Business -- Corporate Finance -- IPO SLP
Facebook, Inc. is a social networking company that engaged in a simultaneously successful and flawed IPO resulting in multiple lawsuits against the company and its underwriters. Though the IPO traded on huge volume and raised $16 billion, it also reportedly resulted in the loss of $billions to investors due to stock overvaluation and supposed mismanagement. Due to these successes and failures, Facebook, Inc.'s IPO is a success story but also a cautionary tale.
Facebook, Inc. is a social networking company that was incorporated in 2004, has more than 5,000 employees, maintains its corporate headquarters in Menlo Park, CA and has more than 1 billion monthly active users on its site: http://www.facebook.com. It is a publicly traded corporation on the Nasdaq 100 and AMEX and its current stock price is $46.26 as of November 22, 2013 at 7:53PM EST (Yahoo, Inc., 2013). Facebook's Sales/Revenue and Profitability (Net Income) in thousands are:
Period Ending
Dec 31, 2012
Dec 31, 2011
Dec 31, 2010
Total Revenue
5,089,000
3,711,000
1,974,000
Cost of Revenue
1,364,000
860,000
493,000
Gross Profit
3,725,000
2,851,000
1,481,000
Operating Expenses
Research Development
1,399,000
388,000
144,000
Selling General and Administrative
1,788,000
707,000
305,000
Non-Recurring
Others
Total Operating Expenses
Operating Income or Loss
538,000
1,756,000
1,032,000
Income from Continuing Operations
Total Other Income/Expenses Net
7,000
(19,000)
(2,000)
Earnings Before Interest And Taxes
545,000
1,737,000
1,030,000
Interest Expense
51,000
42,000
22,000
Income Before Tax
494,000
1,695,000
1,008,000
Income Tax Expense
441,000
695,000
402,000
Minority Interest
(21,000)
(332,000)
(234,000)
Net Income From Continuing Ops
32,000
668,000
372,000
Non-recurring Events
Discontinued Operations
Extraordinary Items
Effect Of Accounting Changes
Other Items
Net Income
32,000
668,000
372,000
Preferred Stock And Other Adjustments
Net Income Applicable To Common Shares
32,000
668,000
372,000
(Yahoo, Inc., 2013)
Facebook, Inc.'s Total Assets, Total Liabilities and Owners' Equity in thousands are:
Period Ending
Dec 31, 2012
Dec 31, 2011
Dec 31, 2010
Assets
Current Assets
Cash And Cash Equivalents
2,384,000
1,512,000
1,785,000
Short-Term Investments
7,242,000
2,396,000
Net Receivables
1,170,000
547,000
373,000
Inventory
Other Current Assets
471,000
149,000
88,000
Total Current Assets
11,267,000
4,604,000
2,246,000
Long-Term Investments
Property Plant and Equipment
2,391,000
1,475,000
Its founders saw and used a very profitable and popular global market with huge financial returns (Forbes.com, LLC, 2013). Despite its worldwide successes, Facebook's IPO was full of mistakes, disappointments and possible deceit that caused a number of lawsuits (Tsukayama, 2012). The contrast between Facebook's successes and its difficult IPO interests me.
Facebook, Inc. filed its S1 Form Registration Statement with the SEC on February 1, 2012, with Morgan Stanley, J.P. Morgan and Goldman, Sachs & Co as the underwriters, 845 million active users reported, and this Consolidated Balance Sheet:
As of December 31, 2011
Actual
Pro-Forma (1)
Pro Forma As
Adjusted (2)(3)
(in millions)
Consolidated Balance Sheet Data:
Cash, cash equivalents, and marketable securities
3,908
$3,908
Working capital
3,705
4,034
Property and equipment, net
1,475
1,475
Total assets
6,331
6,660
Total liabilities
1,432
1,432
Additional paid-in capital
2,684
4,267
Retained earnings
1,606
Total stockholders' equity
4,899
5,228
(Facebook, Inc., 2012)
The IPO was intended to raise $5 billion with public trading of 421 million shares of stock at $28 - $35 per share, starting on May 18, 2012 (Facebook, Inc., 2012). However, there was so much hype and excitement about the IPO that when it began to trade, it first rose to $45/share. By the end of the day, the stock was valued at $38.23 per…
