Facebook goes public, files to enter the stock market this Spring

Maggie Seppi

By: Maggie Seppi, Assistant News Editor

 

Facebook went public Feb. 1 when it filed a $5 billion Initial Public Offering, which means it will start selling shares in the stock market.

 

However, the company’s estimated worth is even higher, falling somewhere between $75 and $100 billion, which would put its venture beyond Google’s when it went public.

 

Many companies go public, for an array of reasons, but Facebook is a bit different in that it is long-awaited. The company was created by Mark Zuckerberg and fellow Harvard roommates in 2004 but waited until now to make the transition.

 

Facebook’s decision to wait eight years to go public was motivated by reasons different from those typically held by other companies that do the same.

 

One major reason was that internal, private trading was no longer viable. Facebook’s 500 private shareholders required the company to start publishing detailed data about its financial performance. The disclosure of in-depth data prevented scrutiny by the U.S. Securities and Exchange Commission according to Mashable, a website dedicated to social media news and digital culture.

 

Facebook’s venture appears to be set fairly high, but IPOs are often underpriced, said UNF Associate Professor of Finance Oliver Schnusenberg.

 

A couple of phenomena are associated with IPOs that are behaviorally based, such as the risks the company takes, Schnusenberg said.

 

For instance, a syndicate buys all the shares, and that syndicate runs the risk of having to sell all of those shares back, so IPOs are often set at a lower price. This way, the company doesn’t make as much money as it necessarily could, but it also runs a lower risk of losing money.

 

Due to IPOs often being underpriced, on average, they tend to underperform, Schnusenberg said.

 

“However, there are exceptions,” Schnusenberg said. “For example, look at Google. It did extremely well, and is still doing very well. Whether that’s going to be true for Facebook, time will tell.”

 

Determining whether Facebook’s estimated worth is plausible is nearly impossible to predict, Schnusenberg said.

 

“If I knew [Facebook’s estimated worth], I would not tell anyone, and I would trade a lot based on that information,” Schnusenberg said.

 

Facebook’s decision to go public presents risks directly to the company, such as loss of privacy and having to report quarterly and annual earnings, but it also presents some risks to its users.

 

The amount of personal information Facebook has collected about its users helped determine the monumental $100 billion estimated worth, according to multiple news sources. With 845 million users worldwide, Facebook could potentially have plenty of private information to fulfill the prediction.

 

Facebook users’ private information has always been released to advertisers to make the advertisements they produce more personalized.

A communication student browses Facebook during class. (Photo by Sean Murphy)

However, the addition of more shareholders – a side effect of going public – presents the possibility of an increase in the amount of private information used. It also introduces the potentiality of that information being exploited more aggressively, according to Mashable.

 

Despite concerns raised, UNF students appear mostly unconcerned about the idea of the information they release on Facebook being a source of profit for advertisers. However, they plan to continue to monitor what they put out there.

 

“I’m always cautious not to release too much information,” said Nursing junior Gabriel Camacho.

 

Chemistry sophomore Josh Carlson said he would consider being cautious on the site.

 

“I do ‘like’ things on Facebook a lot,” Carlson said. “And knowing people are using that information would make me consider limiting myself, but I would continue to do it.”

 

Biology sophomore Annabella De Las Casas said she is aware that there are probably people watching what she does online, but she doesn’t know exactly what they are doing with the information.

 

“I changed my settings to ensure I’m using a secure site, so I’m not too worried,” De Las Casas said. “If [advertisers] want to make money off of the things I ‘like’, they can do that.”

 

Currently, it appears people who are using Facebook are perfectly happy to trade their privacy for access to the service, said Associate Professor of Communication John Parmelee.

 

Parmelee, who is the author of the book “Politics and the Twitter Revolution,” said Facebook is not the only one selling private information.

 

“Almost any company you come in contact with these days, from your bank to your magazine subscriptions, takes your private information and sells it — your address, your name, everything,” Parmelee said.

 

The real way to tell if Facebook has crossed the line will be in a couple of months, when we can determine whether people have dropped their accounts because of lack of privacy, Parmelee said.

 

Email Maggie Seppi at [email protected]

 

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