The Great Debate UK
A new challenge for Zuckerberg
By Kathleen Brooks. The opinions expressed are her own.
Who wouldn’t want to have been an early investor in Facebook? The graffiti artist who spray painted the walls of Facebook HQ decided to take stock rather than a paycheck and will be $150 million dollars richer as a result.
Facebook is one of the biggest ever IPOs in the U.S. and at the end of last week it even managed to knock Greece out of the headlines and was credited with boosting market sentiment.
The IPO road-show generated larger than expected demand for FB stock, which was met by willing Facebook employees and investors eager to sell. The hype didn’t end there; the stock price was priced higher than expected at $38 per share, valuing the company at $104bn! No wonder Facebook co-founder Eduardo Saverin has renounced U.S. citizenship to sell his Facebook stake and avoid capital gains tax. But the vast bulk of analysis in the lead up to the sale has been Facebook negative: it doesn’t have a sustainable business model, it doesn’t generate enough cash per user (approx. $5 per year, per user), too many insiders are too eager to sell, the price will crash…
But if there are so many reasons to sell, why are people queuing up to fill their boots with red hot Facebook stock? I think the reason is Zuckerberg, and investors in Facebook are chasing his next great idea. The first thing he could turn his attention to is marketing and advertising. After saying that advertising isn’t cool (or maybe that was Jesse Eisenberg in the film The Social Network…) it’s wrong to write Zuckerberg off as a sell-out now that ad revenue will most likely be FB’s largest source of cash flow.
