Facebook Incorporation

The Initial Public Offering

Introduction
The entire market is waiting for the emergence of Facebook as a publicly traded company, said Jonathan McNeil, Lead analyst at CXT Technology Fund. Basically Facebook is an online social networking service founded by Mark Zuckerberg and his roommates. Facebook held its initial public offering (IPO) on Friday, May 18, 2012. The IPO was one of the biggest in technology, and the biggest in Internet history, with a peak market capitalization of over $104 billion. Media exparts called it a "cultural touchstone

Company History and Overview

Facebook was not originally created to be a company. It was built to accomplish a social mission to make the world more open and connected. We think its important that everyone who invests in facebook understands what this mission means to us, how we make decisions and we do things we do. Most great people care primarily about building and being a part of great things, but they want to make moneysimply put: we dont build services to make money; we make money to build better services. - Mark Zuckerberg

Company History and Overview

Facebook was launched in February 2004 by Mark Zuckerberg and his four roommates at Harvard University. It was designed as a social utility to allow friends to connect to each other over internet. After an initial run-in with the university administration, the Harvard site took off, leading Zuckerberg to expand to other US and Canadian universities. By mid-2004 had dropped out of Harvard, incorporated Facebook and moved operation to Palo Alto, Califonia, where the company first attracted its first investor, PayPal cofounder Peter Thiel.

Company History and Overview

In March 2006, Zuckerberg declined an offer to sell the company for $750 million, arguing it was worth $2 billion. His optimism was confirmed in October 2007 when Microsoft bought a 1.6 percent for $240 million, valuing Facebook at $ 15 billion. Facebook continued its rapid growth as it was getting more active users.

Company History and Overview

Facebook Timeline, showing active users and revenue:
Year 2004 2005 2006 2007 2008 2009 Active Users 1 million 6 million 12 million 58 million 145 million 360 million Revenue $ 382,000 $ 9 million $ 272 million $ 153 million $ 272 million $ 777 million

2010
2011

608 million
845 million

$ 1,974 million
$ 3,711 million

Statement of Problem
Facebook is an online social networking service and a new company in stock exchange. The problem is to make decision whether to invest or not to invest in Facebooks IPO considering the impact of dot-com bubble of 1990s.

Findings and Analysis

Facebooks Business Model:
Advertizing Payment Business

User Categories and revenue per user:

MAUs DAUs ARPU

Findings and Analysis

Competitive Landscape:
Myspace Google+ Twitter Linkedln

Findings and Analysis

Economic and Market Conditions:
Potential performance of Facebooks IPO in the perspective of global economic environment. Performance of competitors IPO in the perspective of global economic environment.

Findings and Analysis

Capitalizing and Selling Stockholders
Dual-class Share Structure Sales by Current Shareholders Fees Payable to Underwriters

Pricing of Shares

Evaluation
Evaluation proceeds by using the perception of Damodarans Assumption Forcasting of Cost of Capital Competitive Threats.

Recommendation
CXTs investment committee is still confused whether they should invest on Facebooks IPO or not. However, I believe Facebook has more opportunities to grow. They should invest on Facebooks IPO although there are some competitive threats. In my point of view competitive threat can be overcome as there are lot of people are still to come to the Facebook network.