May 16, 2012
Facebook Increases IPO, Again
Michael Harper for RedOrbit.com
Facebook increased the size of their IPO this morning by nearly 25%. Their initial public offering is already expected to set records, most notably the largest IPO of any internet company, even larger than Google´s. This news comes in the wake of yesterday's announcement that they were losing not only advertisers, but the trust of their users as well.
According to Reuters, the company itself has not increased the number of shares they are selling. Instead, these extra shares will be sold by early investors, such as PayPal co-founder Peter Thiel.
Mark Zuckerberg´s voting power will also be reduced from 57.3% to 55.8% as a result from these extra shares.
With these changes and these extra shares, Facebook stands to have the third-largest initial share sale in the US, next to American heavyweights General Motors and Visa Inc.
General Motors, by the way, announced yesterday they were going to pull their paid ads on the social networking site, an account which provided Facebook with $10 million of advertising.
Such news has caused analysts and investors to view Facebook in a dim light, leaving questions about Facebook´s long-term viability.
GreenCrest Capital analyst Max Wolff isn´t viewing the IPO so favorably, either.
Speaking to Reuters, he expressed his concern this way:
“This is much more a spectacle, a media event and a cultural moment than it is an IPO. This is not a game of models and fundamentals at this point.”
News of GM´s departure is likely to worry the Wall Street types, but what of Facebook´s users: the normal, every-day students, mothers and small business owners?
According to an Associated Press-CNBC poll yesterday, half of Americans think Facebook is a passing fad, while 3 out of every 5 users do not trust the company to protect their personal information. Furthermore, only 12% of those polled would feel comfortable making a purchase on the website. As for ads, an expected major source of income for the company, a majority of users (57%) say they never click on them.
Stats like this are likely to make early investors second-guess their decision to buy stock in Facebook.
After all, the site continues to grow, but if they can´t figure out how to make money from the more than 900 million people who use the site globally, they won´t be able to stick around much longer.
In 2011, Facebook had $1 billion in net income on a revenue of $3.7 billion. The question of if they´ll be able to add to this revenue is something yet to be seen.
As they march into their IPO, they stand ready to trump Google by $2 billion as the largest public debut of any Silicon Valley company.
Facebook is scheduled to begin trading on the Nasdaq this Friday. Wall Street banks Goldman Sachs, JPMorgan and Morgan Stanley will host the IPO.