Effraim Landais very familiar with helping companies with an IPO. His own company Effi Enterprises works with companies to explore and obtain various types of financial investments. They specialize in helping emerging companies handle revenue as they continue to experience growth. One sign of marked business growth is when a company is going to go public. Something Facebook recently announced they would be doing with their stocks.
Facebook ‘s IPO
One of the questions that are posed to Effi Enterprises concerns when it’s time to go public. Companies are generally looking for a magic number to that then qualifies the private company for public investments. There really is no set number for revenue or profit that defines the “right” time to go public. Going public in actuality should be when the company is not desperate for finances. The company is no longer just trying to survive but is instead seeking funding to finance expansions or growth. Some are looking for public shares to help the company make acquisitions. Facebook is in the perfect spot to go public by this criterion.
In 2012, Facebook reported a 45% increase in revenue in the first quarter. In comparison, Google reported only a 22% increase in the same time frame. Going public could mean somewhere around $100 billion. Their goal is to raise $5 billion in the IPO, this is with the total valuation of around$100 million.
Going public may be a favorable way to generate revenue. There is no doubt that Facebook has value in the public eye. The question is if key investors will see the same value. When you look at the numbers it is astounding. Facebook will have approximately one tenth of the world’s population signed up. It is likely that no other business has had such a huge audience. Facebook already controls over a quarter of all online advertisements. That’s equal to about one sixth of the ad revenue generated in the United States. With numbers like that, why would investors in the private sector be hesitant to contribute? With its track record it is nearly a guaranteed successful venture.
Business analysts will state that while the ads are the biggest asset, they may very well also be their biggest risk factor. The trouble from here is continuing growth in this arena. The larger a company becomes the more difficult it can be to continue and sustain such monumental growth. Can they continue to build ad campaigns and keep their audience engaged? What about the possibility of overwhelming the users? These are real risks that Facebook must address to reduce the risk of losing rather than gaining. Facebook will need to convince potential investors that they can continue monetizing the millions of users.
What Facebook Says About Going Public With Shares
Facebook plans to offer 180,000,000 shares to the public. These are all Class A Common stock and in addition shareholders are offering 157,415,352. This is their IPO- initial public offering. Previously there has been no public market for Class A common stock. The IPO price should be set from $28 to $35 for each share.