Well well well, Facebook is cashing in . . . or is it, here are some thought starters for you given some folk client side may be asking some questions on this “news”
Technically once you have over 500 private shareholders the financial reporting requirements in the US in SEC terms basically become the same as being a listed company, so you may as well
Clearly with $3.7bn in revenues and $1bn in profit they make a fair amount of money, why do you need to raise more? especially with $3.8bn already in the bank . . .
Buying things has to be the answer – google did it (Youtube being the most obvious one) – but buying growth and defensive opportunities has to be the reason for generating the money.
Is it worth it?
To quote @Peston “At 22 times earnings and 120 times net profit” buying facebook shares would be a “triumph of hope but . . . ” although others have different ways of viewing it
So contextually, biggest tech IPO ever, valuation makes it worth roughly what amazon, macdonalds and a number of other business that probably own some significant and valuable assets, but ho-hum
Perhaps more interestingly the IPO filings show that 15% of their revenue comes not from advertising . . . this has to be where the growth comes from in the long term surely ? In the short term, 50% of impacts are on mobile, but mobile ads havent been turned on yet (but are being tested) and there is still some growth potential in penetration terms in a handful of places . . .
Who knows – what would you buy with $8bn at your disposal ? i may start with Tumblr, or maybe Spotify . . . or maybe Zynga (currently trading at a value roughly equal to this war chest)
One thing we can be sure of – the data debate will rumble on – they have access to arguably the most interesting set of data points on the planet (if you like advertisementing that it), very powerful for advertisers, but then they ain’t doing owt with that anytime soon methinks . . . and discuss . . .