by Justin Dove, Investment U Research
Friday, June 17, 2011
It’s no secret that Facebook is the most anticipated IPO since Google (NYSE: GOOG) went public in 2004.
CNBC’s Kate Kelly heightened that anticipation with her article on Monday. Kelly claimed that Facebook was likely to go public in the first quarter of 2012 and that the valuation could top $100 billion, no typo.
Part of her reasoning for early 2012 was the “500 rule.” It’s a rule that is a part of the 1934 Securities Exchange Act. It basically mandates that if any company reaches 500 private shareholders, the company must publicize the financial records. Most companies that reach this point just go public because they are releasing financials to the public anyway.
While there is talk of the SEC extending this rule to 1,000 investors, in all likelihood Facebook will be going public sooner rather than later. As Facebook COO Sheryl Sandberg said last month, Facebook going public is “inevitable.”
But will it be worth the value?
A study by Performics found that 59 percent of respondents called LinkedIn (NYSE: LNKD) the most important social network they belong to. Interestingly enough though, the same study showed that 20 percent of the respondents claimed to visit LinkedIn each day, while 70 percent logged in to Facebook daily.
Inside Facebook reported last week that Facebook lost nearly six million of its U.S. users in May despite growing in smaller countries such as India and Mexico. A flurry of media outlets picked up on this story and similarly reported a slowing of Facebook’s growth.
Facebook themselves denied the report to BBC, “From time to time, we see stories about Facebook losing users in some regions. Some of these reports use data extracted from our advertising tool, which provides broad estimates on the reach of Facebook ads and isn’t designed to be a source for tracking the overall growth of Facebook.”
Basically what they are saying here is that mobile device application doesn’t contain advertising and isn’t considered part of the reach of Facebook advertising. Since this is a fast growing segment of Facebook’s usage in the United States, it obviously skewed the numbers.
Questions remain as to how Facebook will be able to monetize their services enough to be sufficiently profitable. But one thing we can gather from this week’s drama is that Facebook still has a huge untapped resource in blending advertising or some form of monetization into its growing mobile application usage.
Good investing,
Justin Dove
