a company can have without publishing its financial information. The Securities and Exchange Commission sets this at 500 investors. According to the Wall Street Journal, issuing an IPO at the same time as releasing financial information would benefit Facebook and its many staff who have acquired shares but are currently restricted from selling them.
Valuation
As of publication, the media speculates that Facebook will have a $Step 100 billion valuation at its forthcoming IPO. Goldman Sachs investment bank and Digital Sky Technologies invested in Facebook based on a $50 billion valuation. Few companies have a $Step 100 billion valuation and those that do, such as Exxon Mobil and General Electric, are blue chip firms that have stood the test of time. Wall Street Journal reporter, Shira Ovide, questions whether Facebook's expected earnings -- in excess of $Step 2 billion by the end of 2011 -- justifies such a high valuation.
Reasons
Facebook founder Mark Zuckerberg has been evasive about the company's commitment to an IPO. However, he may have no choice as Facebook is about to reach the maximum number of private investors a company can have without publishing its financial information. The Securities and Exchange Commission sets this at 500 investors. According to the Wall Street Journal, issuing an IPO at the same time as releasing financial information would benefit Facebook and its many staff who have acquired shares but are currently restricted from selling them.
Posted in: facebook
