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Facebook IPO May Happen Before Year-End

1 December 2011 - Features - Editor

As social media continues to gain ground both in the business world and with private users, speculation continues as to whether Facebook, arguably the most popular social media network at this time, will go public. Following LinkedIn's successful initial public offering in May this year, investors appeared keen to support IPOs by prominent players in the social media segment of the tech sector. So there was a measure of disappointment that Facebook seemed to be dragging its heels with regard to going public, with rumors that if this happened at all, it would only be in 2012. As we enter the last month of 2011, however, speculation has resurfaced that Facebook may very well issue an IPO before the end of the year, with the objective of raising $10 billion, valuing the company at $100 billion.

With more competitors entering the marketplace, it is likely that Facebook has identified a window of opportunity that it does not want to let slip by, prompting it to reconsider going public sooner than planned. With the valuation of $100 billion being double the valuation of the company in January of this year, it appears that Facebook anticipates investors will snap up IPO shares. If the figure of $10 billion proves to be correct, the Facebook IPO would be the largest in the US tech sector's history.

Despite issues over privacy, Facebook reportedly has more than 800 million users. Working on the company being valued at $100 billion, each Facebook user is worth $125 dollars. Facebook founder Mark Zuckerberg has readily admitted that the social media site had made some mistakes with regard to privacy issues, a matter which was highlighted by the US Federal Trade Commission (FTC) on behalf of complainants, leading to a number of changes by the company.

Following LinkedIn's much-publicized IPO, other smaller social media companies have also gone public, with some failing to live up to expectations. LinkedIn is still trading above its IPO price, but both Groupon and Pandora Media are trading below their IPO prices, tempering enthusiasm for publicly-traded social media entities. As Facebook is selling a service and is reliant on advertisers for revenue, whether investors do indeed snap up IPO shares remains to be seen.

 


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