Private Corporations offers its shares to the public to allow their companies to raise capital from public investors. This phenomenon is called ‘Initial Public Offering (IPO)’ in the economy of investors. Facebook too had filed an IPO to possibly gain investment as it typically includes share premiums from the public.
David Sherman, professor at Northeastern University analyses Facebook’s IPO. According to him, there is a chance for the public to know about the finance systems of giant social networks like Facebook. It also reveals how strong and profitable the company is. With the growing net income, its cost structure and revenue makes it a remarkable platform with modest services. These services are made available with the growth in finance which was observed in its founder’s letter, Mark Zuckerberg which said
“We don’t build services to make money; we make money to build better services.”
Though the company’s structure and valuation are impressive, the investors will have to evaluate whether their money will be of any good result in the future. The public who plans in investing will find benefit from an 800-million member customer but the question of its performance will remain. It does not guarantee the growth in membership or increase in time spent by the user. It also does not confirm if the users will find any new services to increase and support their advertising.
One of the biggest developments in filing an IPO comes with the complete participation of the public investors in a private setup. Here, the shares are issued and will be traded publicly leading to Facebook’s financial performance becoming a public record. All its activities will be observed and readily tracked by the public which will also know about its growth and business. It will further accelerate communication between the private server and the public.
Akshara Palshetkar