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| Mark Zuckerberg |
On May 18, 2012, Facebook, Inc. went made its Initial Public Offering and
issued its shares to the general public, Before that date it was seen as becoming
the next Google , valued at 100 Billion USD others even anticipated its IPO to
be Bigger than Google. On the opening
of the IPO facebook shares sold at $38 per share valuing the company at a
staggering 104 Billion Dollars the largest
valuation to date for a newly public company making it’s 27 year old CEO
mark Zuckerberg even Richer and seemed like everybody wanted to invest on
facebook.
But now, barely five months later,
Facebook shares have lost almost 47% of their value and many investors have
lost their money and others are whining and calling for the resignation of
Zuckerberg from the position of CEO.
What Went Wrong?
American Stock Market, viewed and
envied by us third World folks as the most efficient stock market in the world,
They way we see it, if there is one place in the world where a company cannot
be wrongly valued much less massively Overvalued is at Wall street, Besides,
People in the US are not in the habit of investing their money without having
really good reasons to do so, After what happened in the Dot Com crisis of the
2000s with grim stories of the Infamous ENRON and WORLDCOM, only fools part
with their money without reasonable amount of research.
Or maybe not, Could it be that people
are not calculative rational beings Economics professors tell us they are? Some
argue that most people who invested on facebook did not even take the time to
read the IPO prospectus and the letter Zuckerberg wrote to the “to be
Investors” at the time, Seems people looked at certain factors which led them
to give the company much more value than it really had, For example; Facebook
has almost 1 billion users all over the world, It
is projected that facebook will have a 17.7% of all online ad revenue by the
end of the year while yahoo will have
13.1 and Google 9.3%. By the end of the year 2011 Facebook had projected
revenue of USD 4.2 Billion.
Looking at these factors, many an
investor felt like investing on Facebook was a right thing to do forgetting
more important indicators of this company’s Value like the fact that almost 50%
of its users are using Mobile devices now which results in much less revenue,
Also there is much chatter among High end Business people that Facebook
advertising is not as effective as traditional modes of marketing, this
includes a research from a Professor Ben Edelman of Harvard Business School who
basically doesn’t think Facebook advertising adds any value to one’s business,
He compares it to advertising on the Far side of the moon hoping that when
Aliens finally get here they will know what to Buy!!.
What is CEO Mark
Zuckerberg’s View?
Mark Zuckerberg, a 27 year old Harvard
dropout founded facebook in his dorm room 8 years ago, as he himself says he
did not think or plan that It will become a company. Many people who know him
say he is not the type of person to crack under pressure and also he doesn’t
care much about money and material things, in His letter to investors he states
clearly that his plans for facebook are Long term extending for Decades and not
months or a few years, So a crisis only a few months from the IPO is nothing to
make him flinch.
Zuckerberg’s standing point is clear
in his letter to investors; He says “….Facebook was not originally founded to be a company. We’ve always cared primarily about our
social mission, the services we’re building and the people who use them. This
is a different approach for a public company to take, so I want to explain
why I think it works….” meaning that Facebook’s main aim is to create
the products and services that help people connect and share, it is not to make
money out of those products, simply put, Facebook raises funds to create the
social products and does not create the social products to make money.
However this turns out,
I think Facebook has revolutionized this world, and from my point of view, a
company with 1 billion users is worth to be part of. What is more important
than High share value is having users who will keep using your services, after
all, I don’t think anybody expected Facebook’s value to keep increasing up and
above $104 Billion, and despite all that At $18,
using the correct share count (2.7 billion), Facebook is still valued at almost
$50 billion.
Victor Joseph Mnyawami is the Founder and Chairperson of Beeble
Sources:
http://www.businessinsider.com
http://www.businessinsider.com
accountingdegree.net
TECH360 Correspondent