Facebook Case IPO

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“Facebook, Inc: The Initial Public Offering” Introduction Facebook, which was founded by Mark Zuckerberg in February 2004, is an online social networking platform with the mission of making the world more open and connected. Within a few years, Facebook attracted millions of new users, from 1 million Monthly Active Users to 845 millions Monthly Active Users. Though competing with global and regional corporations in the industry, Facebook kept growing rapidly. With the high expectation of investors, Facebook finally decided to go public. The “Red Herring” of Facebook stated that its goal was to connect all two billion global Internet users. Basing on our analysis of Facebook’s IPO, we would like to give several recommendations on the…show more content…
However, by mid-May it had fallen to $12.17 with a loss of 39 percent post-IPO. Zynga, the online gaming company, went public in December 2011 and issued 100 million shares at $10/share, which was at the ceiling of the price talk of $8.50 to $10.00. Zynga’s share price fell by 5 percent on the first day of trading and by mid-May was still 14.4 percent below the IPO price. Intrinsic value refers to the value of a company, stock, currency or product determined through fundamental analysis without reference to its market value. It is ordinarily calculated by summing the discounted future income generated by the asset to obtain the present value. In this case, Facebook’s intrinsic value is its estimate value/share from Discounted Cash Flow analysis. As it is showed in Exhibit 3, Facebook’s estimated value/share is $32.44 using Discounted Cash Flow analysis. The price from the price talk is $38, which was raised from around $28 to $35 to $34 to $38 per share because of the overwhelming demand from investors. And the price talk is 17% higher than the intrinsic value. Based on our one-way sensitivity analysis of seven variables as it is showed in Exhibit 4, which are revenue growth rate, terminal growth rate, pre-tax operating margin, increase in Capex, increase in NWC, cost of capital and marginal tax rate, we conclude that cost of capital and pre-tax operating margin are the two most sensitive variables from our calculation of the slope rate R. And our two-way
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