1 Feb 2012

Facebook: smiling all the way to the stock market?

A crazy bubble price, or a sensational bargain? Channel 4 News Business Producer Ben King assesses rumours Facebook is about to launch on the public stock market, valued at $100bn.

Who had the biggest smile at the World Economic Forum in Davos this week? Amongst this gathering of billionaires there were plenty with reasons to be cheerful. But it was the sphinx-like smile of Sheryl Sandberg which got the most attention.

It was her stock response to the legion of journalists – and doubtless other denizens of Davos – who asked about the imminent launch of Facebook on the public stock market.

Sandberg is the social networking site’s chief operating officer, and increasingly plays the public face of the business in place of the notoriously gauche and spiky founder, Mark Zuckerberg.

A smile was all she was prepared to reveal about plans to float Facebook, which has been arguably the most hotly awaited stock market tech event since Google went public in 2004.

Arguably the most hotly awaited stock market tech event since Google went public.

Current reports suggest Facebook is on the point of filing papers which would publicly fire the starting gun on its initial public offering (IPO). Current reports suggest 10 per cent of Facebook will be up for public sale, for a price of $10bn. That would value the whole company at $100bn, dwarfing the $23bn launch value of Google.

This is the largest of a series of big social media-linked firms to go public, following the business social network LinkedIn, social games maker Zynga, and the daily deal website Groupon.

Sceptics have inevitably made comparisons with an earlier generation of internet stock market launches – the dot-com bubble which gave birth to a few stars such as Amazon.com, and a number of spectacular duds like the fashion retailer Boo.com.

However, the social-media floats have hardly been runaway successes. LinkedIn had a stunning first day, more than doubling its launch price of $45. But it has trended downwards ever since.

Groupon and Zynga are currently struggling to stay above their launch prices, a big disappointment to investors who typically hope to see their stocks rise 15 per cent or so as a thank-you for dipping their toes into the risky waters of a stock market debut.

However, Facebook is almost as unique a business at Google was in 2004. It has more than 800m members, more than half of whom log on every day. For a generation of users, it’s the forum where much of their social lives now take place.

Revolutions are organised on Facebook. Pop careers are born, and die there. And advertisers can target potential customers with uncanny accuracy.

Revolutions are organised on Facebook. Pop careers are born, and die there.

As a private company, Facebook doesn’t have to disclose much about how much money it makes, and which activities are most profitable. Before they can start trading their shares on the stock market, they will have to publish a prospectus of hundreds of pages, full of financial and performance data.

For business and technology watchers alike, this will provide a fascinating chance to rummage under the hood of this secretive concern. We’ll find out where they make their money, who owns a stake, and what their fears for the future are.

Opinions will be expressed about whether the $100bn is a crazy bubble price, or a sensational bargain, like Google shares turned out to be. They launched at $85 each. Today they are $576.

The web business is such a cruel and fickle place, that one day’s darling can soon be a clunky embarrassment. Just ask the owners of MySpace and Friends Reunited.

But if the stock market launch does go ahead at the rumoured price, Mark Zuckerberg’s share would be worth around $24bn. That would make him the 14th richest person on the planet.