A couple of significant stories today. Facebook losing millions of registered members in its core markets, and Facebook expecting to file for a $100 billion IPO during the 1st quarter of 2012.
Why has Facebook finally relented to the pressure of an IPO? After all it certainly doesn’t need the cash.
Four reasons for the Facebook IPO:
1- Avert an SEC rule forcing it to file when it officially reaches 500 investors.
2- Provide much needed liquidity to somewhat restless Facebook employees holding valuable stock options.
3- Ride the wave of spectacular social media flotations including last month’s $10 Billion LinkedIn valuation and the upcoming Groupon one.
4- And this is very much linked to 3 above, a loss of 100,000 accounts in the UK and over 6 million in the US last month suggesting saturation levels of the service and growing worries over recent privacy concerns related to a new auto tagging feature.
Goldman is the front runner to underwrite the IPO (probably not at the customary 6-7% of the offering size) but even at the probable 0.75%, the prestige of such an underwriting will guarantee its place at the top of the Ivy leagues of investment banks for years to come
How could Facebook be worth this much?
Lucrative Marketing data (and plenty of it) on 700 million strong consumers worldwide, that’s how.
Would you invest in Facebook at that price? I would.
While I do concede that over saturation (think MySpace and Friendster) and privacy concerns are imminent threats, I truly believe that Facebook has managed to established itself as an indispensable utility that will be a part of our lives for years to come.
