Facebook Inc. operates a social networking website. The Company's website allows people to communicate with their family, friends, and coworkers. Facebook develops technologies that facilitate the sharing of information, photographs, website links, and videos. Facebook users have the ability to share and restrict information based on their own specific criteria.
By WSJ Staff
Over at MarketWatch, Dan Gallagher has a walk up to Facebook’s IPO filing:
Facebook is widely believed to be readying its first initial-public-offering papers this week, with its prospective IPO looming as one of the biggest market debuts in history.
The documents to be filed with the U.S. Securities and Exchange Commission will provide investors with their first significant glimpse into the social-networking giant’s business performance, as well as at such other matters as its spending, hiring and executive pay. The Wall Street Journal reported earlier that the company was selecting its bankers and could make the filing as early as Wednesday.
Whether the filing occurs this week or later, here are some of the key points to look for in the documents:
• Revenue growth: The size of Facebook’s current business has been the source of great speculation. Documents leaked back in 2009, when the company was putting together an investment deal with Goldman Sachs, showed revenue of $1.24 billion for the nine-month period ending in September 2010 — up nearly 180% from the same period of the previous year. Has that growth rate been maintained, or has it slowed or accelerated?
• Sales mix: Facebook is thought to generate most of its revenue from online advertising, but the company also gets a cut of transactions executed over the site, such as purchases of games. Social-game maker Zynga, whose titles include CityVille and FarmVille, reported revenue of $828.9 million for the nine-month period ended Sept. 30, 2011, and the company keeps 70% of the sales its games generate over Facebook, which implies a maximum revenue cut of about $350 million to Facebook for this period from Zynga alone. What percentage of Facebook’s revenue base is composed of ads, compared to transactions, and are there other significant revenue sources?
• The bottom line: The leaked Goldman documents showed net income of $355 million for the nine-month period ended Sept. 30, 2010, compared with $43.6 million in the previous year. But Facebook has also likely had to spend heavily on network infrastructure, new technology and talent between 2009 and now. Have the company’s costs outpaced its revenue growth rate, and will this moderate over time?
• Float and market cap: The most oft-cited number thrown around of late has Facebook going public at a $100 billion valuation. But like Groupon’s debut last year, Facebook may choose to make a relatively small portion of its shares available in the offering. This allows the company to preserve a larger proportion of ownership for future offerings and to safeguard demand for the stock in the event that would-be investors grow skittish ahead of the offering.
• Risk factors: This section of an SEC filing is often filled with boilerplate language, but it could in this case provide some insights into how Facebook sees its position in the market vis-a-vis the positions of its competitors — most notably Google GOOG +0.52% , which has launched its own social network and is gunning to become a major force on the same mobile devices that Facebook needs for future growth. Does Facebook see any other companies as significant threats? • Who gets what: Some early investors take advantage of IPOs to cash out some shares. Early Facebook investors include Peter Thiel and the venture-capital firms Accel Partners, Greylock Partners and Meritech Capital. Software giant Microsoft put $240 million into the company back in 2007. Will any executives, such as co-founder and CEO Mark Zuckerberg, Chief Operating Officer Sheryl Sandberg or Chief Financial Officer David Ebersman sell shares in the deal?
• Bankers: The Wall Street Journal report indicated that banking titans Morgan Stanley and Goldman Sachs GS +1.49% were vying for the coveted lead spot underwriting the deal. Which wins, and what other firms get a piece of the lucrative deal, will be a focus of great interest on Wall Street.