It was one of the most highly anticipated IPOs in the history of Wall Street. But despite all the hype and drumbeats, the Facebook stock has lost almost 25% of its value within the first month of trading and become the second worst listing in US history. Is this just a short term glitch or does it have long term implications for the social network?
Issue Date - 30/07/2012
From the days when his business card read “I’m CEO... Bitch” till today when it has become virtually impossible for him to justify the plummeting stocks of his company, Mark Zuckerberg has begun looking much older than his 28 years. And why not? The billionaire tycoon who was habitual of calling the shots from the confines of an insulated environment, now has to mingle with (and forcibly smile at) the perpetually hungry hounds of Wall Street after his botched IPO – an IPO which Dealogic (a specialist data research firm) calls the second worst listed in US history. The gloss of being the world’s youngest billionaire is swiftly being wiped away with class action lawsuits alleging blocking of revised information about the IPO’s prospects hours before its listing. And of course, there is now also the accompanying headache of having to create value for a lot more shareholders than he originally bargained for.
No matter how much one tries to justify the sequence of events, fact is that Facebook’s debut on the bourses has been a mess. The social network’s $104 billion valuation at the time of its offering was the largest ever by an American company. But then things went downhill. If General Motors’ announcement that it was pulling off all ads from Facebook because of low returns was not enough, lead underwriter Morgan Stanley let slip that it was lowering Facebook’s revenue forecast. A spooked Wall Street went into a tizzy and Facebook’s stock expectably nosedived from its $38 debut. The stock has lost almost 25% of its value within the first month of its stint at the bourses. So is this the end of the hugely successful saga of Facebook’s gravity-defying growth? To answer that, we need to look at issues much deeper than a depressing debut at the bourses. Read on...
The good...
There’s no denying the fact that Facebook will go down in history as a company that spearheaded and laid the foundation for a radical online advertising model of the future. Facebook has built a reach and target driven engagement platform with a user base that is just phenomenal. For the quarter ending March 2012, the social network – that is available globally in more than 70 languages – reported a monumental 901 million monthly users, an increase of 33% compared to the same period last year. Roughly 80% of these users are based out of the US and Canada. On any given month, an average of 526 million users are active on the website. During March 2012, on average 398 million users were active with Facebook on at least six out of seven days. Further, Facebook is home to more than 125 billion friend connections. Of late, Facebook has also seen extraordinary growth in terms of users accessing the social network on mobile. Ironically, Facebook was late to market with a dedicated mobile app. But its growing breed of 500 million plus mobile users speaks volumes for growth prospects. With this wealth of data, Facebook is in a unique position to collaborate with its partners by giving them access to demographic information based on login credentials. Chances are that Facebook might eventually succeed in creating an advertising network that is as deep rooted as present day television networks. But here’s the big question. Despite significant competitive advantage over off-line media, why has the Facebook IPO floundered?
Issue Date - 30/07/2012
From the days when his business card read “I’m CEO... Bitch” till today when it has become virtually impossible for him to justify the plummeting stocks of his company, Mark Zuckerberg has begun looking much older than his 28 years. And why not? The billionaire tycoon who was habitual of calling the shots from the confines of an insulated environment, now has to mingle with (and forcibly smile at) the perpetually hungry hounds of Wall Street after his botched IPO – an IPO which Dealogic (a specialist data research firm) calls the second worst listed in US history. The gloss of being the world’s youngest billionaire is swiftly being wiped away with class action lawsuits alleging blocking of revised information about the IPO’s prospects hours before its listing. And of course, there is now also the accompanying headache of having to create value for a lot more shareholders than he originally bargained for.
No matter how much one tries to justify the sequence of events, fact is that Facebook’s debut on the bourses has been a mess. The social network’s $104 billion valuation at the time of its offering was the largest ever by an American company. But then things went downhill. If General Motors’ announcement that it was pulling off all ads from Facebook because of low returns was not enough, lead underwriter Morgan Stanley let slip that it was lowering Facebook’s revenue forecast. A spooked Wall Street went into a tizzy and Facebook’s stock expectably nosedived from its $38 debut. The stock has lost almost 25% of its value within the first month of its stint at the bourses. So is this the end of the hugely successful saga of Facebook’s gravity-defying growth? To answer that, we need to look at issues much deeper than a depressing debut at the bourses. Read on...
The good...
There’s no denying the fact that Facebook will go down in history as a company that spearheaded and laid the foundation for a radical online advertising model of the future. Facebook has built a reach and target driven engagement platform with a user base that is just phenomenal. For the quarter ending March 2012, the social network – that is available globally in more than 70 languages – reported a monumental 901 million monthly users, an increase of 33% compared to the same period last year. Roughly 80% of these users are based out of the US and Canada. On any given month, an average of 526 million users are active on the website. During March 2012, on average 398 million users were active with Facebook on at least six out of seven days. Further, Facebook is home to more than 125 billion friend connections. Of late, Facebook has also seen extraordinary growth in terms of users accessing the social network on mobile. Ironically, Facebook was late to market with a dedicated mobile app. But its growing breed of 500 million plus mobile users speaks volumes for growth prospects. With this wealth of data, Facebook is in a unique position to collaborate with its partners by giving them access to demographic information based on login credentials. Chances are that Facebook might eventually succeed in creating an advertising network that is as deep rooted as present day television networks. But here’s the big question. Despite significant competitive advantage over off-line media, why has the Facebook IPO floundered?
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Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
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Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
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