Facebook Goes Public
The company confirmed a price Thursday—$38 per share with a projected initial offering valuing the company at and estimates $108 billion.
According to the Wall Street Journal, Facebook executives and early investors are selling up to 484.4 million shares, which will raise as much as $18.4 billion. The company's shares will begin trading on the Nasdaq Stock Market around 11 a.m. ET Friday under the symbol FB.
One big question for investors: Is it worth all the hype or is it merely a mirage of monetization founded on a popularity contest of fan pages and Likes? It remains to be seen what can be derived from the true value of the stock as the public clamors to invest in a business model that is yet to prove sustainable.
Two days leading up to the IPO, General Motors—Facebook's largest advertising contributor—pulled their advertising dollars from the company entirely, revealing the ads had little impact on overall sales. At the time GM officials said the company would re-evaluate their relationship with Facebook. Facebook's contract with GM consisted of 88 percent of their advertising revenue last quarter.
Another concern for investors is the unloading of up to $3.8 billion of additional shares from initial investors Goldman Sachs Group Inc., Tiger Global Management and Facebook director Peter Thiel. This could be a red flag—almost 40 percent of shares to be sold will be generated by the company's initial investors.
Meanwhile, supporters tout Facebook as the Holy Grail of marketing, using real time demographic analytic knowledge of age, gender and monetary wealth to predict consumer habits. But there's yet to be any concrete evidence of the advertising worth.
Johanna Blakley, social media expert and research director of USC's Norman Lear Center, had a number of insights on monetization and the future of Facebook.
“If this were a rational universe, marketers and advertisers from every imaginable industry would be flocking to Facebook," Blakley said. "Being able to tap into the largest vat of real-time information about 900 million people’s interests and desires should be the Holy Grail for anyone trying to find an audience for their wares. Demographic-based marketing was developed because it was too expensive and too difficult to figure out people’s actual interests, but Facebook can tell us exactly what those interests are.”
While demographic data prove to be a mecca of consumer marketing insights, it remains to be seen if businesses can translate this into a means of successful advertising dollars.
Plato’s allegory of the cave comes to mind when examining CEO Mark Zuckerberg’s Svengali-like maneuvers in guiding the IPO. The new business model of social media marketing remains to be seen as a quantifiable new way to do business.
Take for example, Facebook’s new billion-dollar acquisition of Instagram, which was said to come down to Zuckerberg’s sole decision in the end without consultation from the company’s board members. This leads to a valley of investor insecurities when it comes to the company's new role as a public domain.
To invest or not invest, that is the question. In true Shakespearean fashion, there are bound to be losers and winners when it comes to Facebook’s IPO. Whether investors believe Facebook is a desirable stock as it releases its initial offering today, the release has already proven to be a huge development in NASDAQ history.
Reach Staff Reporter Sarah Ledesma here.