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Facebook files its IPO

Marketplace Contributor Feb 1, 2012

Kai Ryssdal: The most mentioned company in business and the markets today was one that doesn’t even trade publicly.


But they’re going to real soon. Facebook filed papers for its initial public offering this afternoon. We’ve got our New York bureau chief Heidi Moore on the line for a little bit of context. The first question of which, Heidi, is this one — you ready?

Heidi Moore: I’m ready.

Ryssdal: So what? I mean, what’s the big deal?

Moore: Sure. Well, think about it this way. It is hard to get 845 million people to agree on anything — we can’t even get our Congress to agree, right? But that many people have signed up for Facebook. So this would be by far the biggest tech IPO in history. It’s a cultural milestone; everyone we know is on Facebook. And it also, this company has spawned an echo system — there are other companies that have depended on it: Zynga, Twitter and Tumblr users tend to be Facebook users as well.

Ryssdal: I saw a great caption of something the other day, you mentioned Zynga, the company that makes “Farmville” — “Facebook betting the Farmville.” But anyway, I digress. Sorry. Now that they’ve filed, though, what ought we look for? What do we need to know?

Moore: Sure. What we know now is roughly how much Facebook is worth, and that is a whopping $100 billion. Yeah, they’re going to try to raise about $5 billion, and we’re finding out that they are doing very well in terms of revenue. They grew their revenue 88 percent from last year to this year. So they’re making $3.7 billion, so we know they’re doing well on that front.

But there are other things that we still have to watch and learn and read more from from this filing, and that is: How does Facebook hope to make more money in the future? What is their strategy? Will most of their money come from online ads? Who are its competitors? It mentioned a few in the filing, but none of them are really ones that you might take seriously. They mentioned a company called Cyworld, which I don’t think we’ve ever heard of. Right?

Ryssdal: Whatever that is.

Moore: Right, we know it’s not MySpace, but who else is it? And, then as the further filings come on, we’ll find out how much people are paid, what their stock options are. The one twist here is that Facebook is one of the few companies that already has a lot of mutual funds that hold shares — as many as 50 mutual funds already hold shares in Facebook. So you’ll be able to see if you have a teensy stake in it through your 401(k).

Ryssdal: That’s actually a key point. It’s been said that Facebook’s a private company, but only kind of, because lots and lots of big institutional investors have a slice of this thing, right?

Moore: Right, exactly. And you know, they know everything about you, so you get to know a little about them.

Ryssdal: A little about them, yeah. One of the other things that companies have to do when they file for an IPO is lay out the risks — the downside things that could happen. What do we know based on the filing today?

Moore: Sure. Facebook mentioned a lot of risks. Now, the thing is, companies mention every single thing that’s possible — Zynga, for instance, mentioned that it was on an earthquake faultline. So they have to cover everything — an asteroid hitting the earth. So Facebook mentioned that it has risks to its brand — you know, what if people don’t like it anymore? Its issues with privacy — we know those have been a problem; if they get to be bigger, it’s going to have to deal with that. It mentioned in passing the possibility of hackers or third-party interference in its servers. You know, can it keep users and grow them? That’s another one. So it’s those types of things — what is its future? And those are the risks that you want to pay attention to. Right now, they’re vague.

Ryssdal: And it’s all going to have to be in paperwork, right? Just to point out to remind people: executives now at this company are in the quiet period and they really can’t say anything, not that they’ve said a whole bunch in the past.

Moore: Right, exactly. It’s been the worst-kept secret so far, but they’re really going to have be quiet now.

Ryssdal: All right, Heidi Moore in New York, thanks Heidi.

Moore: Thank you Kai.

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