IPO Wars: Is this the right time for FB to cash in?


LinkedIn was the first social network that went public. It saw its valuation zoom to $8.5bn (£5.3bn) after its flotation on the New York Stock Exchange on Thursday – $5bn higher than anticipated during mid-May. At $8.5bn, LinkedIn is valued at 35 times last year's revenues. LinkedIn’s stellar performance is a clear indication that the stock markets are in the clutches of a new technology and digital media bubble. LinkedIn's flotation made it easily the highest valuation of a US internet firm since Google went public in 2004.Another example is Groupon that turned down $6 billion from Google. Groupon filed its long anticipated with S-1. Groupon didn’t disclose how much money it expects to raise from its IPO though.

And amidst this, the giant Facebook would be going public anytime next year. A report from CNBC overnight claims the site is preparing for an initial public offering early next year (2012) at a flabbergasting valuation of at least $100bn! CNBC said a the company would be obliged to go public in the first quarter of the year because it is likely to reach the 500-shareholder limit in October, and would then be required to release financial results to the US SEC (Securities and Exchange Commission) every quarter. In January 2011, an investor agreed to buy Facebook stock at a price of $55 per share for an implied valuation of an incredible $124 billion. That's a whopping 62 times valuation on Facebook's $2 billion 2010 revenues.

Rumors have been doing the rounds that Facebook is losing its users and if more concrete evidence emerges of a slowdown in Facebook's growth which would confirm that the company is peaking, it would make sense for Facebook to cash in soon. And Facebook going public would be news big enough to compete with the 2012 Apocalypse!

Jubin Mehta | YourStory.in


Updates from around the world