Facebook IPO signal to Russian internet companies
With 830 million users, Mark Zuckerberg and the co-founders intend to sell up to 12% of the company and raise $10bn, making Facebook one of the most valuable companies in the world.
The placement could push the company’s value up to $100bln beating Disney, Amazon and McDonalds, with Zuckerberg worth up to $25 billion.
Only three other US companies have managed IPOs over $10bn – Visa, AT&T and GM. The biggest internet IPOs so far has been Google at a paltry $1.6bn, and Groupon at $700mln
However, Groupon and Pandora who IPO’d last year are trading below their opening prices and other internet companies below their offer prices. Experts are warning the same can happen to Facebook. Even thought its year on year growth was close to 25%, they say it is unlikely the trend will continue. There’s simply not enough audience for the social network. And slower growth won’t mean higher stock valuations.
"The way Facebook doesn't want to disclose all of its proceeds, it makes us, investment people a little bit cautious about its ongoing IPO," says Vladimir Rozhankovsky, Head of market research at Nord Capital.
"We don’t now how much it proceeds through so-called context advertisement which is right now the main source of revenue for companies like this. The question is, whether Facebook would be able to covert this huge traffic into a cash flow in a future cash flow, it is a big if".
In Russia there are over 4 million Facebook users, including the Russian political and business elite who don’t only “friend” but also invest.
Digital Sky Technologies is an internet investment firm headed by Alisher Usmanov and Uriy Milner. The group owns Russia’s oldest and largest e-mail service Mail.ru, and has a 2.38% stake in Facebook.
“The upcoming IPO may affect the price of Mail.ru group. The initial placement will give Facebook a lot of liquidity. Its followers from the high-tech market will be challenged with their IPOs at such high stakes,” says Ilya Rachenko, Investcafe analyst. “It should be the beginning of the end of the mini-bubble in internet companies. Mail.ru group will have a chance to cash in on the placement. The company will receive huge returns from investing in Facebook.”