Initial Public Offerings Case Study

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Business -- Corporate Finance -- IPO SLP

Facebook, Inc. is a social networking company that engaged in a simultaneously successful and flawed IPO resulting in multiple lawsuits against the company and its underwriters. Though the IPO traded on huge volume and raised $16 billion, it also reportedly resulted in the loss of $billions to investors due to stock overvaluation and supposed mismanagement. Due to these successes and failures, Facebook, Inc.'s IPO is a success story but also a cautionary tale.

Facebook, Inc. is a social networking company that was incorporated in 2004, has more than 5,000 employees, maintains its corporate headquarters in Menlo Park, CA and has more than 1 billion monthly active users on its site: http://www.facebook.com. It is a publicly traded corporation on the Nasdaq 100 and AMEX and its current stock price is $46.26 as of November 22, 2013 at 7:53PM EST (Yahoo, Inc., 2013). Facebook's Sales/Revenue and Profitability (Net Income) in thousands are:

Period Ending

Dec 31, 2012

Dec 31, 2011

Dec 31, 2010

Total Revenue

5,089,000

3,711,000

1,974,000

Cost of Revenue

1,364,000 860,000

493,000

Gross Profit

3,725,000

2,851,000

1,481,000

Operating Expenses

Research Development

1,399,000

388,000

144,000

Selling General and Administrative

1,788,000

707,000

305,000

Non-Recurring

Others

Total Operating Expenses

Operating Income or Loss

538,000

1,756,000

1,032,000

Income from Continuing Operations

Total Other Income/Expenses Net

7,000

(19,000)

(2,000)

Earnings Before Interest And Taxes

545,000

1,737,000

1,030,000

Interest Expense

51,000

42,000

22,000

Income Before Tax

494,000

1,695,000

1,008,000

Income Tax Expense

441,000

695,000

402,000

Minority Interest

(21,000)

(332,000)

(234,000)

Net Income From Continuing Ops

32,000

668,000

372,000

Non-recurring Events

Discontinued Operations

Extraordinary Items

Effect Of Accounting Changes

Other Items

Net Income

32,000

668,000

372,000

Preferred Stock And Other Adjustments

Net Income Applicable To Common Shares

32,000

668,000

372,000

(Yahoo, Inc., 2013)

Facebook, Inc.'s Total Assets, Total Liabilities and Owners' Equity in thousands are:

Period Ending

Dec 31, 2012

Dec 31, 2011

Dec 31, 2010

Assets

Current Assets

Cash And Cash Equivalents

2,384,000

1,512,000

1,785,000

Short-Term Investments

7,242,000

2,396,000

Net Receivables

1,170,000

547,000

373,000

Inventory

Other Current Assets

471,000

149,000

88,000

Total Current Assets

11,267,000

4,604,000

2,246,000

Long-Term Investments

Property Plant and Equipment

2,391,000

1,475,000

574,000

Goodwill

Intangible Assets

1,388,000

162,000

96,000

Accumulated Amortization

Other Assets

57,000

90,000

74,000

Deferred Long-Term Asset Charges

Total Assets

15,103,000

6,331,000

2,990,000

Liabilities

Current Liabilities

Accounts Payable

488,000

359,000

166,000

Short/Current Long-Term Debt

534,000

450,000

181,000

Other Current Liabilities

30,000

90,000

42,000

Total Current Liabilities

1,052,000

899,000

389,000

Long-Term Debt

1,991,000

398,000

367,000

Other Liabilities

305,000

135,000

72,000

Deferred Long-Term Liability Charges

Minority Interest

Negative Goodwill

Total Liabilities

3,348,000

1,432,000

828,000

Stockholders' Equity

Misc Stocks Options Warrants

Redeemable Preferred Stock

Preferred Stock

615,000

615,000

Common Stock

Retained Earnings

1,659,000

1,606,000

606,000

Treasury Stock

Capital Surplus

10,094,000

2,684,000

947,000

Other Stockholder Equity

2,000

(6,000)

(6,000)

Total Stockholder Equity

11,755,000

4,899,000

2,162,000

Net Tangible Assets

10,367,000

4,737,000

2,066,000

(Yahoo, Inc.

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