Mark´s payday: Facebook hitting stock markets
This week I read a jaw-dropping article: Facebook is selling out! I searched for blogs on Google and really and doubtless, between April and July in 2012 Facebook will –finally – head towards the stock markets. This means, Facebook will no longer be owned by Mark Zuckerberg and the facebook crew. Instead, it will be owned by the stock holders. When Facebook goes public in 2012 it could create well over thousands of millionaires. Although many startups offer shares, Facebook of course is a special case. With over 3000 employees now, it is conceivable that by the time those cash out their stock over one third of them would turn millionaires!!! Markimark himself owns 24.7 percent of Facebook. The social network is expected to be valued at as much as 100 billion dollar which would even top Google Inc.
Facebook isn’t yet required to make its financial results public (It will be required to do so by April, because it will cross the 500-shareholder limit by the end of this year). Facebook will generate revenue of $4.27 billion this year, according to Bloomberg, citing data from research firm eMarketer. Approximately $3.8 billion, or 89% of total revenue, will come from advertising. The other 11% comes from other sources, most notably gaming developed by its partner, Zynga, the creator of Farmville.
But is this the right time to open up? The world is watching the EURO crisis drowning down European member states and the USA are highly indebted and about to collapse, too. A quotation of Robert Galbraith shows that the time could maybe not have been chosen better:
“While weak financial markets could postpone or downsize any IPO (Initial Public Stock Offering), even the most conservative market-watchers say Facebook seems destined to set a new benchmark in a region famous for minting fortunes, with even the rank-and-file employees reaping millions of dollars.”
The “Sounds too good to be true” feeling
I read this article and the entire time two feelings accompanied me: First the “Sounds too good to be true” feeling read with me. How could it be determined that these stocks will create that many millionaires when it depends solely on the stock holders that SELL their stock? Indeed, I found comments on blog posts that confirmed that:Commenter Miker-3057253 is giving a metaphor expamle that helped me a lot to understand: „I have an old box van in my back yard. If someone is willing to pay me $1,000,000 for it, I’m not a millionaire unless I actually do the deed and get the cash in hand. Merely having some guy in Toronto tell a reporter at the WSJ (for example) that he would pay $1,000,000 for my truck does not make me a millionaire. By the same token, if I give the guy an option to buy my truck for $100 and he never exercises it, he’s not a millionaire, either – even if old box vans start selling for $2,000,000 each. (I wish.)“
There is always the risk that talented staff would leave with their newfound wealth to make their own mark in the technology world by becoming entrepreneurs or investing in other promising startups -> competitors.
Besides, stock analysts consider the stocks too expensive
As recently as 2009, Facebook was giving engineers with 15 years experience the option to buy 65,000 shares at $6 a share. If we assume that six dollar per share (as it is) is a good price. You have to buy 65,000 shares which equals 390,000 dollars. For every dollar that the stock goes down, this guy loses 65,000 dollars. If we assume that the stock stays at six dollar per unit. Still – if nobody else is willing to pay six dollar for it, the guy has not made one single dollar.
After Google went public in 2004, it was believed that more than 900 employees became instant millionaires, including a chef and masseuse. But just four years after the IPO, nearly one-third of Google’s first 500 employees had left the company for new (ad)ventures. And over the last few years, more pre-IPO employees have left the company with boatloads of cash in their bank accounts.
Chances are, the same will happen at Facebook. The only question is when. So far, Facebook has not made its IPO intentions known, and until it does, hope of becoming a millionaire at the social network is still little more than wishful thinking.
The “What will happen to my data” feeling
The second feeling was: What will happen to my/our/YOUR data? It is pretty sure that the number of people using it will decline when the data arbitrarily gets into any hand of a stock holder. If your friends don´t go there anymore for you there is not much point in going there anymore, too. Even although Zuckerberg insists on continuing to improve Facebook himself, there will eventually be no one left using it. (Which leads to the scenario mentioned above)
Furthermore, the stock holders will have to be fed. – > More ads, more games.
My gut inclination was gettin the hell out of FB. BUT what I have to add is: FaceBook has its issues, but it does an excellent job of helping people stay connected and making it easier to share their lives. People may not be programming or designing on FaceBook, but by helping to keep people connected, it is helping forge ties that can lead to the next great discovery. Also, I think having a socially connected world is, by itself, a great benefit to the human race. People are much less likely to want to go to war with someone that converse with on a daily basis.