Consider This BEFORE Buying Facebook IPO
The announcement and coming due date for the Facebook IPO have been making headlines for some time now. Speculation of its rise/fall, and of it’s silicon-valley-bubble-like qualities have all been well documented. There are 3 key factors to consider before turning your life savings into Facebook stock options: History, Human Rights, Anti-trust FTC investigations.
History -is it repeating?
The old adage of “history repeats itself” certainly seems to play true for most major events to a certain extent. “What goes up must surely fall” -to an extent anyway. When you consider Facebook’s positioning in the business world it’s certainly easy to get overwhelmed by the staggering statistics of it’s user base. Facebook has nearly a billion active users, and more importantly Facebook stands as one of the most frequented and longest duration of time spent websites, in the history of websites. With its fledgling advertising program, Facebook brings in a large amount of revenue ($4.25 billion in 2011). However, with global public investors, Facebook will (much like Google) be forced to come up with new ways and features to keep itself in the black heading into the future. This Initial Public Offering (IPO) forecasts to raise about 16 billion in revenue. That’s quite a chunk for new innovation and development purposes. However, as with the Microsoft, Google, Myspace, and so many other Tech boom public offerings, the once loyal developers and employees who created Facebook will become instant millionaires (perhaps billionaires), going on to retirement or to start new ventures, leaving a void of talent which will need to be filled. As a positive however, this influx of cash will certainly give a short term boost to the Silicon Valley, with new recruits and talent being needed for fresh jobs, additionally over a billion in projected tax revenue for the state of California.
What’s the Human Cost of all this?
An often overlooked facet of this IPO and it’s projected revenue is Facebook’s plans to tackle the Chinese social media markets. Facebook is wagering it can capture the “lion’s” share of that emerging and billion+ user marketplace. Unfortunately, that hedge bet has cost investors before, most notably with Google (damn that history lesson). Google all but gave up on China because the Chinese government wanted Google’s willing censure-ship of activities pertaining to Human Rights violations it was committing against Tibetans and other citizen groups. As well as monitoring and tracking of its citizens’ online search histories and activities, and confining available web content to government approved sources -The Great Firewall. Which would’ve been not only unethical by Western standards (think SOPA and PIPA, and Google’s notorious online protest), but could have likely damaged Google’s brand image.
China is militant towards freedom of expression, and personal privacy is not a right. Aside from requiring adherence to its unethical “Great Firewall,” if the government required(demanded) information about activists or other citizens would Facebook divulge? If Facebook is to truly be a global player in the Online Markets, they need to better define their stance on public privacy, business ethics, and human rights before it loses public perception. Facebook has already come under fire in the States from the Federal Trade Commission for its questionable and confusing Privacy Policies which blur the lines of “private information” and “information -about you.” If you can figure it out, good for you! The FTC is requiring an independent review of those policies every 2 years for the next 20 years!
What’s this about Anti-trust investigations?
Recently Facebook made headlines ’round the world about its high profile acquisition of the mobile photo sharing app Instagram. Details are still murky but it appears that Mr. Mark Zuckerburg (CEO, Facebook) may have been the driving force and sole negotiator on that deal, against and behind the board of directors. Acquiring companies to add to your corporate collective is not new or questionable. However, rumors are coming to light that Instagram initially approached that other social media giant Twitter with the purchase offer. The unconfirmed numbers for that offer, while unsigned, were roughly 500 million dollars. Accordingly, if it could be proven that Facebook put forth such an astronomical amount to purchase the app out from under Twitter in a bid to snuff out the competition, an Anti-Trust-law infringement may have occurred. Microsoft was known for this practice rather notoriously as it came under fire for Anti-Trust investigations in the 1990s, and its Stock prices suffered in correlation. If Facebook endures a grueling FTC investigation how would it’s stock fare?
Conclusion and Opinion
As we’ve covered here, the Facebook IPO stands to be another highlight in history of the often tumultuous and troubled technology segment. History would certainly suggest money is to be made. However how much, and for how long, is really anyone’s guess. Certainly key factors to watch for would be any announcements regarding Facebook’s Chinese endeavors, and news about the Instagram purchase and possible pending investigation. Personally, I’d buy in and get out quick -as a stock such as this will be rather volatile. But if Facebook play’s it’s cards just right we may be witnessing the next Google or Microsoft stock boom.