Should you invest in the Facebook IPO?
Very soon, some say as early as May 18, Facebook will be filing for its Initial Public Offering. Last Thursday, it was learned that the share price will be in the $28-$35 per share range. This could amount to the largest IPO in history and value the company at nearly $100 billion.
So what does it mean to say Facebook could be a $100 billion dollar company? It seems like a lot, so to help put it in perspective I looked at the value (Market Cap) of the 30 stocks that make up the Dow Jones Industrial Average stock market index.
|DJIA Amounts as of May 4, 2012 Market Close|
|XOM||Exxon Mobil Corp||$ 395|
|MSFT||Microsoft Corp||$ 260|
|IBM||International Business Machines Co||$ 236|
|CVX||Chevron Corp||$ 205|
|GE||General Electric Co||$ 205|
|WMT||Wal-Mart Stores Inc||$ 200|
|T||AT&T Inc||$ 193|
|JNJ||Johnson & Johnson||$ 178|
|PG||Procter & Gamble Co||$ 176|
|KO||The Coca-Cola Co||$ 174|
|PFE||Pfizer Inc||$ 169|
|JPM||JPMorgan Chase and Co||$ 159|
|INTC||Intel Corp||$ 139|
|MRK||Merck & Co Inc||$ 118|
|VZ||Verizon Communications Inc||$ 114|
|CSCO||Cisco Systems Inc||$ 103|
|MCD||McDonald’s Corp||$ 98|
|BAC||Bank of America Corp||$ 83|
|HD||Home Depot Inc||$ 79|
|DIS||Walt Disney Co||$ 77|
|UTX||United Technologies Corp||$ 72|
|KFT||Kraft Foods Inc||$ 70|
|AXP||American Express Co||$ 69|
|CAT||Caterpillar Inc||$ 64|
|MMM||3M Co||$ 62|
|BA||Boeing Co||$ 57|
|DD||E. I. du Pont de Nemours and Co||$ 50|
|HPQ||Hewlett-Packard Co||$ 48|
|TRV||Travelers Companies Inc||$ 25|
|AA||Alcoa Inc||$ 10|
As you can see from the list above, a $100 billion valuation would put Facebook somewhere in the middle of the list, on par with McDonald’s and CISCO, but well above such large, respected and profitable companies like Disney, Kraft, American Express and Cat.
Since Facebook is an internet only company, here is a comparison to other internet only companies.
|Amounts as of May 4, 2012 Market Close|
|GOOG||Google Inc||$ 195|
|AMZN||Amazon.com Inc||$ 102|
|EBAY||eBay Inc||$ 51|
|PCLN||Priceline.com Inc||$ 37|
|YHOO||Yahoo! Inc||$ 19|
|LKND||LinkedIn Corp||$ 12|
|GRPN||Groupon Inc||$ 6|
|ZNGA||Zynga Inc||$ 6|
|AOL||AOL Inc||$ 2|
|MWW||Monter Worldwide, Inc||$ 1|
|LPSN||Live Person Inc||$ 1|
Obviously, it will be one of the top three valued internet only companies, but the big question is will it last?
If you’ve been around the internet awhile you know things change fast. Of all the big dot.com’s only a handful have been relatively stable over the past 15 years or so.
All of these sites were, at one time, the reigning champ in their niche and would never have thought their demise was only a few years away.
- Myspace.com was bought in 2005 for $580 million by News corp and was the social network king until Facebook overtook it in 2008. Myspace was sold in 2011 for $35 million.
- Netscape had 90%+ browser market share in the 1990’s, by 2006 it was down to 1%.
- Altavista was one of the top sites in 1997, by 2010 it was shut down.
- Geocities was bought by Yahoo for $3.6 billion in 1999 and was closed 10 years later.
- The Infospace IPO in 1998 started at $5 per share, by 2000 it was at $1300 per share, today it trades at $11 per share.
So given the short, tumultuous life span of an internet company, are you going to invest in Facebook?You can help MoneyPig by sharing his posts with your friends. This is a young blog that runs on word of mouth from readers like you. So take a second out of your day and help spread the word! Thanks. :FatMoneyPig