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Friday, April 27, 2012

Facebook and the IPO

For quite a while now it seems as though news keeps broadcasting information about the upcoming Facebook IPO, what it means for the company, will it be delayed, ect, and ect.

First off, for those who might not be stock savvy, what is an IPO?
Well, right now Facebook as a whole is owned by a small group of people. An IPO means that the Facebook owners are going divide up the company into shares, and sell a portion of them to the public (making many of those original owners quite wealthy). The price they will sell at is determined confidentially in discussions between the heads of the company and a few large banks/brokerage firms who will try to quantify how much the company is worth now, and what it will be worth in the future. Once the shares are open to the public, they will be bought and sold like any other stock.

Facebook will then have these stocks as a kind of currency. If they wanted revenue to improve the platform, they could sell more shares (until they run out, that is). They could also use shares to hypothetically buy another company. In the distant future, if Facebook ever decided that the stocks were trading below their true value, they could potentially buy the stocks back up again.

How will the Facebook IPO do? No one really knows. There is certainly a great deal of hype surrounding it, and it is seen as one of the most significant IPOs in recent history. On the other hand, other media platforms such as LinkedIn and Zynga have already done an IPO, and stock performance has been mixed. Only time will tell.

One this is for sure, and that is social media is here to stay. Facebook has led the charge and continues to innovate and update, and many people do have high hopes about what will happen.

1 comment:

  1. Hi Jessica, nice post. Keep coming :)

    - A Seeker