Many of you may have heard that Facebook, the social networking giant with nearly 800 million registered users, is now finally going public. The decision comes after many years of large growth and domination in the online industry and comes after a lot of criticism on insider trading and other things happening within the firm which has been private for quite a while now. Several outside sources whether it is the SEC or other firms are starting to draw eyes to these private firms that have high net values and are trading stock without being public ( more info http://dealbook.nytimes.
com/2010/12/27/stock-trading- ). The IPO may take a toll on Facebook’s ability to be secret about some of its innovation and real numbers such as the value of stocks that the executives such as Mark Zuckerberg hold. Firms in the Silicon Valley and abroad such as Google are able to be public without losing too much secrecy about their core products but still have some extra hurdles with keeping information within; especially once outside investors monies are tied in. in-private-companies-draws- scrutiny/
The move is interesting as this will be a major IPO raising of $10 Billion dollars which means it is valued at around $100 Billion. While this is not the largest IPO in history it is definitely one of the largest. This will help Facebook stay competitive with such competitors as Google + who are rapidly increasing their userbases around the world. The article below that covers some of the World’s largest IPO’s in history also mention that firms such as General Motors were able to raise about $23.1 Billion dollars as well as Nippon Telegraphy ( NTT ) which had raised about $29.8 billion dollars in 1987 ( in inflated dollars ). This shows that there are still some major players out there that have made more splashes but this is different because it is an internet company. For example Google’s IPO was only about $1.9 billion and is now a very big company. Imagine what these dollars will do for a major firm like Facebook where I would imagine the margins are much more profitable than that of something like NTT and General Motors where their cost of doing business is much higher seeing as they have to make cars ( GM ) and lay internet lines under the ground and ocean which is expensive ( NTT ).
I think it is important that we have IPO’s of firms like Facebook so that there is some more public transparency about what is going on within them especially when they control so much of our personal data. There are various forms of going through an IPO and Facebook has not yet publicly chosen what they are going to do with their shares whether that is auctioning them as Google did in 2004 or setting a price with the underwriter of the deal. We will have to wait to see!