For more than a year there has been rampant speculation about a Facebook IPO, and now one is finally on the way.
According to a report in The Wall Street Journal, Facebook is looking at a deal that would value the company between $75 billion and $100 billion, WSJ reported, making it one of the biggest in U.S. history.
Facebook is looking to raise as much as $10 billion, which would make it the fourth-largest U.S. IPO behind Visa Inc. (NYSE: V), General Motors Co. (NYSE: GM), and AT&T Wireless. A $100 billion valuation would make Facebook worth as much as global powerhouse McDonald's Corp. (NYSE: MCD).
WSJ reported Morgan Stanley (NYSE: MS) would be the lead underwriter, a job that could give the firm more than $500 million in fees. [But that $500 million could lose 90% of its value if this government practice is allowed to continue. Major financial companies won't be the only ones threatened, either. This will hit everyone's investments - and could devour a huge chunk out of your retirement account. Take a look at our latest free report right here for details.]
A strong performance by Facebook could test the idea that social media companies are overhyped. But before you get excited about Facebook shattering that theory, you'd do well to look at some of the other hot tech IPOs of the past year.
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Facebook IPO: How You Could Get Shares in the $100 Billion King of Social Media
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Fuzzy Math, Greater Fools and the Facebook IPO
I have several friends who think the Facebook IPO is the next Microsoft.
I think it's more likely the next Research in Motion.
Or perhaps the next Sony, Kodak, or Eastern Airlines--all of which were once world-class brands that got sideswiped by hungry new competitors.
Facebook...you may as well buy a lottery ticket.
Don't get me wrong. In just a few short years, Facebook has accumulated an unprecedented 845 million users representing 12.07% of the world's population.
But does that merit an offering worth as much as $100 billion?
Maybe to a lot of people, but not to me.
Think about the numbers.
There are 7 billion people on the planet today, 5.15 billion of whom live on $10 or less a day. Of that group, roughly 3 billion people live on less than $2.50 a day.
That means if you remove those who live on less than $10 a day because theoretically they can't afford a computer or don't have enough disposable income to be monetized, that leaves roughly 1.85 billion potential Facebook users.
In a perfect world where a company could capture 100% of its target market, that would cap Facebook's potential user growth at 118.93%.
But we don't live in perfect world. As far as I know, no company has ever captured 100% of its target market. Not once.
I think it's more likely the next Research in Motion.
Or perhaps the next Sony, Kodak, or Eastern Airlines--all of which were once world-class brands that got sideswiped by hungry new competitors.
Facebook...you may as well buy a lottery ticket.
Don't get me wrong. In just a few short years, Facebook has accumulated an unprecedented 845 million users representing 12.07% of the world's population.
But does that merit an offering worth as much as $100 billion?
Maybe to a lot of people, but not to me.
Think about the numbers.
There are 7 billion people on the planet today, 5.15 billion of whom live on $10 or less a day. Of that group, roughly 3 billion people live on less than $2.50 a day.
That means if you remove those who live on less than $10 a day because theoretically they can't afford a computer or don't have enough disposable income to be monetized, that leaves roughly 1.85 billion potential Facebook users.
In a perfect world where a company could capture 100% of its target market, that would cap Facebook's potential user growth at 118.93%.
But we don't live in perfect world. As far as I know, no company has ever captured 100% of its target market. Not once.
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