Posts Tagged ‘Mark Zuckerberg’

Facebook IPO to Be Listed on Nasdaq

Tuesday, April 17th, 2012

Facebook is friending Nasdaq in one of the most-desirable deals among the Internet companies jockeying ahead in the race for social-media IPOs.  The addition of Facebook’s listing enhances Nasdaq’s reputation as the favored exchange among high-tech companies.  The exchange is home to several tech firms, including Apple and Google.  The stock will trade under the symbol FB, as Facebook prepares its initial public offering for May.

“This is a strong, substantial win for Nasdaq, and no doubt a momentum builder for future listings,” said Richard Repetto, an analyst at Sandler O’Neill & Partners.  Facebook’s IPO — which could raise as much as $10 billion — -is likely to be the biggest Internet IPO since Google’s in 2004.  “Winning Google further emboldened Nasdaq’s reputation as being the exchange of choice for the technology companies,” said Jay Frankl, senior managing director at FTI Consulting.  “The Facebook listing I’ve seen as being similar to the Google listing, which had a similar competition between the exchanges, and a similar win for Nasdaq.”

Companies pay an annual fee to list their stock, while exchanges receive listings-related income from the sale of market data and additional services offered to their listed companies.  A company can pay as much as $500,000 annually to be listed on the NYSE, while all Nasdaq fees are capped at approximately $100,000.

The decision is a big victory for Nasdaq, which competes intensely with NYSE Euronext, which operates the New York Stock Exchange.  The listing will give Facebook financial clout as it works to expand its global audience of about 845 million users.  It also might help Facebook avoid a challenge from Google, which wants to rival Facebook with its own social networking system.

Writing in Forbes, Robert Hof wonders if “Will Facebook’s sudden, outsized presence distort the Nasdaq index of 100 companies so that it becomes even more volatile than it already is?  It’s not a premature question by any means.  Already, just a few companies – Apple, Google, Microsoft, Intel, and Oracle – dominate the Nasdaq index, accounting for nearly half the value of the entire Nasdaq 100.  Thanks to its incredible run, Apple stock once again accounts for almost 20 percent of the index, after exchange operator Nasdaq OMX Group reduced its weighting to 12 percent a year ago.  It’s not clear yet, of course, what kind of presence Facebook will have in the index, since it obviously has to go public first and then get added by Nasdaq OMX.  But it seems a good bet that trading in its shares, like those of many new issues, will be anything but calm.  And given the huge interest in the company by investors and the press, and the relatively small float at the outset, every little announcement or hiccup seems sure to send the shares soaring or plummeting.  If Facebook becomes a significant portion of the Nasdaq index, as seems likely, that could make the famously dynamic index even more volatile.  This isn’t much of a problem for Facebook itself.  Its fate rests less with what the stock does in the short term than with how CEO Mark Zuckerberg and his business executives Sheryl Sandberg and others build out the company’s advertising, payments, and other potential businesses.”

CNBC’s Bob Pisani says that Nasdaq’s securing the Facebook listing is an important psychological victory. According to Pisani, “What does matter are the co-branding opportunities, and it here it gets down to a simple issue: what are you offering in the way of a partnership?  It’s not hard to imagine the pitch: the NYSE would certainly have argued that they have broader business-to-business connections with the biggest companies in the world, with whom they can partner to expand the brand name and co-venture with.  I have mentioned before that, as an example, if Groupon (which listed on Nasdaq) was doing something with Starbucks, Groupon might send out 65 million emails that references a deal with Starbucks and Groupon, with the solicitation noting that Groupon is listed on Nasdaq.  Nasdaq will pick up a portion of that cost.  Zillow, to take another company (also on Nasdaq), might have been very interested that Nasdaq has an enormous electronic sign in Times Square that is a virtual billboard for a company that wants to attract eyeballs to its website.  Get it?  What can you offer us?  And just what did Nasdaq offer to Facebook?”

Bill Gates, Sr.: The Rich Must Pay More Taxes

Monday, December 19th, 2011

Bill Gates, Sr., a retired attorney in Washington state, supports a ballot initiative that would require the state’s highest earners — including himself and his son — to pay an income tax.  Currently, the state does not collect personal income taxes.

The father of billionaire Microsoft founder Bill Gates, Jr., believes that the poor pay too much tax, and that the rich don’t pay enough.  Washington’s school system, which is a catalyst for future economic growth in the high-tech state, suffers from too little funding because the wealthy aren’t paying their fair share, according to Gates.  His 1098 initiative — an income tax on adjusted earnings that exceed $400,000 a year per couple or $200,000 for an individual — is drawing protest from Washington business leaders, as well as anti-tax groups.

Initiative 1098 would give tax credits to approximately 80 percent of Washington-based businesses and slash the state share of property taxes by 20 percent for businesses and homeowners.  According to critics, the legislation would harm the economy by taxing the earnings of people who own the businesses — money that would be used to put people back to work.  The opposition’s Defeat 1098 campaign believes that an income tax on 38,400 of the state’s highest earners would take away vital competitive advantages and drive away entrepreneurs.  Even Governor Chris Gregoire’s Commerce Department has publicized Washington’s lack of an income tax in statements about the state’s business climate.

Gates considers Washington state’s tax system to be “dramatically regressive”, something that was proved in 2002 when he led a commission created by the Legislature to study the state tax system.  The commission recommended replacing the sales tax or property tax with an income tax that would rebalance the load.  Gates cited data gathered by the national Institute on Taxation and Economic Policy that show Washington’s poorest 20 percent pay 17 percent of their income in sales, property and other taxes.  By contrast, the wealthiest one percent pays less than four percent.

The initiative would impose a state income tax on individuals earning more than $200,000 and couples earning upwards of $400,000.  In other words, single people would pay a five percent tax on income over $200,000 and nine percent tax if they earn more than $500,000.  Couples would pay five percent over $400,000 and nine percent if they earn a combined income that exceeds $1 million.

“It’s not a matter of picking on someone,” Gates said.  “It’s a matter of correcting to some extent a bad historic situation and arguing — I think absolutely persuasively — that this is a proper source for a serious financial shortfall in our operations, namely the public education system.”

Gates’ proposal also has met opposition from Steve Ballmer, Microsoft CEO, and Jeff Bezos, President of Amazon.com, both of whom donated $100,000 to anti-tax groups.

Another voice of opposition is Stephen Moore, who wrote in the Wall Street Journal, “I wish I had a dollar for every time a wealthy liberal has declared he thinks he should pay more taxes. That list includes Warren Buffett, George Soros, Bill Gates Sr., Mark Zuckerberg and even Barack Obama, who now says that not only should rich people like him pay more taxes, they want to pay more.”

Gates is joined by Berkshire-Hathaway CEO Warren Buffett in calling for higher taxes on the wealthy.  President Obama supports “the Buffett Rule”, a guiding principle to ensure that the rich pay as large a percentage of their income as the middle class.  Some millionaires insist that Buffett doesn’t speak for them.  “There is more of a difference between my financial position as a multi-millionaire and Buffett’s than there is between mine and a guy that makes minimum wage,” one CNN Money reader said.  “Why am I grouped with him and why does he feel he can speak for me?”

Just 24 percent of millionaires said higher taxes on large incomes is the optimal solution, according to a survey from Spectrem Group, a research firm specializing in the finances of affluent Americans.  The largest group of millionaires, 44 percent, believe that a flat-rate tax across all income brackets is the fairest system.

Is the Timing Right for a Facebook IPO?

Wednesday, December 14th, 2011

Facebook is contemplating the idea raising about $10 billion in an IPO that would value the predominant social-networking website at more than $100 billion.  At $10 billion, the offering would raise significantly more money than any other technology IPO, and Facebook expects investors to be eager to buy into the social-networking company.  The IPO would overshadow that of the previous record holder, Infineon Technologies AG, which generated $5.23 billion in its 1999 debut.  Agere Systems Inc., which raised $4.14 billion in 2000, currently occupies second place.

Mark Zuckerberg, Facebook’s 27-year-old founder and CEO, will undoubtedly be rewarded by the website’s rise.  A valuation of $100 billion will further increase Zuckerberg’s net worth which had earlier been estimated at $17 billion, according to Forbes magazine.

Facebook expects federal regulators to call for the firm to disclose its financial results by April 30, 2012 — if it doesn’t go public sooner.  Facebook chose to wait until next year to launch its IPO to give CEO Mark Zuckerberg extra time to add users and increase sales.  Facebook, which has a staggering 800 million users, is also increasing its focus on mobile technology, aiming to leverage the shift to smart phones and tablets.  The firm expects its next billion users to connect primarily via mobile devices, rather than desktop computers.

Zuckerberg noted that an IPO isn’t something he has spent “a lot of time on a day-to-day basis thinking about.  We’ve made this implicit promise to our investors and to our employees that by compensating them with equity and by giving them equity, that at some point we’re going to make that equity worth something publicly and in a liquid way.  Now, the promise isn’t that we’re going to do it on any kind of short-term time horizon.  The promise is that we’re going to build this company so that it’s great over the long term.  And that we’re always making these decisions for the long term, but at some point we’ll do that.

Writing in the New York Times’ “Deal Book” column, Steven M. Davidoff isn’t certain that this is the correct time for a Facebook IPO.  “Facebook is in a corner.  Another Internet hotshot, Groupon, is trading below its offering price, and the market for internet initial public offerings over all appears to be deflating.  The European sovereign debt crisis isn’t helping the market gloom.  The coming months are shaping up to be a bad time to undertake an IPO.  Still, Facebook will almost certainly have to go public during this time whether it wants to or not — and whether or not it can get a valuation of $100 billion or more in doing so.  And it’s partly Facebook’s fault — it just has too many shareholders.  Securities regulation requires a United States company with 500 or more shareholders of record to begin filing reports, including audited financial information, with the Securities and Exchange Commission four months after the year it exceeds this threshold.  Facebook most likely exceeded 500 shareholders this year.  By the end of April 2012, it will become subject to this heightened regulation and have to disclose a spate of confidential business information.”

What does the prospect of an IPO mean to potential investors? TechCrunch writer Josh Constine wasn’t optimistic in a post bluntly titled “Why Greedy Stockholders and a $100 Billion IPO Could Hurt Facebook.” Constine says that if Facebook becomes subject to the desire of its stockholders, the site will innovate less by making profit a higher priority than user experience.  For example, more ads are likely to pop up on users’ pages.  “Outside stockholders could detract from Facebook’s vision and momentum,” he wrote.  “They could push for faster returns, and pressure the company to display more ads, turn mobile into a direct revenue stream, and play it safe with product.  This might produce short-term gains, but could hamper what CEO Mark Zuckerberg has built into a core communications utility for the world.”

Facebook Is Worth $50 Billion? Anyone Remember the Dotcom Bubble?

Tuesday, July 12th, 2011

Could social media be the victim of the next dot.com bubble? Although Facebook has been valued at $50 billion – more than Yahoo!, eBay, and Time Warner and butting heads with such giants as Amazon and Google, there is some question about what the valuation is based on.  According to Newsweek, “Some media experts have compared Facebook with Disney, valued at about $70 billion.  But Disney has real, tangible assets – parks, hotels, cruise ships, iconic images to market on everything from T-shirts to tableware, and a massive library of classic animated films – to back its assessed value.  Facebook has a virtual network that, according to Time, links one-twelfth of the world’s population.  However, according to The Wall Street Journal, Facebook still has enormous infrastructure costs that include as much as $700 million for two data centers, and its profits have yet to be publicly disclosed.  When an investor buys a piece of Facebook, what exactly does that investor get?  The sudden, meteoric explosion in value of online social media sites like Facebook and Twitter is eerily reminiscent of the rise about 15 years ago of the online businesses that created the ‘dotcom bubble.’”

On the PBS Newshour,  Ray Suarez interviewed Josh Bernoff, a senior vice president of Forrester Research, who has written two books on social media.  According to Bernoff, “I certainly think that there’s no rational way to understand these valuations.  I want to be clear here.  Social is very exciting.  There’s a lot of business perspective, a lot of optimism that goes along with it.  But I think these valuations are based on where people think the next buyer will come from and not on where the actual revenues of these companies are going.”  Earlier this year, Microsoft bought Skype for $6.5 billion, although its revenues are less than $1 billion a year.  When LinkedIn went public, it was valued at $9 billion.  Its profits are just $12 million annually.

According to Experience:  The Blog “The dot-com crash of 2000 was devastating.  Even now, 11 years later, the NASDAQ Composite is just a hair over half of where it stood in March 2000.  The crash caused the loss of $5 trillion in market value, huge numbers of people lost their jobs, and the facade of most of those dot-com millionaires crumbled as their paper wealth evaporated.  (To me, the insanity of the dot-com craze is demonstrated by a single story told to me by a now-successful exec in a social enterprise company.  Back in 2000, he ran a tiny startup that got caught up in the dot-com hysteria; at one point it hit a market cap of $1 billion but was generating just $60,000 of revenue.)  I am taking you on this trip down Memory Lane for a reason:  It’s happening again.  Investors in social media startups are looking to cash in, and valuations are soaring despite modest to no profits.  Recently, Airbnb, a site that allows people to arrange short-term vacation rentals of rooms, homes and apartments, received a round of funding based on a $1 billion valuation.  While the company has not released financials, best guess estimates are that Airbnb only generates around $10 million of revenue.  To put this into perspective, Marriott has $12 billion in revenue and a market cap of $14 billion.”

The Next Web disagrees with predictions of a second dotcom bubble.  “Dotcom 2.0 is much stronger than its predecessor.  People are more technologically savvy and, crucially, broadband and smart phones are approaching ubiquity.  The world is switched-on, tuned-in and can’t get enough Internet.  Technological advances aside, the one thing that will ensure we don’t see another dotcom disaster is social media marketing.  The key to success this time lies in finding ways to monetize the many ventures – it’s understood that driving traffic isn’t enough, which is why Twitter is actively seeking ways to drive its revenue.  In fact, Twitter may make as much as $150 million this year, according to some reports.  There’s no question there are a lot of over-valued companies out there at the moment; some will undoubtedly crumble and some will flourish. But Dotcom 2.0 isn’t a bubble, and it won’t burst.”

Potential Facebook IPO Could Value Company at $100 Billion

Monday, June 27th, 2011

Facebook is likely to file for an initial public offering (IPO) as early as October or November that could value the popular social networking site at more than a whopping $100 billion.   Goldman Sachs is the top candidate to manage the lucrative offering, which could come in the 1st quarter of 2012.  Facebook, whose chief operating officer last month called an IPO “inevitable,” made no comment on the report.

The company’s IPO likely would probably be prompted by a section of the 1934 Securities and Exchange Act known as “the 500 rule” At heart, the rule mandates that once a private company has more than 500 investors, it must release quarterly financial information to the Securities and Exchange Commission, just as public companies do.  Facebook, which is likely to cross the 500-investor threshold this year, would probably launch a formal IPO in advance of a public-company reporting obligation that would be required next April.  Another factor motivating the IPO, according to people familiar with the plans, is Facebook’s wish to increase employee compensation.  Early in 2010, Facebook curbed employees’ ability to sell their company shares privately to other investors — a move that may now be prompting employees to quit Facebook so they can monetize their shares.  If the company goes public, however, employees will be able to sell their stock on the open market, allowing them to cash in on their holdings.

“Unable to sell their private shares, Facebook employees are growing restless,” according to Kate Kelly at CNBC.   “An initial public offering is expected.  A factor in the company’s IPO timing is the Securities and Exchange Commission’s requirement that some companies like Facebook must disclose financial information if they have more than 500 private investors.”  The IPO speculation and record high valuation is comes on the heels of recent numbers showing declining user-ship in some of Facebook’s leading markets.

Writing in the Wall Street Journal, Shira Ovide says that “Facebook is on track to exceed $2 billion in earnings before interest, taxes, depreciation and amortization for 2011.  That’s even higher than the expected 2011 profit circulated in the early part of the year when Goldman Sachs and Russian investment house Digital Sky Technologies invested in Facebook at a $50 billion valuation.  If Facebook ends the year with $2 billion in Ebitda, would IPO investors stomach a 50 times trailing multiple valuation?  Seems bubble-like.  Trust us.  Wall Street bankers, lawyers, P.R. mavens, caterers and everyone else are slobbering for a slice of the Facebook IPO magic.  Facebook has been meeting with potential bankers that want to shepherd the IPO.  Goldman Sachs is thought to have an inside track to lead the IPO thanks to its recent investment in Facebook, but don’t count out big banks such as J.P. Morgan and Morgan Stanley, which have led recent big tech IPOs.  Facebook CEO Mark Zuckerberg has been non-committal about an IPO for a long time.  As recently as December, Zuckerberg gave his weird deer-in-headlights stare when ’60 Minutes’ asked him whether he would ever push his baby into the public markets.  ‘Maybe’ was Zuckerberg’s answer.  But momentum is taking over.”

Not so fast, says Fortune magazine’s Dan Primack. According to Primack, “Pay attention to news that Facebook is planning its IPO.  But take its proposed valuation with a grain of salt.  First, the most recent private trades of Facebook stock came in at around $85 billion, and private trades are meant to be done at a discount to public valuations.  LinkedIn shares, for example, traded at $23 per share on the private markets six months before going public at $45 per share.  At that velocity, Facebook actually would be valued at $165 billion next January.  More importantly, it’s impossible to intelligently speculate on an Internet company valuation 6-10 months out.  Will the bubble still be inflating?  Will it have popped?  Will macro trends have continued their anemic recovery, or double-dipped back down?  Facebook is probably immune to the timing issues related to IPO windows, but it does not stand apart from the economy at large.  If we experience a massive advertising pullback, for example, then Facebook could take a hit in its largest revenue pot (or at least a growth slowdown).  Not saying that will happen, but obviously it could.  To me, the only value in today’s ‘$100 billion’ report is in referring back to it when the company has an actual public valuation.”

Facebook May Breach the Great Firewall of China

Tuesday, May 3rd, 2011

Social networking could gain 1.3 billion new users if a deal goes through that will introduce Facebook to ChinaFacebook Inc. has signed an agreement with Baidu, Inc.  a search engine company, to create a social-networking website in China.  “We are currently studying and learning about China, as part of evaluating any possible approaches that could benefit our users, developers and advertisers,” Palo Alto, CA- based Facebook said.

The arrangement follows several recent meetings in China between Facebook CEO Mark Zuckerberg and Baidu CEO Robin Li.  The Baidu website would not be incorporated with Facebook’s international service, and a potential launch date is “not confirmed.”  Facebook said it is “currently studying and learning about China, as part of evaluating any possible approaches that could benefit our users, developers and advertisers.”  By entering the Chinese market, where the world’s most popular social-networking service is currently banned, Facebook would gain access to the nation’s nearly 500 million Internet users.

According to Pascal-Emmanuel Gobry of MSNBC Business Insider, “The deal makes sense for both sides. On Facebook’s side, it needs a big local partner to break into the huge Chinese market. On Baidu’s side, it is threatened by social network juggernaut Tencent, and it might be a safer bet to build a social network with one of the most successful social companies in the world than to try to build its own.”

Baidu, which is China’s largest search engine, wants to provide more social networking opportunities in China.  The impediment has been the Chinese State, which owns the “Great Firewall of China” and has blocked sites like Facebook, Twitter and YouTube.  Google removed its search engine last year.

Writing on the website Digital Trend, Molly McHugh is curious about how Facebook can compete if it enters the Chinese market.  “Facebook has been blocked in China since 2009, when riots in the country’s Xinjiang region led to severe crackdowns on Internet use.  Since then, statements from Chinese officials and Facebook CEO Mark Zuckerberg have hinted at the possibility of cooperation between the two, if a compromise between the nation’s overbearing censorship and Facebook’s ‘openness’ can be reached.  Now it looks as though something is going on.  What exactly that may be is still up in the air, but numerous reports say Facebook is working with China to come up with a solution.

“According to Marbridge Consulting, as well as a few blogs,” according to McHugh, “a post on Sina Weibo from Hu Yan Ping, the founder of a Chinese market research firm claims that Facebook will be collaborating with Baidu to build an entirely new social networking site.  Ping wrote, ‘Facebook really is about to enter China, the agreement is signed.  A domestic website will work with Facebook to create a new site.  This new site is not interlinked with Facebook.com.  The question is, will this live or die in China?’”