Facebook IPO

I have been reading about the Facebook Initial Public Offering (IPO) and here are just a couple of things that I have found  in the Prospectus document from which these extracts have come:


Facebook's Mission

We don’t build services to make money; we make money to build better services.

Culture The Hacker Way

As part of building a strong company, we work hard at making Facebook the best place for great people to have a big impact on the world and learn from other great people. We have cultivated a unique culture and management approach that we call the Hacker Way.

… The Hacker Way is an approach to building that involves continuous improvement and iteration. Hackers believe that something can always be better and that nothing is ever complete. They just have to go fix it: often in the face of people who say it’s impossible or are content with the status quo.

Hackers try to build the best services over the long term by quickly releasing and learning from smaller iterations rather than trying to get everything right all at once. To support this, we have built a testing framework that at any given time can try out thousands of versions of Facebook. We have the words “Done is better than perfect” painted on our walls to remind ourselves to always keep shipping.

(There's more to the Hacker Way in the Prospectus document from which these extracts have come ...)

Five core values for how we run Facebook

1 Focus on Impact

2 Move Fast

3 Be Bold

4 Be Open

5 Build Social Value

(There's more to these value in the Prospectus document from which these extracts have come ...)

From a financial point of view, the implied P/E ratio for Facebook when the shares are finally sold are as follows:

P/E Ratios based on an issue prices below and the EPS above	Based on results as at 31/12/11	As at 31/3/12
$28	57.14
29	59.18	72.50
30	61.22	75.00
31	63.27	77.50
32	65.31	80.00
33	67.35	82.50
34	69.39	85.00
35	71.43	87.50

Those P/E ratios are high, I think and are indicative of the hype surrounding this IPO. Take a look at the risk assessments in the Prospectus to see some of the things that Facebook is worried about. One such worry is that Facebook might not be here in 1 year's time or 5 years or 10 years ... They admit in the risk assessment section that significant parts of their business are already on mobile platforms and are moving to mobile platforms more and more and yet they have no real strategy for turning such connections into revenue and therefore profit: I find that scary!


If I were thinking of investing in a company I wouldn't pay such a vast amount for a share in this dot com company UNLESS I was merely going to try to make a major short term windfall profit.


Duncan Williamson