Case Study: Facebooks' Initial Public Offering

In May 2012, as Facebook prepared for its initial public offering (IPO), company executives and investment bankers were trying to determine the initial offer price. Facebook indicated the price would be between $28 and $35 per share in its most recent pre-IPO registration statement. However, recent...

Full description

Saved in:
Bibliographic Details
Published in:Journal of financial education 2014-04, Vol.40 (1/2), p.167-191
Main Authors: Tamm, Chris, Varma, Abhishek
Format: Article
Language:English
Subjects:
Business structures
Common stock
FINANCE CASES
Initial public offerings
Investment banking
Investors
Search engines
Shareholders
Social media
Stock prices
Stock shares
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:In May 2012, as Facebook prepared for its initial public offering (IPO), company executives and investment bankers were trying to determine the initial offer price. Facebook indicated the price would be between $28 and $35 per share in its most recent pre-IPO registration statement. However, recent performance and strong investor demand during the road-show may have warranted an increase in the IPO price. Facebook had grown quickly since its founding in 2004 to over 900 million users all across the world. The dramatic growth in users had resulted in substantial revenue and income growth as well; however, there was some evidence that Facebook's growth may have been slowing. This slowing growth along with the mixed performance of several recent technology IPOs made it difficult to forecast the future cash flows and value Facebook. In addition to the valuation, investors had to also consider the fact that Mark Zuckerberg, Facebook's CEO, would control over 57% of the voting rights even after IPO.
ISSN:0093-3961
2332-421X