Facebook IPO

[IM Today]

A couple of links for any Aussies who might be interested in a dabble.

http://www.news.com.au/business/mark...-1226259227353

http://www.news.com.au/business/mark...-1226258237608

If you are thinking about it, take note of the central paragraphs in the second article. Australian economic performance needs to be low for you to capitalise on your investment.

[Dunworking]

A good piece about the Facebook IPO here: http://www.moneyobserver.com/news/12...orth-investing

Earlier this month, Facebook announced its stock market flotation plans. But what is Mark Zuckerberg's company really worth, and how will the IPO affect other listed social media sites?

We are still in the preliminary stages of our valuation work on Facebook, especially given the limited information currently available. That said, we see Facebook as an exceptionally well positioned business with high barriers to entry due to the scale and stickiness of the user base, consisting of 845 million active users.

Although rumoured Facebook valuations may look full based on historic revenue metrics, we believe the high growth rates are likely to be sustainable because the monetisation of users remains in the early stages. One interesting way to look at the opportunity is the $3.8 billion revenue in 2011 divided by 483 million daily active users, which suggests they are currently only capturing $7.86 per user, per annum.

The most significant incremental opportunities lie in better monetising their social mapping, enabling advertisers to precisely target small groups of users, and also mobile usage, which is a huge opportunity especially in emerging economies where smartphones are the primary method of accessing the internet.

Facebook’s profitability is clearly strong with operating margins already over 40 per cent. This compares favourably to Google’s which was in the mid 20 per cent in 2003 and 2004 around the time of their IPO. In itself, this combined with high growth rates justifies using a higher multiple of revenue for valuation. That said, Q4 2011 saw just 55 per cent revenue growth year-on-year which was a significant slowdown from 100 per cent-plus in the previous four quarters. We will be watching reported Q1 growth closely to ensure we understand the extent to which this is influenced by increased mobile usage and how quickly the mobile opportunity can be monetised.

Some statistics from the recent filing:

· 845 million monthly active users.
· 483 million daily active users. 360 million who logged in six out of seven days, i.e. an everyday activity.
· 425 million used Facebook mobile products.
· 100 billion friend connections.
· 2.7 billion likes & comments per day in the three months to the end of December 2011.
· 250 million photos uploaded per day.

The key risk of investing in emerging technologies, such as the social media space, is that the pace of innovation in the technology sector is accelerating. Facebook has cleared the most difficult hurdle in that it now has huge barriers to entry with its network of over one billion users globally, but they need to keep innovating to maintain this position. They have also eliminated most of the competition, with Google + faltering and early competitors such as MySpace, Bebo and Friends Reunited now too small to be relevant.

That said, Facebook is not alone and we believe LinkedIn and Sina (a leading Chinese portal, which is gaining significant traction with Sina Weibo - a hybrid business combining elements of both Twitter and Facebook) have also reached sufficient scale for it to be tough for new entrants to compete. However, Facebook is the deal everyone has been waiting for and its eventual valuation, once trading as a public company, will form the reference point for all other stocks in the space.

With that in mind, we would expect a successful IPO to act as a positive catalyst for many other social media related stocks.

We believe technology valuations are generally very compelling and the sector looks well placed to outperform in 2012. However, to date, we have taken a conservative approach regarding social media - largely because the number of social media related IPOs has been limited and the free float in each has been constrained to ensure the floatations are successful. That said, we currently have small positions in both LinkedIn and Sina and we would expect both to benefit from a re-rating around a successful Facebook IPO.

By Ben Rogoff (pictured) and Nick Evans, co-managers of the Polar Capital Global Technology fun

[Dunworking]

An update on Facebook share listings you might be interested in, IM Today:

FACEBOOK has decided to list its shares on the Nasdaq Stock Market after its initial public offering, FOX Business reported.

The move comes as a miss for the New York Stock Exchange, which had also been lobbying for the much-awaited IPO from the social-networking giant.


Earlier this week, The Wall Street Journal reported Facebook said it is preparing its IPO for May. The company filed for the IPO in early February, in an offering that could raise as much as $US10 billion ($9.7 billion) and value the eight-year-old company at $US100 billion.

Read more: http://www.news.com.au/breaking-news/facebook-to-list-shares-on-nasdaq/story-e6frfku0-1226320237221#ixzz1rS0SbOQD