Why is facebook going public?

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Texashiker

Texashiker

Lifer
Dec 18, 2010
18,811
198
106
When a company is popular, successful, and making money like facebook, why go public?

There are lots of companies out there that are privately owned, and they are doing just fine.

I thought the motivation for going public was to raise opening cash. But when you have plenty of cash, why go public?
 
G

Genx87

Lifer
Apr 8, 2002
41,091
513
126
I dont think they need to raise cash as much as the owners of the company want a nice pay day. Time to be rewarded on a massive scale for their hard work.

What does zuckerberg plan to make on the deal? Billions?
 
Capt Caveman

Capt Caveman

Lifer
Jan 30, 2005
34,543
651
126
Texashiker said:
When a company is popular, successful, and making money like facebook, why go public?

There are lots of companies out there that are privately owned, and they are doing just fine.

I thought the motivation for going public was to raise opening cash. But when you have plenty of cash, why go public?
Click to expand...

No, the motivation is not to raise cash for FB. It's to reward/compensate investors who have invested millions and not received anything in return so far.
 
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rudder

rudder

Lifer
Nov 9, 2000
19,441
86
91
Get other people's money. Once all these companies paying $$$ to get user data realize that the amount of money they spend to get the data does not make their sales skyrocket.... eventually the idea of facebook as a highly valuable data mining operation will fade and revenues will drop. The ones who bought the pubic stock will be the ones losing out.

Of course people may continue to spend $5 here and there for a larger barn in Farmville, who knows. .1% of facebook users spending that much a month is still a shit ton of dough.
 
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D

dmcowen674

No Lifer
Oct 13, 1999
54,889
47
91
www.alienbabeltech.com
rudder said:
Get other people's money. Once all these companies paying $$$ to get user data realize that the amount of money they spend to get the data does not make their sales skyrocket.... eventually the idea of facebook as a highly valuable data mining operation will fade and revenues will drop. The ones who bought the pubic stock will be the ones losing out.
Click to expand...

Well, specifically it's the 1%ers getting other people's money.

This is the beginning of the end for Facebook.
 
M

Matthiasa

Diamond Member
May 4, 2009
5,755
23
81
If I recall correctly the number of outside investors they have already is nearly high enough to have to file with the SEC anyways.
 
S

ShawnD1

Lifer
May 24, 2003
15,987
2
81
dmcowen674 said:
Well, specifically it's the 1%ers getting other people's money.

This is the beginning of the end for Facebook.
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lol just like AOL and MySpace and a bunch of other garbage that isn't actually worth anything.

People are retarded. They don't see the cycle at all. How much was MySpace sold for? Like half a billion dollars? It's nice that the founders of MySpace made bank on that. They know how to sell a company and make money just as well as the buyers know how to lose a shit load of money for no reason.
 
Capt Caveman

Capt Caveman

Lifer
Jan 30, 2005
34,543
651
126
ShawnD1 said:
lol just like AOL and MySpace and a bunch of other garbage that isn't actually worth anything.

People are retarded. They don't see the cycle at all. How much was MySpace sold for? Like half a billion dollars? It's nice that the founders of MySpace made bank on that. They know how to sell a company and make money just as well as the buyers know how to lose a shit load of money for no reason.
Click to expand...

Except FB makes money and has beaten it's competitors. Heck, Google can't even compete against them. FB will actually be a good investment if you have the money to buy in.
 
S

ShawnD1

Lifer
May 24, 2003
15,987
2
81
Capt Caveman said:
Except FB makes money and has beaten it's competitors. Heck, Google can't even compete against them. FB will actually be a good investment if you have the money to buy in.
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AOL and MySpace were profitable too.
It's just one more company that falls into the long list of companies where the stock price is based on hype and name recognition.

This article is a bit dated, but it highlights what I'm talking about
http://shauncarter.com/2011/01/facebook-pe-ratio-125-50-billion-valuation/
(january 2011)
Facebook’s financials are not so private any longer as Goldman Sachs has released unaudited financial reports to high net worth investors who are being offered up over $1 Billion of Facebook stock.
Based on the partial 2010 earnings figures, Facebook had net earnings of $400 Million on $1.6 Billion in revenue. These numbers just seem too good to be true and value Facebook at a whopping P/E ratio of 125.
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PE 125 is horrible. That means you buy $125 of shares and the profit at that time would be $1. That's less than people make by keeping their money in something like an ING Direct savings account.

Look up the numbers for a different company. One that you know is successful to some degree. How about Coke:
http://www.google.com/finance?q=coca+cola
PE ratio of 12.41, so that's about 8%. Roughly 10x better than Facebook. I hope Zucker bails on FB while the company value is still high.
 
yllus

yllus

Elite Member & Lifer
Aug 20, 2000
20,577
432
126
There are a good amount of Facebook employees who have been promised to be able to cash in their options at some point - if they don't go public there will be a large exodus of talented developers.
 
M

momeNt

Diamond Member
Jan 26, 2011
9,290
352
126
ShawnD1 said:
AOL and MySpace were profitable too.
It's just one more company that falls into the long list of companies where the stock price is based on hype and name recognition.

This article is a bit dated, but it highlights what I'm talking about
http://shauncarter.com/2011/01/facebook-pe-ratio-125-50-billion-valuation/

PE 125 is horrible. That means you buy $125 of shares and the profit at that time would be $1. That's less than people make by keeping their money in something like an ING Direct savings account.

Look up the numbers for a different company. One that you know is successful to some degree. How about Coke:
http://www.google.com/finance?q=coca+cola
PE ratio of 12.41, so that's about 8%. Roughly 10x better than Facebook. I hope Zucker bails on FB while the company value is still high.
Click to expand...

They are expecting to come out of the gates at 125 PE? wow.

This is going to be a financial business school case study in a few years analyzing its implosion.
 
Patranus

Patranus

Diamond Member
Apr 15, 2007
9,280
0
0
Its quite simply. The investors who made Facebook possible want to cash out.
 
Capt Caveman

Capt Caveman

Lifer
Jan 30, 2005
34,543
651
126
ShawnD1 said:
AOL and MySpace were profitable too.
It's just one more company that falls into the long list of companies where the stock price is based on hype and name recognition.

This article is a bit dated, but it highlights what I'm talking about
http://shauncarter.com/2011/01/facebook-pe-ratio-125-50-billion-valuation/

PE 125 is horrible. That means you buy $125 of shares and the profit at that time would be $1. That's less than people make by keeping their money in something like an ING Direct savings account.

Look up the numbers for a different company. One that you know is successful to some degree. How about Coke:
http://www.google.com/finance?q=coca+cola
PE ratio of 12.41, so that's about 8%. Roughly 10x better than Facebook. I hope Zucker bails on FB while the company value is still high.
Click to expand...

/facepalm

AOL and MySpace lost due to competition. What is FB's competition?

PE 125 is incorrect, especially based on partial 2010 numbers that are just a guess. More reputable sources put the PE between 50-80(based on the valuation being from 75 - 100 billion, Google's PE when it went IPO was 80.

Edit - comparing your link to the Washington Post - http://www.washingtonpost.com/blogs...or-zuckerberg/2010/12/20/gIQAyU7EfQ_blog.html

Shaun Carter -> $400 million net income based on $1.6 billion in revenue
Washington Post -> $2 billion net income based on $4 billion in revenue
 
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M

momeNt

Diamond Member
Jan 26, 2011
9,290
352
126
Capt Caveman said:
/facepalm

AOL and MySpace lost due to competition. What is FB's competition?

PE 125 is incorrect, especially based on partial 2010 numbers that are just a guess. More reputable sources put the PE between 50-80(based on the valuation being from 75 - 100 billion, Google's PE when it went IPO was 80.

Edit - comparing your link to the Washington Post - http://www.washingtonpost.com/blogs...or-zuckerberg/2010/12/20/gIQAyU7EfQ_blog.html

Shaun Carter -> $400 million net income based on $1.6 billion in revenue
Washington Post -> $2 billion net income based on $4 billion in revenue
Click to expand...

Facebook's competition is the FBI, and large companies changing their preferences in data collection for advertising. Facebook may never be toppled as a social networking tool, but it's hard to say that it's business model will be viable for some 25 year old to hold the stock for the next 60 years.

http://www.zdnet.com/blog/facebook/fbi-to-monitor-facebook-twitter-myspace/8119
 
Capt Caveman

Capt Caveman

Lifer
Jan 30, 2005
34,543
651
126
First

First

Lifer
Jun 3, 2002
10,518
271
136
Facebook is going to be around a while, and to compete with the likes of Google they're going to need more cash. Although supposedly they're netting $1.5B on $4B of revenue annually, so they're already building a solid cash reserve.

Anyone who thinks this is cashing out isn't looking at the big picture. Facebook has cornered the market on lots of advertising including and especially all sorts of mobile advertising, something Google is nascent in compared to their traditional desktop advertising. Mobile apps, games and browsers are the wave of the future as it'll all eventually be integrated into one OS, and Facebook is in prime position for that eventuality.
 
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L

lothar

Diamond Member
Jan 5, 2000
6,674
7
76
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