“Carpe Diem! Sieze the day, boys.
Make your lives extraordinary!” – So exclaimed a certain Mr. John Keating, the
brilliance of Robin Williams running riot though the countenance of the young
professor, smiling at the small group students gathered in front of him. Dead
Poets Society, (1989) – a movie that could have been watched by a wide-eyed,
five year old kid named Mark Elliot Zuckerberg. Who knows, Mr. Keating and his
inspiring quotes could have been just the push little Mark required in setting
out on a journey that would culminate in a creation that the today everyone
calls Facebook.
Facebook has been an extraordinary
development in the world of internet. What started out as Mark’s little dorm
room creation has now given the world the platform to ‘connect’, ‘like’,
‘share’ and ‘comment’. All this and much more have added to the appeal of the
social networking giant – the latest being the filing of SEC and the eventual
release of the IPO. But has it been the right move for the curly-haired poster
boy of Silicon Valley? Could the world’s largest technology IPO also be the
biggest blunder ever? Or are we reading too much into the data? The debate has
already started and to avoid getting lost in the melee of ‘strings’ and
‘numbers’ one should sit back and crunch the ‘basics’ first.
The basics are certain simple
law-of-the-land fashioned truths about the two biggest words in the title of
this article. ‘Facebook’ and ‘IPO’ – and these two need as simple an
understanding as possible for the data to make sense to one and all. To begin
with, here’s looking at the IPO or the Initial Public Offering - a tool used by
companies to raise capital (money for bigger, grander plans), to provide
liquidity to its founders, employees and early investors and to benefit from
the prestige or notoriety of being a ‘public’ company. With the aforementioned
set as a background, ‘Facebook’ can be described as – a second generation
Internet company with ‘dynamic’ content (set your status, like a comment, share
a photo), communication platform (user connections, chat, message, wall-posts),
800 million active users and a plethora of games, apps and ‘addictions’ to make
one spend close to 6 hours a day surfing it (ComScore says it, I don’t).
Having crunched the basics, the
next step is to question, how did it all happen? Any IPO begins with a company
filing an entry at the SEC – Securities & Exchange Commission, under a
particular category, which in the case of Facebook was S1. The filing, among
other things, includes a letter from the company founders, to prospective
shareholders, which in the case of Facebook, was an interesting one from Mark
Zuckerberg. With the filing formalities out of the way in the month of January
2012, the IPO was released on 18th of May, 2012 amidst much fanfare
and hullaballoo. The opening price was $38/share. So far so good – a company has invited the
public to invest and much needed capital is being pumped in by eager investors.
But in retrospection, was this process needed at all? If yes, what is in store
for the blue and white hued social network?
Facebook had money coming in from
private investors, much before its decision to go public. With Goldman Sachs,
Microsoft, Hong-Kong billionaire Li Ka Shing, Russian honcho Yuri Milner and Bono’s
Elevation Partners, all pouring money into the internet darling, raising
capital was certainly not difficult. It became even easier when Facebook
employee shares were up for grabs on the ‘grey’ market – SecondMarket or
SharePost. In addition to this, providing liquidity to the founding partners
wasn’t difficult either. The investment by Russian Investment fund DST sort of
completes the picture in this respect, with its offer to buy $100 million of
stock directly from the employees. Hence, cash wasn’t a problem. Then why file
an S1 in the SEC? Why go public?
Here is where the proverbial
‘streams’ seem to converge. If one goes through the SEC filing of Facebook and
the passionate letter for Zuckerberg and juxtaposes it with the prestige of
going public and associated bits of wisdom, the reason begins to emerge. The
story of Facebook, the evolution of the company, the equation it has with the
public, the attraction quotient of its value proposition – has grown and is
something that investors just cannot be kept away from. Social media as a tool,
technology and a platform has evolved with Facebook as its champion, face and
torchbearer. The industry has taken to Facebook like a glutton to a tasty lamb
chop. Targeted Marketing & Advertising are ruling the roost in terms of
revenues for ‘FB’. It is only fitting that the public focus on social media,
the interest it generates throughout the world and the implications it can have
for the future be better measured, analyzed and invested in for the future.
This is something the Stock Exchanges around the world are too good at.
But is it only the ‘public’ we need
to look at? Can it be simply that Facebook needs more money? Maybe – if one
looks at its burgeoning growth trajectory, its competitors and the evolution of
the consumer it serves. Browsing is going mobile, literally. And with that,
Facebook needs to go mobile too. With Android and iOS standing guard to a
market full of opportunities, Facebook will require developing its interface –
the mobile way. The baby steps in that direction – acquisition of Insta.gram –
is a sign of sorts. But that is certainly not enough. From a very simple logic
– more money is needed if Facebook wants to acquire more or grow faster. And an
IPO is surely one of the best ways of doing that – of ‘seizing the day’ (in
order to ‘make’ things ‘extraordinary’).
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