An Initial Public Offering (IPO) is an act in which a privately owned company sells its shares to the public on the stock exchange. An IPO helps a privately owned company to raise funds which in most cases is used for the development of the company and at the same time managing to maintain control over the affairs of the company. Initial public offer is the first presentation of stocks to the public by a private company with an aim of raising additional capital or becoming publicly traded. It’s a risky investment since the demand and the resale value of the stocks is uncertain.
A case study of Facebook Inc initial public offer will help understand the whole process in the New York Stocks Exchange (NYSE). Facebook Inc is a social networking service provider that commenced in February 2004, providing Facebook social networking services. Currently, the company has more than one billion active subscribers, more than half accessing their services via mobile phones. Recent Facebook’s IPO was a clear indication of how hard it may be to make a decision on when to acquire a newly released company’s stock. Other social networking companies like e-Bay, Yahoo! , and Linked-in had very successful entry in the public stock market however Facebook Inc did not depict a similar trend on their initial day of trading.
The company held its initial public offer (IPO) on May 18, 2012. The IPO was one of the biggest in technology, and the biggest in Internet history, with a peak market capitalization of over $104 billion. Media pundits called it a “cultural touchstone” (Warren Olney, 2012). Mark Zuckerberg the Facebook's founder and chief executive had for a long time declined to trade the company’s stock publicly, and also rejected a number of offers after Facebook's initiation nevertheless, it accepted private investments from companies- especially technology related firms.
As the number of shareholders surpassed the 500 target, the company had to go public (Felix Salmon, 2012). The founder however controls the operations and management of the company, despite its being a public company. Facebook IPOThe much anticipated Facebook IPO was undertaken in May, over the years there have been speculations of a Facebook buyout.
The value of Facebook as a business was mainly valuated by its user’s data; hence a large percentage of facebook’s revenue comes directly from selling users data. Facebook filled its IPO on 1st February 2012, Facebook’s IPO was widely accepted and there was a general feeling of optimism surrounding the IPO and this was experienced even through the road shows which commenced on May 7th 2012.Facebook IPO was widely anticipated by investors and this was evidenced through its target valuation which was valued over 100 billion. On may 18 2012 Facebook introduced its stock opening on the stock exchange which was valued at $38 , with only half a minute gone over 80 million shares had been traded, and on the close of the first day of trading 458 million shares had been traded, with the stocks reaching a high of $45 per share but at the close of the market the stock price was disappointing at $38.23.