...Case Report Facebook INC: The Initial Public Offering Group Members Ao Zhou 114214195 Zehua Huang 114352699 Emily Buczkowski 112344252 Rui Cao 114368911 Julian Gooch 112364922 University of Maryland, R. H. Smith Business School Summary Facebook is an emerging internet-based company which has astonishing growth in the past decade. Its substantial user base, subsequently massive database and pioneer brand image provide Facebook with the profitability base of its business. The main goal in this case is to evaluate the opportunity of investing Facebook in its IPO. Here we use both DCF valuation and Multiples valuation method to measure if Facebook is fairly priced. It turns out that both DCF valuation and Multiples valuation indicate that Facebook’s stock price is overvalued, suggesting the manager not to buy Facebook at IPO. We could also justify this decision by putting release of non-tradable stock and price trend of other recent IPOs into consideration. University of Maryland, R. H. Smith Business School Overview of problem Facebook is a leading social networking company with rapidly revenue growth, whose profit mainly come from advertisements. It planned to go public on May, 2012. Our issue in this case is to decide whether it is a good opportunity for CXT to invest on Facebook in IPO. So we need to estimate the value of a Facebook share to see if it is overvalued or undervalued. Section 1 Case Briefing 1. How does Facebook make money...
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...Benchmarking Analysis: Gene One profile Gene One is a biotech industry. It created a technology that eliminates the need for pesticides for tomato and potato crops. This environmentally friendly gene transformed Gene One into a $400 million company in just eight years. Gene One aims at 40% growth in 36 months, thus, it needs an IPO to respond to the demand and meet their targets. The venture capital will allow Gene One to develop new technologies, increase their exposure, and strengthen the brand. The CEO, Don Ruiz, received board approval and is poised to implement his plan with the help of his senior executives. Similarly, other companies that have reached the growth of Gene One have used the prospects of an IPO to develop newer products, advance their technologies, and seek expansion of their brands. Facebook According to Facebook (2011) website, the company was created in February 2004 by Mark Zuckerberg, co-founders Dustin Moskovitz, Chris Hughes, and Eduardo Saverin from their Harvard dorm room, which in June of the same year moved to its new location in Palo Alto, California. In December 2004, the site had already reached one million users worldwide, from its initial start at the Harvard, Stanford, Columbia, and Yale dorms (Facebook, 2011). Its reach entered more than 800 college networks, thus, sparking media attention, bringing to Facebook its first venture capital investment of $12.7 million by Accel Partners (Facebook, 2011). With more than 5.5 million...
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...1. How does Facebook make money? What are the value drivers of its business? What is its comparative advantage relative to other social networking companies? At the time of the IPO, Facebook possessed two revenue streams: advertising ($3.145B in 2011) and payments ($0.555B in 2011). The advertising business delivered ads to Facebooks users. Users uploaded an incredible wealth of information to Facebook, including their authentic identities, interests, and social connections, allowing advertisers to target their ads to an unprecedented degree. Further, all user uploaded information became the property of Facebook, granting them a monopoly on the data. This hyper-focused approach contrasted with those of other major technology driven advertising firms, like Google, whose value proposition is the ability to reach a significant percentage of all consumers using the internet. Facebook’s other revenue driver, online payments, consisted of in-game purchases of virtual goods for social games. In 2011, all of this revenue was generated via Zynga games. This business relied upon consumers using Facebook as their home for socially-connected online gaming. Given that payments represented a small portion of Facebook’s revenue, and that the advertising business was at the time more developed and predictable, valuing the company as an advertising company rather than a hybrid advertising and payments company seems appropriate. The comparative advantage of Facebook relative to other...
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...For the exclusive use of L. Wang, 2016. W12453 FACEBOOK, INC: THE INITIAL PUBLIC OFFERING (A) 1 Ken Mark wrote this case under the supervision of Professors Deborah Compeau, Craig Dunbar and Michael R. King solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Copyright © 2012, Richard Ivey School of Business Foundation Version: 2014-03-13 INTRODUCTION “The entire market is waiting for the emergence of Facebook as a publicly traded company,” said Jonathan McNeil, lead analyst at CXTechnology Fund (CXT), as he spoke to the fund’s investment committee on May 16, 2012. The highly anticipated pricing of the Facebook initial public offering (IPO) was underway, and in three hours, McNeil was scheduled to provide the lead underwriter, Morgan Stanley, with CXT’s final indication...
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...Company Analysis: Facebook, Inc. Merlinda C. Lucas MBA6008 Global Economic Environment Instructor: Lester Hadsell Abstract The Coffee Crisis case study illustrates how the decline in coffee consumption and the rise of coffee production was addressed by the governments of coffee producing countries in 2004. The coffee market was identified, defined and explained in the context of both international nature and structure. The new entrants into the coffee market were identified and examined. A supply and demand analysis was conducted to address what the shift factors were and what were some of the changes in consumer behavior. It was concluded some of the remedies presented by the International Coffee Organization, Inter-American Development Bank and Oxfam were incorporated to help elevate some of the issues presented and analyzed. Facebook, Inc. is the world’s leading social networking company. It became a public traded company on May 18, 2012, filing a $5 billion initial public offering (IPO), “making it one of the biggest in tech history and the biggest in Internet history” (Tangel, Hamilton, 2012). Facebook is social networking service, established in 2004 and headquartered in Menlo Park, CA, that builds products to create utility for users, developers, and advertisers. Users (people) use Facebook to stay connected and share and express what matters to them with their friends, family, and community through their user profiles. Developers use the Facebook Platform...
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...objective is to provide information relating to trading under one roof. This Blog Malaysia Stock Picks: How to spot a good IPO and a bad IPO in ... 11 May 2012 I can't help but to mention one classic example of Vastalux Energy Bhd. In 2008, Vastalux stocks were undersubscribed and since its listing the share price hasn't climbed any higher than its IPO price and is currently facing ... http://malaysiastockpicks.blogspot.com/ 1 11 May 2012 How to spot a good IPO and a bad IPO in Malaysia Here is a guide to spot a good Initial Public Offering (IPO) and a bad IPO in Malaysia. Whether you are looking to subscribe for flipping for first-day gains or to hold for the long run, understanding why companies go for IPO is equally as crucial as looking for pertinent points that will increase your chances of striking a good deal and avoiding a bad one. Why Companies go for IPO? All companies listed on the stock exchange have one common interest in mind – to raise funds. Initial Public Offerings is the company’s first time raising funds selling its stock to the public. Fund are raised either for business owners themselves as they cash out from the company or for the company as they issue additional shares and sell them to the public. As we all know, another alternative for raising funds is debt. Debt and borrowings have to be repaid, whist capital raised through IPO doesn’t. This makes raising capital an interesting affair for any company established...
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...The success of advertising on Facebook. Facebook has gainfully evolved their advertising platform into the highly sophisticated Social Ads in use today. Social Advertising was released in late 2010 and exploits word of mouth and turn user interactions between friends into advertisements.[1] Early on, Social Ads generated up to ten times as many clicks as regular advertising and increased the advertising revenue contribution of its mobile platform. Today, text and display ads represent 87% of its Trefis stock price and is their most important division.[2] Figure 1 depicts Facebook’s success at monetizing mobile advertising as Revenue per Page View (RPM) rose from a low of around $0.27 in 2010 to $0.42 in 2013, and is forecasted to increase. Figure 2 illustrates quarterly revenue growth of 64% over the same quarter last year, and 70% increase of the same trailing nine months from 2013. A loyalty analysis suggests Social Ads can generate new growth in revenue while keeping the acquisition costs relatively low. Figure 3 depicts FB’s increase in Enterprise Value (EV) and EV/EBITDA multiple in recent years. The rising third quarter EV for 2014 also underlines the success in monetizing their Social Ads in the mobile space. The Facebook Platform and Facebook for Web sites. Developed in 2007, Facebook Platforms enables third-party developers to develop applications within the Facebook environment. Figure 4 shows how third-parties like Zynga can access user data through...
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...IPO When a business is growing, but not as quickly as it could, the next best thing to do instead of borrowing capital is going public. A company can do so by creating an initial public offering, or IPO where they sell ownership shares of the business to the public. The IPO can open windows of opportunities for a business in terms of financial growth and public awareness. On the downside, an IPO can restructure a company’s management and everything about the company must be disclosed and viewed even by competitors. With this in mind, many companies who are deciding between whether to go public or not may have their second thoughts. I will be discussing the advantages and disadvantages that come with IPOs and the results that some companies have seen from going public. What is an IPO? The initial public offering or IPO according to CNNMoney.com is “the first time that a company’s shares are traded on a public market.” It is the process where a privately owned company issues shares of stock to the public, in other words, the company is “going public.” Small private companies have IPOs to raise capital and gain public awareness, while large, well-established companies have IPOs to become publicly traded companies. A person who is interested in a particular company can buy one of two types of shares: common or preferred stock. When a company only issues one class of stock, it is called common stock. Common stocks are generally less expensive to purchase than preferred...
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...countries. The Company develops, markets and operates online social games as live services played over the Internet and on social networking sites and mobile platforms. The Company’s games are accessible on Facebook, other social networks and mobile platforms to players globally, wherever and whenever they want. It operates its games as live services. All of its games are free to play, and it generates revenue through the in-game sale of virtual goods and advertising. In March 2012, the Company acquired New York-based social game developer OMGPOP, makers of the cultural hit mobile game, Draw Something, and over 35 additional social games. In 2012, the Company launched several new games, including Hidden Chronicles, Zynga Bingo, Scramble With Friends, Slingo and Dream Heights. Zynga is a social network game development company located in San Francisco, California. The company develops browser-based games that work both stand-alone on mobile phones and as application widgets on social networking websites such as Facebook, Orkut, Google+ and Myspace. As of May 2012, Zynga's games on Facebook have over 250 million monthly active users. Five of Zynga's games, CityVille, Zynga Poker, FarmVille, CastleVille, and Hidden Chronicles, are the most widely used game applications on Facebook, with CityVille having over 40 million monthly active users. Zynga filed with the SEC to raise up to $1 billion in an initial public offering on July 1, 2011, and began trading on NASDAQ December 16, 2011...
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...Project Group: LE THI THU HIEN LE THI NGOC YEN TRUONG TU QUYNH NGUYEN HONG CAM BINH Summer 2012 An overview Facebook was realized on February 4, 2004 by an American computer programmer and Internet entrepreneur- Mark Elliot Zuckerberg. Facebook has said it will be valued at up to $96bn (£59bn) when it sells shares to investors this month in a record-breaking flotation. The first investment from Peter Thiel was $500,000 into Facebook. Facebook has minted four billionaires: Mark Zuckerberg, Dustin Moskovitz, Eduardo Saverin and Sean Parker. The 27-year-old Zuckerberg's net worth was estimated at $17.5bn on the 2011 Forbes list of the wealthiest Americans. Moskovitz had a net worth of $3.5bn but pipped Zuckerberg for the title of world's youngest billionaire, being eight days younger. The Brazilian-born Saverin, who left Facebook early on after a falling-out with Zuckerberg, had a net worth of $2bn. Parker, the Napster co-founder who briefly served as Facebook's president, had a net worth of $2.1bn On November 15, 2010, Facebook announced it had acquired the domain name fb.com from the American Farm Bureau Federation for an undisclosed amount. On January 11, 2011, the Farm Bureau disclosed $8.5 million in "domain sales income", making the acquisition of FB.com one of the ten highest domain sales in history Nowadays, 1 in every 13 people on earth uses Facebook, more than 900m active users, with over 250 million of them who log in every day. The average user has about 130 friends...
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...Facebook, who became a publicly traded company in May 2012, has seen a struggle in the ability to meet financial market’s expectations. The well-established social network is struggling to meet investors’ expectations and has a stock rate of -11.70%. For at least the fifth consecutive quarter, the social network’s revenue growth has shriveled while costs continue to rise. Facebook had an initial IPO of 38 dollars, but finished the regular session down 8.5% to 26.84 dollars. This document will conduct a critical analysis of the key issues facing Facebook, which include relying on advertising, increasing operational cost and difficulties increasing growth, shifting to smart phones, and increasing competition. One key issue contributing to Facebook’s struggle is that they heavily rely on advertisement for revenue, but are having issues maintaining that revenue. When looking at the first quarterly report for investors, 83% of its revenue comes from advertising (Elstone). Zynga, a social gaming company, provides about 14% of Facebook’s advertising revenue, but they have seen a 37% decrease in their stocks too (Elstone). Major companies who have been using Facebook for advertisement are beginning to question if their ads on Facebook are working. For example, General Motors Co. believed that the ads were ineffective and that there was no evidence to believe otherwise. This led them to pull $10 million worth of ads from Facebook in May (Raice). Limited Run, another U.S. based company...
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...To: Dr. Nguyen From: Derek Su Date: November 22, 2015 Subject: Uber Extra Credit Project What is Uber? Uber Technologies Inc. is a network orchestrator, connecting passengers with drivers. Uber manages a network of drivers and passengers through a phone app. It also provides options and varieties in the transportation service. Business Model: Step 1 (Request a cab): The first step in the business model of Uber is about creating a demand. People have a smartphone app, which lets them request a cab instantly or schedule it for some time later. Step 2 (Matching): As soon as the request is made, a notification about your details is sent to the nearest driver. Cab driver has the option to accept or reject the ride. In case he rejects, notification is sent to another driver in that area. Step 3 (Ride): Customer can track the cab when it is arriving and the ETA is also shown to the customer. The meter starts as soon as the customer sits in the cab, which can be tracked through the customer side app as well. Friendly drivers make sure that the ride is comfortable for the passenger. Step 4 (Payment & Rating): Once the ride is over, customer gets an option to rate the driver. Rating system is an important part of Uber’s business model as it lets a person know about the driver before booking a ride and helps him trust the driver. Revenue Streams: * Car rides on per km/mile basis * Surge pricing technology: Whenever the demand increases...
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...1 INTRODUCTION Since San Walton opened his first store in 1962, Wal-Mart has grown into a global retailer with more than 4,000 store in the United States and more than 6,000 internationally. According to Wal-Mart CEO, Mike Duke, Wal-Mart’s strategic focus areas are •Making sure the company has the best retail talent at every level of the organization by recruiting, developing and retaining the best associates; •Delivering on the productivity loop that enables Walmart to operate for less so the company can drive prices even lower for its customers •Being even more disciplined about operating expenses and capital spending; •Investing to serve more customers globally and accelerating the vision of anytime, anywhere access by bringing together best-in-class online, mobile and social capabilities and our more than 10,700 stores; and •Benefiting our communities and having a world class compliance organization. Walmart has been the giant of brick and mortar retailers having topped the Fortune 500 list on more than one occasion. Several business news agencies have notde that Wal-Mart is stumbling into E-Commerce market as it attempts to adapt its click and mortar business strategies to its E-Commerce business. According to CNN Money Wal-Mart plans to become an online juggernaut, but its online business numbers have been disappointing. Walmart’s E-Commerce has come up with a plan to do e-commerce right. The • Walmart began recruiting top Silicon Valley talent...
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...company is to continue its growth of 40% each year, the company will have to go public with an initial public offering (IPO) within the next three years. The purpose for this paper is to review Gene One’s decision to become a public company. Taking Gene One public would be a new venture for the senior team members, who realize that, collectively, they have zero experience with IPOs. This paper looks at the issues and opportunities Gene One is facing, stakeholder’s perspective and ethical dilemma, the end-state goals, alternative solutions, a risk assessment and the optimal solution, and last implementation of the plan. Situation Analysis Issue and Opportunity Identification Gene One is a company that entered the biotech industry with groundbreaking gene technology that eradicated diseases in tomatoes and potatoes. In just eight short years, the company grew into the $400 million company that it is today. Past events that have led to Gene One current issues and opportunities are the fact that the company has grown at such a rapid pace that it outgrowing itself. Further, an increase in stock prices is indicative of the growing interest in the biotech industry. Don Ruiz, the company’s CEO, and the board of directors believes that if the company is to continue its growth of 40% each year, the company will have to go public with an initial public offering (IPO) within the next three years. Stakeholder Perspectives/Ethical Dilemmas The rights, interest and values of the various...
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...Activists call for closure of No. 2 nuke power plant TAIPEI--Environmental groups staged a protest yesterday to urge the government to shut down the No. 2 nuclear power plant in northern Taiwan, citing concerns about the safety of the plant. The protesters gathered outside the Legislature, calling for the government to review the operations of the 30-year-old plant in Wanli, New Taipei City. They pointed out that in a routine safety check on March 16, the state-run Taiwan Power Co. (Taipower) found that one of 120 bolts that anchor the plant's No. 1 reactor to its concrete base had broken and six others had cracked. Taipower recently applied to resume operations of the No. 1 reactor after replacing some parts and carrying out other safety checks. But the environmental groups said the cracks in the bolts indicated deterioration of the nuclear power plant's structure, operating systems, parts and components. Allowing continued operation of the aging plant would jeopardize public safety. At a recent public hearing on the matter, Tsuei Su-hsin, secretary-general of Green Citizen Action's Alliance, said the decision to resume operations was not transparent. Forecasts for slow growth in China, worries over Greece bailout take toll on markets HONG KONG--World stock markets sank Tuesday over worries about slower economic growth in China and a possible snag in the deal for Greece to get its bailout money. In early European trading, Germany's DAX was down 0.4 percent at 6,835...
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