A Social networking site launched on February 2004 with just few thousands of USD, today values around $50 billion organisation, with around 550 million registered users and market capitalization of whopping $175 Billion
The valuation and membership of facebook has grown dramatically over the last few years. According to one data, it was most visited site last year, even more popular then most popular search engine, google.com.
Ranking is as per popularity is as below:
Shareholders of Facebook:
The Facebook has not yet gone public. Many people who are awed by the way this site is growing, are desperately waiting for this company to go public.
The recent move by Facebook, where it has sold around 4% of its stock to Goldman Sachs, has sent clear signals to market that company might go public with in a year or so.
The recent move by Facebook, where it has sold around 4% of its stock to Goldman Sachs, has sent clear signals to market that company might go public with in a year or so.
1. Mark Zuckerberg and other founders
2. Microsoft ( around 1.6%)
3. Digital sky technologies
4. Goldman Sachs
5. SPV ( Special purpose vehicle) created by Goldman sachs.
Reason for forming SPV:
Recently Goldman Sachs helped Facebook to collect much needed 2 billion USD. Goldman Sachs itself invested USD 0.5 billion, taking 1% of stock while valuing the company around $50 Billion. The rest of 2 billion USD, was collected by forming SPV which allowed other investors to invest money.
Now I was wondering why they did not they go directly to the market and collected money.
The reason for this lies in the fact that, there is one clause in SEC (Securities and Exchange commission) act, according to which any company having more than 500 investors, has to disclose all its earnings and also has to bind by most of the regulation for public companies.
This also basically means that Facebook has to go public earlier than they have actually planned.
The company want to wait for few more months/year before they go public, as they believe that this would very likely help them fetch higher valuation then current levels.
So in short, by forming SPV they have tried to circumvent SEC. Now SEC is looking into this investment and probably if Facebook is found to be guilty of circumventing this act then Facebook will be forced to go public after about 4 months of this fiscal year that is somewhere in May 2012.
The reason for this lies in the fact that, there is one clause in SEC (Securities and Exchange commission) act, according to which any company having more than 500 investors, has to disclose all its earnings and also has to bind by most of the regulation for public companies.
This also basically means that Facebook has to go public earlier than they have actually planned.
The company want to wait for few more months/year before they go public, as they believe that this would very likely help them fetch higher valuation then current levels.
So in short, by forming SPV they have tried to circumvent SEC. Now SEC is looking into this investment and probably if Facebook is found to be guilty of circumventing this act then Facebook will be forced to go public after about 4 months of this fiscal year that is somewhere in May 2012.
Growth of valuation of facebook:
Feb 2004: Few thousands
June 2004: PayPal Co founder Peter theil becomes its first outside investor - $10 million
September 2006:Facebook got offer from Yahoo for acquisition at $1 Billion.
October 2007: Microsoft invested $240 million valuing company at $15 billion.
May 2009: Digital sky Technologies invested $200 million valuing company at $10 billion
Jan 2011: Goldman Sachs invested $.5billion valuing company at $50 billion.
I believe that this company would grow further due to some reasons:
1. More and more people in developing countries would realize the importance of social networking, which will increase the membership of Facebook.
2. Internet penetration will increase in developing countries and with the increase in internet penetration, its membership would also increase.
3. As most of the revenue of Facebook comes through advertising and many companies have now started using social networking as most important tool to reach customer so this factor will also play an important role in increasing the value of company.
Still there are some questions, like to what extent the valuation provided by Goldman Sachs to Facebook is correct. According to some people the valuation of Facebook is based on some unreal cash flows which would not materialize in future.
Secondly it may be possible that some other social networking site would come which will ultimately lead to the shift of people from Facebook to some other site which is what happened to Orkut isn't it? ( to some extent ).
Secondly it may be possible that some other social networking site would come which will ultimately lead to the shift of people from Facebook to some other site which is what happened to Orkut isn't it? ( to some extent ).
