My thoughts on Facebook

It was just a couple days ago that Facebook announced they will enter to the stock market though Initial Public Offering (IPO), I don't think there is anything wrong with it yet. It is another opportunity for the investors and themselves to create more business and more profit, therefore I suspect they will be a lot of people looking forward to the launch the same as Facebook itself. The question is how are they going to position themselves in the right way to increases their future share price and maximisation of their future investors and shareholder's values in the long term. According to Peston (BBC News, 2012) last years profits after tax were one billion dollars, but the actual revenue were $ 3.7bn ( £2.3 bn) last year and it is 95 percent less than the expected market value. Well, the current estimate after the shares are traded would be in the region of $80 bn (or £50 bn). So it is huge for themselves and its industry and further success. Does that mean Facebook still can generate huge amount of share price value in the future?

As far as I know Facebook has been trying to enter the Chinese market all the time as it will be there biggest market in the future, as they predicted, because China has 5bn internet users. There is no doubt of the future potential in the Chinese market, I have to say that there will also be a lot of challenges ahead as well, for example China itself has its own social networks called Tencent (QQ), RenRen and SINA which are similar to facebook and currently has dominated the whole Chinese internet market, it seem to be the Chinese people cannot live without it. Although Facebook had launched a Chinese vision of Facebook in 2008 but this was not available to mainland China, (unless you are clever enough to use a proxy to get in) since then they still have not fully entered the Chinese market due to the Chinese government not giving a go a head permission. Can Facebook successfully enter the Chinese market? Or will the Beijing government probably be suspicious of the control of the ruling communist party that could be effected by the social network? Remember the hassle Google had with the Chinese authorities and they closed their offices and operated from the outside.

Mr Zuckerberg has the equivalent of 56.9 percent of the voting power (CNBC, 2012) with 28.2% of class B super shares and 30.6% of other class B shares, this means that Facebook is actually owned and controlled by him as well. The public will have no say in the governance of the company, does that mean the shareholder will benefit from Mr Zuckerberg's rule of the entire of Facebook? Well we have to wait and see then.

Recent studies of founder CEO firms show that their performance far exceeds that of non founder CEO firms. Founder CEO firms have higher capital expenditures, invest more in R & D, make more acquisitions and focus more on mergers. The valuation and operating performance of these firms have been found to be significantly higher. So I don't think that the new shareholders will have much to worry about.