Expected Value

It is expected that Facebook, to be publicly listed as FB, is hoping to raise $5B USD in proceeds from its public offering.  This is substantially less than the previous reported $10B USD.  If the proceeds approach $10B, this will make Facebook the 4th largest IPO in US history behind Visa, General Motors and AT&T Wireless.

The lead underwriter is Morgan Stanley followed by JPMorgan, Goldman Sachs, Bank of America / Merrill Lynch, Barclays Capital and Allen & Co.  The offering is expected to take place in Q2 2012.

Under the 2005 stock plan, options and restricted stock units were granted to employees from 2005 through 2011.  The weighted average exercise price is $0.83 USD per share.  The low exercise price will generate a huge amount of wealth amongst hundreds of Facebook employees.

Financials

Revenue & Net Income / Loss
2011: Revenue $3.7B USD, Net Income $1.0B USD
2010: Revenue $1.97B USD, Net Income $606M USD
2009: Revenue $777M USD, Net Income $229M USD
2008: Revenue $272M USD, Net Loss -$56M USD
2007: Revenue $153M USD, Net Loss -$138M USD

With 1,883.9B outstanding shares and a net revenue of $3B, that’s $1.60 per share.  A valuation of $100B would yield a P/E Ratio (PE Ratio) of 60 – 65.

Facebook Payments have been an accelerating and very valuable aspect of their business.  Of the $777M in revenue for 2009, $13M came from payments.  2010 of $1.97B in revenue, $106M came from payments.  And in 2011, of $3.7B in revenue, $557M came from payments.  The balance of revenues are generated from advertising.

Marketing & Sales expenses are aggressively low.  Accounting for 12% of revenue in 2011 ($427M), $184M in 2010 or 9% and in 2009 $115M or 15%.  The large increase in spend, year over year, is due to increased headcount to support revenues.

Research & Development spend was 10% of revenue in 2011 ($388M USD).  2010 was 7% or $144M and in 2009 $87M or 11% of revenue.  The increase in spend was driven by new headcount.

Cost of Revenue hovers around 25% over the trailing 3 years.  $860M (23%) in 2011, $493M (25%) in 2010 and $223M (23%) in 2009.  This is largely driven by data center, networking and hardware expense.

Large Clients  Zynga is the only client that accounts for more than 10% of revenue — 12% for 2011.  In previous years Zynga accounted for less than 10% of revenues.  Zynga is expected to continue being a substantial revenue base until 2015 when their agreement to use Facebook Payments expires.

Capital Expenses The majority of Facebook’s Capital Expenses are encompassed in Capital and Operating Lease agreements facilitating cash flow.  This allows Facebook to maintain $3.39B USD in cash and cash equivelents.

Acquisitions have largely been immaterial to Facebook.  15 acquisitions largely for patents.  Total value of cash based acquisitions was less than $70M total.  Extensive stock grants were issued for the majority of acquisitions.

User Base

Facebook at the end of 2011 had 845M active users of which approx. 50% are active daily.  The majority of Facebook’s active users access the site via their mobile devices in addition to workstations (normal browsers).  This is becoming an increasing threat to Facebook’s revenues as the mobile site and applications on all platforms (iOS, Android, Blackberry) do NOT display ads.

100 billion friend connections as of YE 2011.  250 million photo uploads per day.  2.7 billion likes and comments per day.

Misc. Company Info

3,200 total worldwide employees or $1.156M in revenue per employee in 2011

Competition listed as: Google +, Cyworld in Korea, Mixi in Japan, Orkut in Brazil and India, and vKontakte in Russia.

Compensation:

Mark Zuckerberg – CEO: $500,000 Cash
Sheryl Sandberg – COO: $300,000 Cash
David Ebersman – CFO: $300,000 Cash
Mike Schroepfer – VP, Eng: $275,000 Cash
Theodore Ullyot – GC: $275,000 Cash

Zuckerberg owns 28.4% of all Facebook stock.  All other members of senior management own less than 1% each.