Facebook IPO: History, Pricing Factors, and Future Prospects
This paper examines Facebook's rise from a Harvard dormitory startup to the world's largest social network, and analyzes the company's planned Initial Public Offering (IPO) targeting approximately $10 billion. Beginning with a brief history of Facebook's founding by Mark Zuckerberg in 2004, the paper traces its expansion from a university-only platform to a global social network. It then evaluates the key factors likely to determine IPO pricing — including investor sentiment, company size, and firm age — before considering variables that could affect share value once trading begins. The paper concludes by assessing Facebook's future growth prospects, including potential uses of IPO proceeds for organic expansion and acquisitions.
- Introduction: Overview of Facebook's growth and planned IPO
- Facebook: A Brief History: Founding, expansion, and early milestones
- The Planned IPO: IPO targets, revenue figures, and market context
- Factors Likely to Determine Facebook's Share Price: Investor sentiment, size, and firm age as pricing drivers
- Facebook's Future Prospects: Post-IPO growth strategies and revenue opportunities
- Conclusion: Summary of IPO outlook and company future
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What makes this paper effective
- The paper follows a clear logical progression — from company history to IPO mechanics to pricing factors to future outlook — giving readers a complete picture of the investment event.
- It grounds financial analysis in concrete figures (e.g., $3.71 billion in 2011 revenue, 85% of revenues from advertising, 88% year-over-year growth) that lend credibility to the argument.
- The annotated bibliography demonstrates source evaluation skills, briefly summarizing and assessing the relevance of each source used.
Key academic technique demonstrated
The paper effectively uses multiple causal factors to analyze a single financial event. Rather than offering a single explanation for how the IPO price will be set, it systematically identifies three distinct determinants — investor sentiment, company size, and firm age — and explains the logic of each. This multi-factor analytical approach is a strong model for business and finance writing at the undergraduate level.
Structure breakdown
The paper opens with a brief contextual introduction, then provides historical background on Facebook's founding and growth. The central sections analyze the planned IPO and the factors affecting share pricing, both at launch and after trading begins. The final section projects future growth scenarios before a brief synthesizing conclusion. An annotated bibliography closes the paper, evaluating the two primary sources used throughout.
Introduction
Facebook, a leading social networking service with more than 800 million users, has grown far beyond the expectations of most observers since the time it was founded. Launched in 2004 by Mark Zuckerberg and several college colleagues, Facebook gradually became a dominant force in the social networking field. The company was seeking to raise approximately $10 billion from an upcoming Initial Public Offering (IPO). Apart from making a number of its existing stockholders instant millionaires, Facebook's IPO was expected to impact positively on the firm's bottom line, market capitalization, and performance going forward.
Annotated Bibliography
Philips, S. (2007, July 25). A brief history of Facebook. Retrieved February 27, 2012, from The Guardian website: http://www.guardian.co.uk/technology/2007/jul/25/media.newmedia
This article concerns itself primarily with how Facebook developed over time since its inception. It goes into significant detail in charting Facebook's growth from a social networking platform targeting a small number of university students to a global social network. The author also touches on some of the most recent happenings surrounding Facebook at the time of writing, from rumors of public figures having joined the platform to the banning of events organized through Facebook.
Raice, S. (2012, February 2). Facebook sets historic IPO. Retrieved February 26, 2012, from The Wall Street Journal website: http://online.wsj.com/article/SB10001424052970204879004577110780078310366.html
This article concerns itself primarily with the anticipated IPO of Facebook. Raice carefully considers the arguments surrounding the offering, including the reasons why Zuckerberg had been reluctant to take the company public. The article also highlights Facebook's recent financial performance, with particular emphasis on both revenue and profitability. The author draws on the opinions of several market analysts in seeking to assess Facebook's prospects going forward.
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