The Value Of The Facebook Ipo Essay

The Value Of The Facebook Ipo Essay

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Facebook has striking growth rate in the number of the users and the revenue. It mainly depends on the powerful Internet to build the large relationship network among friends. The increased mobile usage is the key contributor of the growth in the overall user base. Its daily active users has reached 483 million worldwide until the December 2011. The market value of the Facebook is about $15 billion based on its share sold to the Microsoft. Due to its increasing popularity and key position in the social media market, going public is an inevitable trend. The aims of the Facebook IPO are to create a public market for its existing shareholders and take a share of the public equity market. In view of the above-mentioned facts, people will have a great enthusiasm for Facebook IPO. However, the underwriters of Facebook has raised the price of per share higher than its intrinsic value to make more money. To avoid irrational purchase because of the eagerly pursuit, the CXTechnology should cautions for this investment.
Facebook makes money in various ways. First, advertising accounted for the majority of the revenue. It took up 99 percent of Facebook’s revenues in 2009, 95 percent in 2010 and 85 percent in 2011. The social connections and demographic information of users allowed the advertisers to have opportunities to segment and target these users. The requirement for users to reveal their authentic identities gave companies good opportunities to grasp their information and make money. Facebook created database according to the interests and hobbies of users by mapping the connections between users and their friends and recording the services and products they liked. Based on users’ interests and connections, advertisers could target cus...

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... its predicted intrinsic value. Therefore, it is very likely that the price of the IPO will fall down after the passion of the public decreased. It is a good opportunity for CXTechnology to buy the stock after the price shows the sign of decline and becomes stable. Besides, the Facebook’s stock has the wild popularity and tremendous potential, so it may receive scrambling competition and sell out in a short period. Secondly, since the enthusiasm of the public will not be waned in a short time, the CXTechnology can finish purchase and sale quickly in the right time to take advantage of price variations. Thirdly, the CXTechnology should stay close with the stock market trend and purchase a variety of stocks except that of Facebook to spread risk. For example, it can buy a small part of high-risk and high-return stocks and a large part of relatively stable stock.

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