May 11, 2012

The Bubble burst [131/365]

It's officially the largest gift of money that any IT Company has got so far. And naturally as it comes, has attracted more than it's share of brickbats.

A couple of days ago, I blogged about how the IPO could be a fantastic mistake or an accidental triumph, a lot of people thought I could have made the wrong judgement. But as it's owner in his hoodie and his grand PR team begins to whip up the markets into a frenzy, it's the moment of truth.

The most important questions that face the social networking company are:
  • Valuation: The social network is aiming for an IPO at $28-$35 a share, for a value of up to $95 billion. But as a *Breakingviews analysis shows, sanity resides at the low end of the valuation scale.
  • Governance: It could take decades or only a few years but the overwhelming control investors are ceding to the 27-year-old Facebook founder will eventually cease to be in their best interest.
  • Dependence: It’s not just social networking junkies that are hooked on the firm. Businesses such as Zynga have been created on its back. Bankers are pegging their careers on floating the firm. And California needs the impending IPO to help close its yawning budget gap.
With remarkable dexterity, Mark has made investors fall in love with a company of 900 billion users. So at $35 a share, the moolah is good not only for Mark but for his country too.

Behind the facade, facebook is just a company built on consumer addiction. A recent article by Forbes predicts how companies like Google and facebook will completely disappear in the next five years. No doomsday prediction this, but some hard facts here.

This is not a kind of news that many would click 'Like' to, but for a company that is preparing one of the largest IPO coups of the world, this could be Reality!

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