Sponsorship Link
Within days, Facebook is expected to file for an initial public offering with the U.S. Securities and Exchange Commission, for the first time doing a public financial strip tease.
/
That's what a company has to do to obtain public investment as well as satisfy regulators who may raise questions. Last year, highly anticipated IPOs by the likes of Groupon and Facebook partner Zynga were delayed for months in Washington as their boards had to deal with precisely these issues.
Facebook, based now in Palo Alto, Calif. but moving to Menlo Park, Calif., has never revealed anything about its financial operations except to announce membership numbers - 800 million, or nearly triple the U.S. population, or 11 percent of the global population.
Here are five things to monitor when the IPO is filed:
Must Read
Who owns the company? Since Mark Zuckerberg, now 27, established it in 2004, shares have been sold to insiders, such as Tyler and Cameron Winklevoss and Eduardo Saverin, whose characters were depicted in "The Social Network," but there are others including Hong Kong tycoon Li Ka-shing, PayPal founder Peter Thiel, LinkedIn CEO Reid Hoffman and Zynga CEO Mark Pincus.
Follow us
Then there are venture capital investors, including Accel Partners, Greylock Ventures and European Founders Fund; investment banks such as Goldman Sachs, and corporations including Microsoft and Russia's Digital Sky Technologies.
The prospectus will lay out who owns what and how much, as well as if anything is to be sold in the deal. Zuckerberg, for one, apparently sold $100 million worth of shares in 2010 to donate cash to the Newark, N.J. school system. Others may have used secondary exchanges as well.-
Key: who cashes out and how much insiders, such as Zuckerberg and COO Sheryl Sandberg, retain.
What kind of revenue does Facebook generate? By comparison, Google reported 2011 revenue of $37.9 billion, up 29 percent, while Yahoo reported revenue fell 21 percent, to $4.98 billion.
How "sticky" is Facebook and what kind of revenue is generated from advertisers? eMarketer, a research company, estimates Facebook's 2011 revenue was $4.27 billion, with 88 percent derived from advertising.
Comscore, another researcher, reported Facebook's share of the 2011 market for display ads rose to 27.9 percent from 21 percent in 2010. Yahoo had about 11 percent, with both Google and Microsoft holding below 5 percent shares.
Facebook may detail how many daily clicks are generated from its users, especially the heavy ones, as well as specify some of its traffic. Still, whatever value is pegged for its shares, it will have to reflect some of these numbers.
Google shares, trading Tuesday at $576.87, value the Mountain View, Calif.-based company at $187.6 billion. Their price-earnings ratio is 19.37.
Yahoo shares, trading at $15.45, value the Sunnyvale, Calif.-based company at $19.2 billion and a price-earnings ratio of 18.85. Of course, given Yahoo's recent history, investors including Daniel Loeb's Third Point Capital believe Yahoo's current price masks billions of untapped assets in foreign investments.
