Not sure if you've heard, but there's this company called Facebook that's going public today. You may have seen some press coverage of its IPO this week...
The good news is that the frenzy ends today, when Facebook shares finally begin trading at $38 (U.S.) a pop on the Nadsaq.
The headline numbers: At $38 a share, Facebook's total worth as a company is in the $104-billion range. Facebook itself will raise almost $7-billion from the offering, and its private shareholders will make a few billion more than that.
I think we'll see it open with a pretty big pop, though not for any rational reason. This thing has become less of an IPO and more of a cultural event, to be honest. As for Pintrest, I can see the appeal, but another round of funding just put the site's valuation in the $1.5-billion range, and Facebook's just coming off the announcements that they're buying both Instagram and Lightbox. Still, wouldn't be surprised if they picked it up anyway.
The strange thing about this IPO is, I'm not entirely sure Facebook needs the money. I think they mostly went public because they were hitting the limit of private investors under U.S. law, after which they would be treated as a public company anyway, so their hand was forced.
Hi All, I'm Iain, one of the Globe's tech reporters
. It's an interesting morning.
A neat thing to keep in mind today is Instagram -- its executives took the majority of Facebook's acquisition cash in stock, and with a pricing of $38, they're already worth well more than the headline $1-billion that Facebook paid for them back in April.
No idea about when or if the shares are going to peak. Looks like shares will start trading at 11, but Nasdaq will start a conference call 45 minutes before then to keep investors updated.
David, A great point. Facebook needs to ramp up advertising and marketing revenues without alienating its massive user base, and to justify this huge valuation. But nobody really knows how that's going to happen, at least to the degree that's necessary. Adam, you're right, people spend a lot of time on it -- but who's clicking on those ads? And was GM pulling out a canary in a coal mine or yet another example of a company shunning a company publicly to make themselves look really savvy and strategic (I see this with app developers publicly abandoning BlackBerry, just as a side note).
Paul Barter, VP Research at T4G Limited and Adjunct Prof at Schulich, is joining us to take your questions. Welcome, Paul.
Good morning all. It's a big day.
I'm with you David and Iain. Facebook needs to decide whose more important to them ... users or advertisers. Right now their not making either really happy.
Paul, It reminds of that scene in the Social Network -- where they have to keep it free and cool to make it a business. This is a sort of grand coming out party for that friction, which may well define the company over the next few years.
Right David ... Facebook was a site that enabled people to 'connect with their friends'. As your feed starts to fill up with branded messaging and sponsored ads does it actually get harder to connect with friends?
Justin ... I agree about the Facebook user base loyalty. In fact I wonder if Facebook might be the next investment in the 'sin portfolio' .. and equaly adictive. Alcohol, smoking firearms and privacy (Facebook).
Adam, I'm purely guessing here, but I assume that if there's a major evolution of their business model, that it's going to be slightly more nuanced than a premium/non-premium, ad/no-ad, approach. That, of course, is a guess, but they have a pretty wide spectrum of things they can do now.
I think they should follow in Google's steps here. Take your time and get it right. Test test test. Try a/b alternatives and slowly but surely evolve
Dacosta ... there were many stories the last couple of days about the smart money selling. When Goldman Sachs is a seller you've got to wonder about the wisdom of buying
Bloomberg TV is comparing some Internet IPO debut days: Zynga closed slightly down from its $10 launch price (now down 17 per cent since its IPO), while LinkedIn had more than doubled its $45 IPO price. Groupon, meanwhile, is down about 38 per cent since its IPO debut.
Another recent tech IPO had a similar swoon, according to AP: Pandora, an Internet radio company, went public June 15 at $20 a share. You could have bought the stock during the day for $26. It's now trading under $11.
Retail investors need to remember that just because they love the experience a company provides doesn't mean the stock is a good buy.
dianne, Newspapers are familiar with this, er, conundrum -- providing free content and reaping relatively meager display ad profits, or providing some sort of digital subscription model for a premium service, where individual users are more engaged (and lucrative). I think the main point to take away, is that you can't assume all of Facebook's 900-million odd users will pay; some will be casual users, or will shift to Google products. But how much more valuable are those users once they start deciding to pay? And in Facebook's case, since the business model is still evolving, what are the options available other than a flat out fee?
Before the bell, we've been asking readers whether this is a good investment. Take our quadrant poll here and see what others have said. bit.ly
