If you’re anything like me (read: not a Wall Street junkie), you’re scratching your head wondering why the Facebook IPO (NYSE: FB) and Facebook IPO price are such a big deal. If anything, some of us are moderately concerned that Facebook’s big push into the public spotlight might negatively impact our own little profile pages in the world’s favorite social media outlet. Here are five answers to your top five questions about the Facebook IPO and how to get in on the Facebook IPO.
2. Why is Facebook going public?
In a nutshell, the Securities Exchange Act of 1964 is forcing Facebook into the public spotlight. The antiquated rule states that any private organization with more than 500 shareholders must follow the same financial disclosure requirements as public companies. In layman’s terms, they can either go public and offer Facebook stock or face a bigger (and much more expensive) hassle to stay private.
3. How much cash can Facebook raise with the IPO?
With a recent valuation of $83.5 billion and estimated valuation at $100 billion (that’s right: billion!), experts estimate that Facebook could raise as much as $15-18 billion in cash with the IPO, with the Facebook IPO share price set yesterday at $38.
4. How will the Facebook IPO affect users?
To justify the valuation, Facebook IPO investors are going to expect revenue growth – and amazing revenue growth at that. Today, Facebook only makes about $5 per user per year, which is a pretty sizable number when multiplied by an estimated 900 million Facebook users. But with investor pressure for higher profits, here’s what you might expect for Facebook moving forward:
- According to Zuckerberg, nothing but more Facebook goodness. In his February letter to potential Facebook investors, he wrote: “Facebook was not originally created to be a company. … It was built to accomplish a social mission—to make the world more open and connected. … Simply put: we don’t build services to make money; we make money to build better services.”
- In reality, we’ll likely see more strategic app investments similar to Facebook’s merger-acquisition deal with Instagram and a deeper focus on the Facebook mobile experience with 40% of Facebook users accessing mobile apps.
- More advertisements – and more persistent advertisements to avoid another huge loss like the General Motors Facebook ad campaign suspension.
- Fees for in-app upgrades and services similar to the status “highlight” promotions they’ve tested already.
- More farms, poker and words with friends. Keep ‘em coming, Zynga, or 12% of Facebook’s revenue is gone-zo.
5. The fifth question comes courtesy of the Washington Post: I saw Facebook’s CEO Mark Zuckerberg on TV in a hoodie. He looks like a kid. Should I give this guy my money?
Welcome to the Age of Millennials: All the kids wear hoodies on $100 billion Facebook IPO day.
For those of us who learn better through pictures, here’s an awesome Facebook IPO infographic from AccountingDegreeOnline (random author, I know, but still great info).