On the cusp of Facebook’s initial public offering (IPO), we take a look at just what’s on offer, and what that might mean for the social media giant’s more than one billion users.
Listed as a public company, Facebook is hoping to raise $5 billion from the sale of around 421 million shares, an ambitious goal which if achieved, would land them on the shortlist of largest IPOs of all time.
Next to CEO Mark Zuckerberg’s 28.4% majority share, the sale would see nearly 18% of the company become public, valuing it at around $100 billion and placing fourth on the list of the world’s biggest companies behind Apple, Google and McDonald’s.
Analysts have been quick to warn against investing, citing the notoriously volatile performance of .COMs on the share market, but there has been significant public interest in the shares which are set to debut on the market later this week.
A cause for concern for some is the last minute release of a further 84 million shares by early backers last week including PayPal founder Peter Thiel who increased his initial release from 7.7 million to 16.8 million.
Not everyone is selling though, Instagram founder Kevin Systrom will be watching the IPO closely following the sale of his App to Facebook earlier in the year for $1 billion, much of which it was later revealed came in the form of Facebook stock.
What It Means for Users
For Facebook’s 845 million active users who generate an average 2.7 billion daily likes and comments, the move to public company might see some unwelcome changes in daily functionality.
By law, when a company goes public they are obligated to continue creating increased value for their stakeholders, and while Facebook’s value has grown exponentially year to year, it has yet to keep up with the demands of a large public stakeholder base.
So far advertising has proven their single greatest source of revenue, bringing in $3.7 billion last year alone, but while user numbers continue to grow, reports show overall advertising revenue from the last six months is down.
While it’s safe to say advertising revenue is unlikely to dry up any time soon, there are concerns from users that options to minimise advertising on your page will disappear in the fight for advertising real estate to keep its value.
In an initial step, Facebook has announced the introduction of advertising on their mobile platform, currently an ad free space. Whether this is enough to combat the dip in ad space value however remains to be seen.