INDEX

Sr. no. Contents

1. History
2. Before going public
3. Why it went public
4. Going public
5. Public trading
6. Reasons for failure
7. Bibliography
 History
"Facebook knows more things about more people than does Google, and those people have
stronger emotional connections and loyalty because that's where their friends are. So given a
few years to figure it out, Facebook could end up being worth more than Google, which has a
market value of $200 billion."

-Kevin Landis, Chief Investment Officer

Facebook is an American corporation and a social networking website based

in Menlo Park, California. The Facebook website was launched on February 4,
2004, by Mark Zuckerberg, along with fellow Harvard College students.

The founders had initially limited the website's membership to Harvard students;
within the first month, more than half the undergraduates at Harvard were
registered on the service. Eduardo Saverin, Dustin Moskovitz, Andrew McCollum,
and Chris Hughes joined Zuckerberg to help promote the website. In March 2004,
Facebook expanded to the universities of Columbia, Stanford, and Yale. It later
opened to all Ivy League colleges, Boston University, New York University, MIT,
and gradually most universities in the United States and Canada.

In mid-2004, entrepreneur Sean Parkeran informal advisor to Zuckerberg

became the company's president. In June 2004, Facebook moved its operations
base to Palo Alto, California. It received its first investment later that month
from PayPal co-founder Peter Thiel. In 2005, the company dropped "the" from its
name after purchasing the domain name facebook.com for US$200,000.

A high-school version of the site was launched in September 2005. Facebook also
expanded membership eligibility to employees of several companies,
including Apple Inc. and Microsoft. On September 26, 2006, Facebook was
opened to everyone at least 13 years old with a valid email address.
 Before going public
For years, Facebook and Zuckerberg resisted both buyouts and taking the
company public. The main reason that the company decided to go public is
because it crossed the threshold of 500 shareholders, according to Reuters
financial blogger Felix Salmon.
Facebook reportedly turned down a $75 million offer from Viacom in 2006.
That same year, Yahoo! attempted to buy the company for $1 billion but
Zuckerberg refused.
Also that year, BusinessWeek reported a $2 billion valuation for the company.
Facebook did accept investments from companies, and these investments
suggested fluctuating valuations for the firm. In 2007 Microsoft beat
out Google to purchase a 1.6% stake for $240 million, giving Facebook a notional
value of $15 billion at the time. Microsoft purchased preferred stock, which
meant that the company's actual valuation would be considerably lower than $15
billion.
Meanwhile, that valuation dropped to $10 billion in 2009, when Digital Sky
Technologies bought a nearly 2% stake for $200 million - a larger stake than
Microsoft had purchased at a lower price.
An investment reported in 2011 valued the company at $50 billion.
 Why it went public?
1. According to security and exchange commission rules, private companies with
more than 500 shareholders on record, must adhere to financial disclosure
requirements that public companies do

2. Facebook raised 16 billion dollars through the ipo. This money can be critical
for hiring more people, building facilities and creating breakout products, and it
also can be extremely helpful for making important business-growing acquisitions.

3. Credibility: Being a publicly trading company is considered a major

achievement. And it also is a statement it means a company has the
wherewithal to meet rigorous federal regulations. This is especially important for
companies that eventually want to land larger customers. Going public provides a
sense of corporate stability.

4. Currency: The value of private stock is difficult to determine. After all, its
usually difficult to convert it into cash. But such is not the case with public stock.
And because of this, a company can use its stock as currency to buy other
companies.

5. Liquidity: As Facebooks Mark Zuckerberg stated in the companys prospectus:

Were going public for our employees and our investors

The fact is that by being public, a companys key supporters can get rewarded for
their efforts and risk-taking. This means being able to sell shares in the company
over time. Often times, these stock options can be worth much more than an
employees salary. In Facebooks case, more than a thousand employees are
millionaires because of their stock options.
 Going public
Facebook filed for an initial public offering on February 1, 2012 by filing their S1
document with the Securities and Exchange Commission (SEC). The preliminary
prospectus announced that the company had 845 million active monthly users

To ensure that early investors would retain control of the company, Facebook in
2009 instituted a dual-class stock structure. After the IPO, Zuckerberg was to
retain a 22% ownership share in Facebook and was to own 57% of the voting
shares. The document also stated that the company was seeking to raise US$5
billion, which would make it one of the largest IPOs in tech history and the biggest
in Internet history.

Prior to the official valuation, the target price of the stock steadily increased. In
early May, the company was aiming for a valuation somewhere from $28 to $35
per share ($77 billion to $96 billion). On May 14, it raised the targets from $34 to
$38 per share. Some investors even suggested a $40 valuation, although a dip in
the stock market on the day before the IPO ended such speculation.

Strong demand, especially from retail investors, suggested Facebook could choose
a relatively high offering price. Ultimately underwriters settled on a price of $38
per share, at the top of its target range. This price valued the company at $104
billion, the largest valuation to date for a newly public company.

On May 16, two days before the IPO, Facebook announced that it would sell 25%
more shares than originally planned due to high demand.

Prior to the IPO, several investors set price targets for the company. On May 14,
before the offering price was announced, Sterne Agee analyst Arvind Bhatia
pegged the company at $46 in an interview with The Street. The interviewer
cautioned Bhatia against what she perceived as Bhatia's low valuation, suggesting
the stock could rise to "60, 70, 80 dollars" and could shoot up to $60 on the first
day of trading
 Public Trading
Zuckerberg rang a bell from Hacker Square on Facebook campus in Menlo Park,
California, to announce the offering, as is customary for CEOs on the day their
companies go public.

First Day
Trading was to begin at 11:00am Eastern Time on Friday, May 18, 2012. However,
trading was delayed until 11:30am Eastern Time due to technical problems with
the NASDAQ exchange. Those early jitters would foretell ongoing problems; the
first day of trading was marred by numerous technical glitches that prevented
orders from going through, or even confused investors as to whether or not their
orders were successful.

Initial trading saw the stock shoot up to as much as $45. Yet the early rally was
unsustainable. The stock struggled to stay above the IPO price for most of the
day, forcing underwriters to buy back shares to support the price. Only the
aforementioned technical glitches and underwriter support prevented the stock
price from falling below the IPO price on the first day of trading.

At closing bell, shares were valued at $38.23, only $0.23 above the IPO price and
down $3.82 from the opening bell value. The opening was widely described by the
financial press as a disappointment
Subsequent days
Facebook's share value fell during nine of the next thirteen trading days, posting
gains during just four.The next day of trading after the IPO (May 21), the stock
closed below its offering price, at $34.03.The stock saw another large loss the
next day, closing at $31.00. A 'circuit breaker' was used in an attempt to slow
down the decline in the stock price. The stock increased modestly in coming days,
and Facebook closed its first full week of trading at $31.91. The stock returned to
losses for most of its second full week, and had lost over a quarter of its starting
value by the end of May. This led the Wall Street Journal to call the IPO a
"fiasco."The stock closed its second full week of trading on June 1 at $27.72. By
June 6 investors had lost $40 billion.Facebook ended its third full week at $27.10,
slightly lower than a week previous. The company finished its fourth full week
with an increase to $30.01, its first weekly gain
 Reasons for failure
Internal factors: Much of the lack of confidence in the stock came from
within, as 57% of the shares sold in the IPO were from Facebook insiders. Another
factor in the stock's falling price was the decision by General Motors to pull $10
million in advertising from Facebook due to ineffectiveness.

NASDAQ Glitch Costs Investors: On the day of the trading, the

stock opening was delayed due to technical glitches, as NASDAQs electronic
trading platform was unable to handle the high volume of trades. This also
prevented some investors from selling the stock during the first day of trading
while the stock price was fallingforcing them to incur bigger losses when their
trades finally went through. Investors stuck with huge losses sued, and NASDAQ
eventually paid a $10 million fine over the botched IPO debacle.

Overpricing: The share price was originally set conservatively, between $28
and $35 a share. But three days before the market debut, the underwriting banks
Morgan Stanley, JP Morgan, and Goldman Sachs increased the IPO range to
between $35 and $38, citing heavy demand. This change was despite consensus
among some large investors that Facebook was overpriced and that the IPO was
overhyped.

Excess supply: Prior to the offering, Facebook also expanded its number
of shares by 25%, to 421.2 million. But usually, retail or individual investors are
allocated up to 20% of the total shares in an IPO. This was considered a bad move
when the shares were overvalued, and it led to forced selling from investors who
were allotted more shares than they expected and when quick profits failed to
materialize a couple of days after the IPO
 Bibliography
https://en.wikipedia.org
https://in.finance.yahoo.com
https://www.investopedia.com
https://www.forbes.com
https://www.jpmorgan.com
https://www.theguardian.com