The world’s major social networking company begins life anew today as a publicly traded company on the Nasdaq.
With its IPO priced at $38 per share (Ticker symbol: FB) – at the top of expectations, Facebook will be valued at $104 billion, raising $16 billion for itself in the process and minting many new millionaires and billionaires.
Facebook will end the day with a higher valuation than Amazon.com and other well-known companies such as Kraft, Walt Disney and McDonald’s.
It’s a big windfall for a company that began eight years ago with no apparent way to make money using its free membership model.
The Christian Science Monitor writes:
Facebook’s offering is the culmination of a year’s worth of Internet IPOs that began last May with LinkedIn Corp. Since then, a steady stream of startups focused on the social side of the Web has gone public, with varying degrees of success. It all led up to Facebook, the company that’s come to define social networking by getting 900 million people around the world to share everything from photos of their pets to their deepest thoughts.
It has done so while managing to become one of the few profitable Internet companies to go public recently. It had net income of $205 million in the first three months of 2012, on revenue of $1.06 billion. In all of 2011, it earned $1 billion, up from $606 million a year earlier. That’s a far cry from 2007, when it posted a net loss of $138 million and revenue of $153 million.
“They could have gone public in 2009 at a much lower price,” said Nick Einhorn, research analyst at IPO investment advisory firm Renaissance Capital. “They waited as long as they could to go public, so it makes sense that it’s a very large offering.“
The new riches accruing from the third largest IPO in history has prompted at least one new billionaire – Facebook co-founder Eduardo Saverin, to renounce his U.S. citizenship this year and move to Singapore, a country with no capital gains tax.
This raised the ire of U.S. legislators, two of whom -Sens. Charles E. Schumer (D-N.Y.) and Bob Casey (D-Pa.) denounced him Thursday as a tax dodger and introduced legislation to punish him and others who give up citizenship to duck big tax bills.
“This is a great American success story gone wrong,” Schumer said. “Mr. Saverin wants to de-friend the United States just to avoid paying taxes, and we’re not going to let him get away with it.“
Saverin has a 4% stake in the company, according to the “Who Owns Facebook?” website. The stake could be worth about $4 billion after the IPO.
Despite the buzz surrounding the Facebook IPO, more than a few analysts have doubts about the future profitability of Facebook, given its “free-to-the-public” model.
In essence,these commentators insist that Facebook is overvalued, with a valuation of over 100 times earnings.
This as not deterred investors however, seeking a piece of the social network that has over 900 million members. Time will tell whether the stock buyers are financial lemmings or geniuses.
For early investors however, Facebook has made them richer than their wildest dreams.