Slashdot Mirror
Facebook Could Spawn Thousands of Milionaires
Hugh Pickens writes "Retuers reports that the world's No. 1 online social network is preparing for a blockbuster initial public offering that could create thousands of millionaires as Facebook employees past and present begin hatching plans on how to spend their anticipated new wealth. 'There's been discussions of sort of bucket list ideas that people are putting together of things they always wanted to do and now we'll be able to do it,' says one former employee who expects his shares to be worth $50 million and is planning to book a trip to space with Virgin Galactic that would cost $200,000 or more. 'It's been a childhood dream.' Another group of Facebook workers has begun laying the groundwork for its own jungle expedition to excavate a relatively untouched site of Mayan ruins in Mexico that sounds like Raiders of the Lost Ark. But for many of Facebook's staffers, the IPO will provide the means to pay off school loans and buy a house or new car and many homeowners and real-estate agents are eagerly anticipating a surge of new buyers that could push prime real estate to new heights. 'If a Facebook guy buys a house and wants to remodel it, maybe the contractor will buy another car,' says Buff Giurlani. 'Maybe the realtor will put a car in. There's a trickle-down effect.'"
The good. the IPO will provide the means to pay off school loans and buy a house or new car.
It is good to get out of debt and solidify yourself.
The Crazy. one former employee who expects his shares to be worth $50 million and is planning to book a trip to space with Virgin Galactic that would cost $200,000 or more
It is crazy to become wealthy then chance it all on being shot into space.
The Disgusting. real-estate agents are eagerly anticipating a surge of new buyers that could push prime real estate to new heights
Agents that can't wait to pump up the prices on homes in anticipation for a very small number of potential clients.
Having to work for a living is the root of all evil.
I'm an individual retail investor, and I've done quite well in the market, thanks. In fact, it's lifted my middle class family well into the "one percent" (net worth).
Of course, I remain unconvinced FB can sufficiently monetize all those users to make the IPO a good deal for the average innvestor. But the point of the OP was that the workers were somehow being stolen from when they are already holding FB stock and will be enriched come IPO day. Just makes no sense.
Slashdot "libertarians": Small government for me, big government for those I disagree with. -1, I disagree with you
Typically employees can't sell their shares until at least six months post-IPO.
The SEC required a 2-year wait until the early 1990s. Which is partly why IPOs that ran way up after the IPO and then crashed were so popular during the original dot-com boom.
How much is Facebook really worth, anyway? Let's look at the numbers. Facebook revenue for 2010 was $1.86 billion. Goldman Sachs, which makes a private market in Facebook stock, sent a report to their investors indicating Facebook earned $355 million in the first 9 months of 2010. That would be $473 million for the year, for a 25% profit margin. Of course, those are unaudited numbers. When the SEC filings take place for an IPO, they may decrease as accounting gimmicks are disclosed and discounted.
The next question is, do we value Facebook as a growth company or an ongoing company? Let's look at Facebook's traffic stats. Traffic went up steadily until mid-2011, when it peaked. (Before Google+ started, incidentally.) It's been down a bit since then. So Facebook may have maxed out and started on its decline, like every other social network from AOL to Myspace did. There probably isn't a lot of growth left. Is there anyone not on Facebook who wants in?
OK, what's a company with $473 million in annual revenue worth? Google's price/earnings ratio is 21.39. Microsoft, 9.34. IBM, 12.69. Netflix 16.11. AOL 26.43. Yahoo 19.51. IAC (Ask's parent) 18.27. So we can say that the market is at best valuing mature Internet companies around 20x earnings.
That gives Facebook a valuation around $9 billion.
Even that may be optimistic. That assumes Facebook's user base doesn't shrink. Remember when Myspace was on top? This is Myspace on the way down. To earn that $9 billion valuation, Facebook has to maintain its current size and profitability for 20 years. Does anybody think that will happen?
(How many people here remember when one of the founders of Slashdot was asking on here what to do with his money when VA Linux, the parent of Slashdot, went public in 1999? They had the biggest first-day runup after an IPO ever. The stock hit $239 on the first day, and then went into a screaming dive. Six months later it was around $40. Not as rich as he thought. By 2002, it had dropped to $0.54. The stock is still trading as GKNT, formerly LNUX. Here's the chart.)