Speculating on the Facebook IPO Price

While the speculation continues regarding when the Facebook Initial Public Offering (IPO) will occur, many stock market participants are trying to figure out what the Facebook IPO Price will be when the stock starts trading on a public stock exchange. The Facebook IPO Price will ultimately be determined by the number of shares that Facebook and investors currently holding private Facebook shares decide to sell to the public via the IPO and the valuation given by the market to Facebook at the time of the IPO.

With over 750 million active users, the pending Facebook IPO has generated a buzz in the Wall Street IPO market that rivals other famous Internet IPOs, such as Google, eBay, and Amazon. Facebook is aggressively trying to expand into markets outside of the United States, including China, which will continue Facebook’s growth in active users for a number of years. Facebook monetizes its active users by selling advertising that appears on user’s pages. With so many active users who use Facebook as their primary means of communication over the Internet, the potential for monetizing those users via advertising is enormous.

While it is impossible to put an exact valuation on the total value of the pending Facebook IPO, some reputable stock market watchers have stated that by 2012 Facebook may be worth more than $100 Billion based on projected revenue and earnings growth. With an estimated 2.5 billion private shares of Facebook outstanding, if the company and insiders sell 20% of their private Facebook shares to the public in an IPO, the Facebook IPO would be for 500 Million shares. Assuming Facebook is worth $100 Billion based on their projected revenue and earnings growth when the Facebook IPO occurs, the Facebook IPO Price would likely be approximately $40 per share, which would yield a whopping $20 Billion, and would make the Facebook IPO one of the biggest IPOs ever. If the Facebook IPO Price is above $45 per, due to strong demand for the IPO, then the Facebook IPO will break the IPO record that was set by Industrial and Commercial Bank of China in 2006, when the bank raised $22 billion in an IPO.

Facebook IPO Price – Buying After The IPO

Regardless of what the Facebook IPO Price is for those investors lucky enough to be allotted shares in the Facebook IPO, the stock will almost certainly start trading considerably higher once it is available for public trading. Then the question for individual investors and those who are unable to obtain shares in the Facebook IPO is whether Facebook is worth buying via the stock market. That question is impossible to answer at this time. It all depends on what Facebook’s stock is trading for after the IPO and what its post-IPO valuation is in relation to its future prospects for revenues and earnings growth. Those who brought at the Facebook IPO Price may be looking to flip their shares for a quick profit, which could create a buying opportunity for those shut out of the Facebook IPO.

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