Wednesday, July 17, 2019

Facebook Case Study Essay

EXECUTIVE SUMMARYA starchy that has been floating on the filiation exchange has been take awayed and prised and the firm I sire chosen was Facebook. In my report I hand included the recent write up of Facebook as to how the accessible ne devilrking pose started and the developments from the submission until recently.I further more than(prenominal) went on to pass judgment the seed of pay with a design explanation as to what root of pay is and the different type of sources getable to trading i.e. perfectly name , medium experimental condition and farsighted limit. This explains the type of finance none need starting from twenty-four hourslight to twenty-four hour period transactions to long term buying of assets and investments.After my understanding of what sources of finance are, I done some re appear on Facebooks source of finance and came to a expiration that the firms sources of finance is long term source of finance as they earn currency by fate s( initial familiar wrap upering).The intellect for Facebooks floatation was simply because at the time they decide to go public the firm was already set as one of the exit companies around, besides even though the firm was extremely requiremented in that location was still electro nix stories about the firm.Facebook continues to grow and to try and deliver the 200 million users entertain in that respect are at once talks of a Facebook telephone that is due to be released this year. foundation garmentI am required to select a firm that has floated on the pullulate exchange in the last 4 years analyse and critic onlyy evaluate the firms decision to go public. The firm I chose was Facebook and in my report I bequeath be discussing the following about the firm. new-make history of the smart setThe firms sources of finance/ bully building of the firmReason for flotationImplications of the flotationPerformance of shares since flotation approaching prospects for the fi rmRecommendations as to the future tense payABOUT FACEBOOKFacebook is a popular companionable networking blade billet whose name originated as a dub of directories handed out to university schoolchilds that aided in them getting to know their fellow students.The companionable networking site was invented by Harvard computer light student coiffure Zuckerberg, along with a few class mates. Facebook withdrawicially started off in October 2003 when Zuckerberg launched Facemash.com to allow visitors to compare pictures of two students and say whos hot and whos not. The website became popular as people enjoyed deprivation on the internet and checking out pictures of their friends.In January 2004 an article in the Harvard Crimson say that Zuckerberg registered the Facebook.com domain as he was now inspired by the success of Facemash. in short after the launch of Facebook the website eventually grew as it was now break awayed by Sean Parker (Former Co Founder of Napster) who i nformally advised the student on what to do, and by June 2004 Facebook received its starting signal base private investment from Peter Theil http//www.youtube.com/ gravel?v=ROrUea0gLlY, the founder of PayPal who gave $500 000 in exchange for 10.2% of the company. Sean Parker after became president of the fresh incorporated company Facebook.Facebooks domination move to grow until it became the second most visited web property online. In August 2009 Facebook acquired the actual time new aggregator site friends feed and in 2012 Facebook made a huge splash in the grocery store by acquiring instragam for some $1 meg.This year Facebook has introduced a graph search to help users find out more about their friends and connections. This feature lets you search by means of data shared by friends to discover people their interest, restaurants, more and much more. This is the set-back major step Facebook has taken towards competing with Google.SOURCES OF financeBusiness needs money to swear investment and finance their daytime to day activities. A company may consume to raise money internally (by retaining and investment profits) or externally.Each source of finance has a insecurity attached to it, the risk that the business provide not check the fiscal commitments related to the source. The mix of all the financial sources is known as the financial risk of the company. An essential requirement in facts of life finance is that business should join repayments and new(prenominal) expenses, as the fall due. This is by and large achieved by ensuring that on that point is a bully match in the midst of _cash inflow generated by the use of money and cash outflows to the servicing payments to the finance brocaded_.TYPES OF SOURCES OF pay.Short term finance- usually needed for a business day to day operations e.g. paying wages, fond club suppliers and so onThis is usually the cheapest one to use as it is easier for a change institution to asses le nding risk for shorter loan periods. Types of short term finance include the followingOverdraftsShort term loansTrade credit accumulated expenses and deferred incomeFactoringMedium term finance- This source of finance dope be utilize to finance the acquisition of Motor Vehicles, Machinery, Computers, etc. Three main types of medium term finance areHire PurchasesLeasing consideration LoansLong term finance- In finance the purchase of a stimulateing (major investments), long term finance would be appropriate. on that point are two alternative methods of raising long term financeDebt-Bank loans and BondsEquity-is an essential source of long term finance and consists of Preference shares, Ordinary Shares and Retained bread (internally generated cash flow).Equity finance is raised through the change of ordinary shares to investors and prat be raised either viaA new share initial public offering ,Placing or IntroductionA rights Issue.FACEBOOKS SOURCES OF FINANCE/CAPITAL STRUCTURE .Facebooks source of finance is the long term finance as the firm makes its money through sale of ordinary shares from investors such as IPO (Initial Public Offer) which is the first offering of shares to the world-wide public.The social networking site officially filed for an IPO on February 1 2012. The preliminary course catalogue declared that Facebook was seeking to raise $ 5 billion in investment at the time the company announced that they take aim 845 million users active on the site with close to 2.7 billion equals and comments daily.After the IPO, Mark Zuckerberg planned to retain 22% monomania stake in Facebook with 57% of take shares which was cherished by the underwriters as be worth $38 individually and set the company at 104 billion, the largest valuation eer to date for a new company going public.Facebook selected Morgan Stanley as the lead consultant for the IPO as the company had originally lead the IPO of internet terass like Group on, Zynga and diffe rent banks such as Goldman Sachs, Bank of America Merril Lynch,Barclays Capital and JP Morgan. gibe to AllFacebook , shares demand been actively trading between $25-$40 which gives Facebook a valuation of approximately $17000, more than Microsoft which was valued at $15000.Most of Facebooks trades takes come through secondmarket a company trustworthy for generating a market around typically illquid assets while while the value of the trades is unkown.While Facebook note is not the type of thing you can trade in a day due to the fees and time involved in transactions , except most investors see a great return in simply 6 months.BELOW IS A interpret WITH FACEBOOKS SHARE PRICE IN whitethorn 2012 WHEN FACEBOOK DECIDED TO FLOAT.GRAPH 1.1REASON FOR FLOTATIONThe reason for Facebooks flotation was due to the fact that the companys IPO was valued as one of the best amongst top companies.When Facebook made its long expected founding as a public company, the social networking company l inked up with the largest public companies in the world alongside Mc Donalds , Amazon.com and Bank of America. The wall street daybook reported that Facebook was prepared to file initial paperwork for an offering that could raise as much as $10 billion.As the intelligence service about Facebook spread worldwide and it later became the most popular and influential world-wide website, Investors now started to flock to acquire shares in Facebook.Articles stated that even though Facebook was valued a high charge at that place was still a debate indoors business and media circles on the true value of the company. The social networking site also made money through announce allowing other companies to advertise about their business on the website.In May 2012 Mark Zuckerberg and other executives began a lane show to influence institutional investors to buy shares before the flotation. integrity of the underwriters JP Morgan along with Goldman Sachs and Morgan Stanley were included in the road show.IMPLICATIONS OF THE FLOATATION FOR THE crockedEven though there is a great measuring of effort in the flotation of Facebook there are still some negative views on the social site. An article in the guardian called _Facebook flotation trinity reasons to distract it_ it states that Facebook is not worth $100 billion and that Zuckerberg has not put a price tag on his creations so its still early to say that he provide attempt to achieve that core when the flotation started.Below are the three reasons given in the articleZuckerbergs first letter to the authorisation investors was a grotesque dispatch. As it stated that Facebooks ambition was to build a service that gives people the fountain to share and help them once once more to transform many of the core institutions and industries.Facebook has no need to float as it does not need to invest as the firm is profitable and generates enough cash to comply its current objective.Zuckerberg is upholding control of Facebook by adopting a dual voting structure with him and investors.In response to the negative forwarding about the website , Facebook opposed by precept that the main reason for floating is to allowing long investors to cash in a serving of their winnings and to help Facebook grow. The float promoters were thusly seeking to emphasize that the investments obtained were potentially for a profitable ontogenesis and to play hatful the risk faced by the firm. transaction OF THE FIRMS SHARES SINCE FLOATATIONZuckerberg has called the stock implementation unsatisfying. The social networking leaders stock has preoccupied nearly half its value since flotation. more than $50 billion has been cut off Facebooks market value as the companys shares have fallen from $38 to $19.43. The CEO has mazed the most as the value of his facebooks holdings locomote more than $9 billion which questioned his skeptics and pretend his ability to lead a company.The performance of the shares has o bviously been disappointing and has caused some demotivated employees, however Zuckerberg motivated them and they studyd that things leave behind improve as time goes go on.After legion(predicate) up and downs and significant critics from the public the share prices started showed a highly volatile deportment with prices as low as $17.73. The potential performance of the company did not coin the investors and therefore had a impact on the company as a whole.In November 2012 Facebook shares has shown a significant rise in value reaching the highest price in months, As the value it continued emerging the company witnessed an increase of 15% each month to date.The major factor that has pushed the social networkings markets performance is the increase in investors self-assertion in the companys potential to earn a high revenue in the future periods. The self-reliance is directly linked to the change magnitude success of the performance as the come in of business advertising on the website increase which means higher revenue and higher revenue means higher returns for investors. incoming PROSPECTS FOR THE FIRMFacebook has and always impart be the king of the social media sites , as the site is still growing worldwide. To date the social networking website has more than 200 million registered users.Researchers believe that Facebook can evolve another google as they are also relying on advertising for their revenue.The social networking sites goal now is to raise a personalized digital paper through the newsfeed that has boththing a person would want to know about people. This leave be perfectly customized just for the users.Mobile will be the key to Facebooks future addition said the head of advertising as only 30% of users access through desktops and 70% through roving devices every day. A plan to invest a huge amount of money will be the target for Facebook in the future as talks on creating a Facebook smartphone continues.Facebook is also targ eting other continents like Asia, Latin America and Africa as users in these areas have grown by 33% each year.Even though they introduce the mobile device Facebooks ultimate goal willstill remain to get more users online and to improve current features that will keep current users entertained.CONCLUSION /RECOMMENDATION TO THE FIRMS FUTURE FINANCINGFacebook is available to everyone all over the world and there still huge potential for growth for the firm.My recommendation to the firm regarding their finance would be to focus on their advertising model, modify it and allowing business to advertise more on their website. By doing that they will do nurture their chances of doing better than search engine giant Google and revenue will increase which will benefit both the firm, current and potential investors. With the introduction of the new Facebook phone they have to ensure that the phones are better past other smartphones. Facebook has to earn the general publics confidence in the m by coming up with new ideas on their IPO, if the public is well-to-do they will invest more in the company. However with the introduction of the new phone I believe share prices will increase.

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