Facebook to go public, sell shares
Facebook officials said in an announcement Wednesday they are hoping to raise $5 billion when the company goes public. The company was formally privately owned by founder and CEO Mark Zuckerberg.
Facebook owners are optimistic about its ambitious goal, as it would be the highest Internet initial public offering since Google raised $1.9 billion in 2004. The social networking site boasts 845 million users, according to a Feb. 1 article by The Associated Press
Because users don’t pay to gain access to the site, the company makes most of its money from advertisements. Facebook’s access to consumer information allows ads to be highly specialized and therefore more beneficial for advertisers, according to the article.
Fernando Diz, an associate professor of finance at Syracuse University, said in an email that little about Facebook will change despite its recent announcement. The reason for this is because the company created two classes of shares. The first, Class A, is subject to the IPO. The second, Class B, is not open to the public and has 10 times more voting power than Class A. Zuckerberg will own a majority of Class B.
While the power will stay in the hands of Zuckerberg, the change will benefit the company’s employees, Diz said.
‘Going public also allows current employees to be incentivized through grants of ‘restricted stock’ or ‘employee options’ which are a much cheaper way of incentivizing and retaining employees for the company than paying cash salaries.’ Diz said.
Adam Dukoff, president of SU’s Investment Club, said in an email he thinks Facebook’s decision to go public was a wise move.
‘Going public and being able to sell Facebook shares on a secondary market enables Facebook private shareholders to profit on their holdings,’ he said.
Dukoff said he would not be investing in Facebook himself. The amount of users who actually log onto the Facebook website and see the advertisements are a lot less than the numbers suggest.
‘It is not clear what makes Facebook so valuable and what their future growth prospects are,’ he said.
The only downside of a company such as Facebook going public is that it is now required to make its company information publicly available and what it does financially will be monitored closely, Diz said.
Tate Chow, a junior industrial and interaction design major, said although he wouldn’t personally be buying stock any time soon, in theory, buying Facebook stock seems like a good idea.
‘If you follow trends for social media stocks, it’s a good idea to buy into the stock,’ he said. ‘If I was in the investment field, I would definitely test the waters to see how far it would go.’
Published on February 13, 2012 at 12:00 pm
Contact Sarah: seschust@syr.edu
