What is the Long Term Value of Facebook IPO

May 22, 2012 - PRLog -- It was the most anticipated initial public offering (IPO) since Google’s in 2004 when Google offered 19,605,052 shares at a price of $85 per share.  The sale of $1.67 billion gave Google a market capitalisation of more than $23 billion. The vast majority of the 271 million shares remained under the control of Google, with many Google employees becoming instant paper millionaires.

At $104 billion, Facebook is being valued at more than the combined value of Nike and Goldman Sachs, even though last year Facebook had revenues of $3.7bn while Goldman Sach's were 10 times that.

Whether you love or loathe Facebook, no one can deny that this is one company that has massive potential.  They will have more than a billion people logging in to their Facebook accounts this year which is more than three times the populations of the US.  It is the social media force to be reckoned with and around 400 million people log on six days a week and in the first three months of this year alone those people "liked" or commented on Facebook items 3.2bn times a day.

The Facebook IPO was not all smooth sailing though, with Nasdaq having major problems returning order confirmation to some investors for hours and even days in some cases.  System problems also delayed the start of trading for 30 minutes.

Commenting on the long-term value of the Facebook IPO, Ajay Bhalla, Professor of Global Innovation Management at Cass Business School says:

“With its IPO priced in excess of $100bn, Facebook has no doubt been extremely successful in capturing the investor mood at right time.  However, investors cannot bank on the current undisputed position it commands in the social network world. The ability of Facebook to reinvent itself will depend not just on having sticky customer base but also on its capacity to introduce new products. For that it may have to maintain the acquisition spree and introduce a different culture than the one is prides itself in. It will also require different set of management competencies than the one it has nurtured for so long.”

Ajay Bhalla is Professor of Global Innovation Management in the Faculty of Management (http://www.cass.city.ac.uk/courses/phd/areas-of-study/phd...) at Cass Business School, where he teaches PhD students (http://www.cass.city.ac.uk/courses/phd).  Cass has a deep commitment to research across our three PhD faculties of Management, Finance, and Actuarial Science (http://bunhill.city.ac.uk/research/actprojects.nsf/Resear...).