Facebook $5 billion IPO: Invest (or not) based on SEC Form S-1 review


Facebook IPO - pix 01

Facebook has just filed papers for an initial public offering potentially worth $5 billion. Have a read of Facebook’s Form S-1 prospectus filing, pay special attention to the  MD&A section (Management discussion and analysis). According to MarketWatch,

“[Facebook] did not specify the amount of shares or projected price range in the filing, nor did it specify which exchange it hopes to list its shares on. The company said it intends to trade its shares under the ticker symbol “FB.” It said it had revenue of $3.7 billion with net income of $1 billion for the year ended Dec. 31.”

See also report in CNN Money,

How much Facebook is worth: In this initial paperwork, companies don’t declare how many shares they’re going to sell, or how much those shares will cost. Those details will be added in an updated filing shortly before trading begins.

Without that share price information, Facebook’s valuation is still speculative.

Facebook has its own guesses, though. The company said it conducted its own valuation of its stock at the end of each quarter, and as of December 31 determined it to be worth $29.73 a share.

Trading won’t begin for several months, as Facebook now has to field questions from regulators and court investors for its stock sale.”

Many Facebook users/amateur investors are feeling euphoric and wanted to invest in Facebook, viewed as a once in a lifetime opportunity. Some would invest in a company relying on the greater fool theory but I think it is wiser to invest based on proper research.

BNN’s Marty Cej said it concisely earlier today,

This will be the first opportunity for the public to see how the company really works, how it generates revenue, the pace of revenue and profit growth, the risks and the opportunities. Analysts and investors will finally be able to attach a valuation to the company and decide whether the stock will be worth a punt when it goes public in a few months time. No matter how well you think you know the company, there will be surprises.

From Form S-1Consolidated Statements of Income Data

Facebook IPO - pix 03 - Consolidated Statements of Income Data

Consolidated Balance Sheet Data

Facebook IPO - pix 04 - Consolidated Balance Sheet Data

P.S. As a general rule, use the SEC EDGAR database to conduct company research before investing. Informed investing is much more rewarding than speculating/gambling (to make/lose money) in the long run.

Feb 5, 2012 Update: MarketWatch, “Why Facebook is likely to do a face-plant – Commentary: Long-awaited IPO is Stupid Investment of the Week

MarketWatch, “Facebook’s IPO will be way overvalued – Commentary: Facebook price-to-sales ratio projected to be sky high

MarketWatch, “The year of FacebookCommentary: Social network is subject to shifts in online advertising

Guardian, “Facebook prepares for risks and rewards in its future


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