News / USA

Facebook to Sell Stock to Public This Month

Facebook Users WorldwideFacebook Users Worldwide
x
Facebook Users Worldwide
Facebook Users Worldwide

Related Articles

Ken Bredemeier
Social media giant Facebook is planning to sell stock in the company, beginning sometime later this month.  
 
One of the biggest names in social media, Facebook, is planning what stock markets call an “initial public offering,” or IPO.
 
What the company will be doing, for the first time, is giving the public a chance to buy stock in Facebook.  When they buy the stock, investors will become part owners of the company. 

What is Facebook Really Worth? - Related video by Mil Arcega

x
What is Facebook Really Worth?i
|| 0:00:00
X
Mil Arcega
May 08, 2012 10:32 PM
Facebook kicked off its cross-country roadshow this week to promote the company's initial public offering (IPO). The company hopes to raise $10.6 billion, giving it a market value closer to established tech giants such as Google and Amazon.com. While most analysts believe Facebook will have no trouble finding investors, some question whether the world's largest social network is really worth as much as shareholders think it is. Mil Arcega has more.

What is Facebook Really Worth? - Related video by Mil Arcega

For eight years, Facebook has been owned by its founder, Mark Zuckerberg, and others who helped create it and have worked at the U.S.-based company.  In the world of high finance, the company has been considered to be privately owned.
 
“An initial public offering is very important to a company that is looking at its business long-term, and realizes that the most certain way to place a value on the company is if there is an actively traded market for its shares.  So when a company goes public, you have a better idea of what it is worth when a lot of investors are agreeing on its value as the shares trade.  That enables a company to raise capital at an established valuation, sell the company or to provide liquidity to insiders who want to slowly diversify their ownership in the company that would sell shares into a liquid market where there is an agreed-upon value," she said. 

Kathleen Smith is co-founder of Connecticut-based Renaissance Capital, which analyzes initial public offerings of companies looking to sell the stock to the public.  She explains why an IPO can be crucial in the life of a corporation.With the first stock sale, planned for mid-May, Facebook will be publicly owned, although the original owners will also retain stock they can keep or sell for whatever their shares might be worth.
 
Some investors might buy only a few shares in an IPO, perhaps with a stock purchase costing only a few hundred dollars.  With such a purchase, they will own only a very small portion of a company.
 
But large investors in major corporations like Facebook often own substantial portions of a business and can have a major say in how the company is run.  Sometimes, as will likely be the case with Facebook, large investment companies buy stock worth millions of dollars.  
 
The investment firms might be buying shares of the Facebook on behalf of wealthy individuals, or perhaps retirees or teachers or others who have pooled their money to make stock purchases.
 
The goal of all investors is to make money, to buy shares of a company’s stock in the hope that the business is well-managed and its profits grow.  If that happens, the value of an individual investor’s stock could grow quickly.
 
But the opposite is also possible.  If few people are interested in a company’s product, or if a company loses money, the value of its stock can diminish, even become worthless.
 
Business analyst Kathleen Smith says there are several reasons why the Facebook IPO has attracted widespread attention.
 
“There are a lot of users of Facebook and they are aware of the company and what it does.  So there is an awareness of it.  From the professional investor standpoint, many are in awe of how quickly the company has been able to achieve something like $5 billion in revenue, and is profitable, highly profitable, [in] such a short period of time.  And it is likely to be, depending on its valuation, which some are saying could be between $75 [billion] and $100 billion, the most highly valued IPO that we have seen, ever.  So it has attracted attention amongst the institutional investors, the pros, with how unique it is in terms of the significance to the IPO market," she said. 
 
Facebook says the company could be valued at $96 billion and that the price of shares will be between $28 and $35.  That initial share price is higher than for many first-time stock offerings.  Nonetheless, Smith says, the Facebook IPO could draw interest from investors throughout the world.
 
“We would not be surprised directly to see investors that are not necessarily U.S., such as sovereign wealth funds, other international investors, who are interested in ownership of the publicly traded shares," she said. 
 
Once Facebook is listed as a publicly traded company, its shares will rise or fall, depending on its financial performance and the other economic twists and turns that affect the world's stock markets. 
 

You May Like

Video Experts Warn World Losing Ebola Fight

Doctors Without Borders says world is losing battle against Ebola, unless wealthy nations dispatch specialized biological disaster response teams More

Video Experts: Rise of Islamic State Significant Development in Jihadism

Many analysts contend the group - which grew out of al-Qaida in Iraq - has been rebuilding for years More

US-Based Hong Kongers Pledge Support for Pro-Democracy Activists

Democracy advocates call on Chinese living abroad to join them in opposing new election rules for their home territory More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Larger Than Life Chinese Lanterns Make Southern California Appearancei
X
Elizabeth Lee
September 02, 2014 8:57 PM
Chinese lanterns with a long history are lighting up in 21st century style at the Los Angeles County Fair in southern California. Visitors can see traditional lanterns that hang, but also lanterns in the shape of animals, iconic landmarks and many other objects, all created by artisans from a place in China known for its lanterns. Elizabeth Lee has the details from the fair in the city of Pomona.
Video

Video Larger Than Life Chinese Lanterns Make Southern California Appearance

Chinese lanterns with a long history are lighting up in 21st century style at the Los Angeles County Fair in southern California. Visitors can see traditional lanterns that hang, but also lanterns in the shape of animals, iconic landmarks and many other objects, all created by artisans from a place in China known for its lanterns. Elizabeth Lee has the details from the fair in the city of Pomona.
Video

Video Experts See Rise of ISIS as Significant Development

The Islamic State’s rise seems sudden. It caught the U.S. by surprise this summer when it captured large portions of northern Iraq and spread its wings in neighboring Syria. But many analysts contend that the group - which grew out of al-Qaida in Iraq - has been rebuilding for years. VOA's Jela de Franceschi takes a closer look at the rise of ISIS and its implications for the Middle East and beyond.
Video

Video Israel Concerned Over Syrian Rebels in Golan

Israeli officials are following with concern the recent fighting between Syrian rebels and government forces near the contested Golan Heights. Forty-four U.N. peacekeepers from Fiji have been seized by Syrian Islamist rebels and the clashes occasionally have spilled into Israel. VOA’s Scott Bobb reports from Jerusalem.
Video

Video Ukraine Schools Resume Classes, Donate to Government Forces

A new school year has started in Ukraine but thousands of children in the war-torn east are unable to attend because of ongoing clashes with pro-Russia rebels. In Ukraine's capital, patriotic education has become the norm along with donations to support injured security forces fighting to take back rebel-held areas. VOA's Daniel Schearf reports from Kyiv.
Video

Video US Detainees Want Negotiators for Freedom in North Korea

The three U.S. detainees held in North Korea were permitted to speak with foreign media Monday. The government of Kim Jong Un restricted the topics of the questions, and the interviews in Pyongyang were limited to five minutes. Each of the men asked Washington to send a representative to Pyongyang to secure his release. VOA’s Carolyn Presutti has our story.
Video

Video Turkmen From Amerli Describe Survival of IS Siege

Over the past few weeks, hundreds of Shi'ite Turkmen have fled the town of Amerli seeking refuge in the northern city of Kirkuk. Despite recent military gains after U.S. airstrikes that were coordinated with Iraqi and Kurdish forces, the situation remains dire for Amerli’s residents. Sebastian Meyer went to Kirkuk for VOA to speak to those who managed to escape.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Jewish Ghetto

When the German Nazi army occupied the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered at the Union League Club in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.

AppleAndroid