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One thing about Facebook is that Facebook doesn’t need the money that Facebook is raising in the Facebook IPO that Facebook just filed. (Did you hear?) It’s got almost $4bn in the bank and it can’t even be bothered to pretend that it’s got any plans for what to do with more:

The principal purposes of our initial public offering are to create a public market for our Class A common stock and thereby enable future access to the public equity markets by us and our employees, obtain additional capital, and facilitate an orderly distribution of shares for the selling stockholders. We intend to use the net proceeds to us from our initial public offering for working capital and other general corporate purposes; however, we do not currently have any specific uses of the net proceeds planned.

And while the selling shareholders undoubtedly will be happy to be able to sell in the open market, they can kind of do that now, with robust SharesPost and SecondMarket trading at high-eleven-figure valuations. Basically Facebook is IPOing because it’s got so many shareholders that it is legally required to register so might as well raise a few yards of rainy-day money while it’s at it.

When that’s your posture – and, to be fair, when people are beating down your door to buy your stock – you can be pretty, pretty cavalier with shareholder rights. What that means here is a two-class share structure (insiders get 10 votes per share, the public gets 1 vote), a board of directors that is not required to be independent, and Mark Zuckerberg controlling 57% of the voting power of the shares (while only owning 28%) via really quite all-encompassing voting agreements with current investors, some of which last until he dies. If your theory of public corporations is “they should be controlled by and for the benefit of the public shareholders,” this may trouble you. If your theory is “I’d follow Mark Zuckerberg anywhere,” then, carry on.

Other things to know or avoid knowing:

– Morgan Stanley is lead left, JPMorgan is #2, Goldman a miserable #3, and BAML, BarCap and Allen & Co. also named in this filing. (Expect more to come.) As a capital markets geek I was impressed that Morgan Stanley is sole “representative” of the underwriters, which means that they have the right to waive the lock-up agreements that limit sales by Zuckerberg and other inside/selling shareholders for 3 to 18 months. It is good to be a “representative” because if the stock runs and the selling shareholders want to sell more, they have to get your permission – which means you are pretty much guaranteed a bookrunning slot in the next deal. Banks push hard to be representatives and cutting out JPM and GS shows Zuck’s desire to keep outside interference to a minimum.

– As a consolation prize, Goldman has about 66 million shares that it apparently bought at a $50bn valuation. At $75bn that gives GS a profit of around $190mm on shares owned by GS Group and almost $700mm on shares owned by its funds (on which it gets 5% of profits, so another 35 bucks). Better than the IPO fees I guess.

– There are 845mm monthly active users and “100 billion friendships.” Dealbreaker’s crack team of analysts calculated an average of 118 friendships per active user. But then I was all – wait, what is a friendship? Like, if I am friends with you, is that one friendship (per natural use of the term), or two (because it increases each of our “friend” counts by 1)? If the former, then the average Facebook user has 236 friends; if the latter, 118 (right?). This is a very important valuation metric for me.

– Speaking of valuation metrics, pre-money diluted EPS is like $0.43, which at $40/share (around $75bn pre-money) is close to a 100 P/E, which is probably too low or something. (Is P/E a thing?)

– Financials include $3.7bn in revenues and $1bn (exactly!) in net income; growth rate for users, top line and margins are all slowing from super-fast to just regular fast so second derivatives whatever. Also 12% of revs are from Zynga, so keep buying those shiny tractors.

– But what about the dark side? Specifically, that “Facebook undoubtedly costs employers billions of dollars a year in lost time.” Billions!

– Zuckerberg will be mind-manglingly rich, but you knew that. Something like $28bn / #9 in the world. But “In the first quarter of 2012, our compensation committee discussed and approved a request by our CEO to reduce his base salary to $1 per year, effective January 1, 2013,” so that’s nice.

– Could be NYSE, could be NASDAQ, none can say, but the ticker will be the obvious FB rather than the far superior LIKE.

– The Winklevii are gonna be centimillionaires. Larry Summers dislikes.

In conclusion, Facebook.

Facebook [SEC]

Facebook Files for IPO [WSJ]

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Show all comments

80 Responses to “Facebook Facebook Facebook Facebook”

  1. Groupon says:

    I bet going public even though you don't need the money is the NKI.

  2. Chandragupta says:

    This reads like a typical BB research note, well done Matt ! CFA paying the fuck off

  3. login says:

    allright waiting for one of the lights out moon ascending etc etc guys on this one..

  4. J Gorman says:


    The Best Ships are Friendships

  5. Guest says:

    Paraphrasing the first 3 lines of Zuckerberg's letter: Facebook was never supposed to be a company. We have a purely social agenda. Investors need to understand that.

    Check. Put me down for 10,000 shares.

  6. ThatsVVacc says:

    Matt Levine
    Matt Levine
    Matt Levine
    Matt Levine

  7. unreal says:

    I guess this is truly the end…….America's most amazing company. Literally produces billions from nothing. Not a maker of things, doer of things, even bankers can create great and useful things. But this? If this does not call the absolute top of the market in America, I dont know what would. Seriously, its time to short the entire country/market/everything. is there a nice mutual fund for that?

  8. Guestest says:

    100 Billion is the new million…
    – Dr. Evil

  9. Ken Lewis says:

    Wow…..Bank of America really does suck

  10. McKinsey says:

    Our Social Media Tycoon benchmarks would suggest Facebook is 25% overstaffed, and should call us immediately to assist in the right-sizing.

  11. Guest says:

    1: FB goes public at ridiculous valuation
    2: Short FB
    3: Start Occupy Facebook
    4: ?
    5: Success

  12. Mitch says:

    Malkovich Malkovich Malkovich

  13. HandiCapital says:

    Hey Matt, nice headline… But you only need to say "Facebook" three times to summon Zuckerberg out of FarmVille to lounge around your house wearing Adidas sandals and make supportive statements like "Don't worry Matt, your readers are dumb fucks".

    Oh, and the article wasn't half bad either.

  14. RestrictedCash says:

    Yes, no, no, yes, yes, yes, nooooooo. Somebody poke me or check-in!

  15. Fuckerberg says:

    My posts get around 45,000 likes, that's all the love i need.

  16. MIT says:


  17. gselevator says:

    Let's get one thing straight. Mark Zuckerberg is a fucking loser.

  18. - 2.5 says:

    Do you know how to post videos to facebook ??

  19. Sleeper says:

    The North Face says 'cool, calm and collected.' The facial expression says 'I just soiled my drawers from the brunette rubbing up against my leg.'

  20. Kim's Checklist says:

    Ray J – check
    Reggie – check
    Kris – check
    Tebow – rejected!
    Zuck –

  21. Guest says:

    Has anyone done due diligence on the brunette in the middle?

  22. VonSloneker says:

    “100 billion friendships" mentioned in the same breath as income statement metrics. I just flashed back to an embarassing research note I wrote in the 90s. Stop Zuck before it's too late…

    – Eyeballs, Pageview & CPM

  23. guest says:

    Still want proof of CFA results MATTY BOY!!!

  24. Sloan says:

    Nice babe to the left of Zuck

  25. Beleaguered Tables says:

    But in the ultimate "fuck you" to MS, Goldman received the highly-coveted Lead Left position in Matt's tags

  26. Mehmet says:

    I invested all my monies in Facebook when Ismail YK made a music video dedicated to Facebook that involved ninjas, a tidal wave, and a last minute escape of a flooding NYC on a helicopter. Facebook Facebook.[youtube 0V9YsjSJmZY http://www.youtube.com/watch?v=0V9YsjSJmZY youtube]

  27. Kevin Waspi says:

    Remember, Mark is not a "material" type of guy, so that's why he has no problem with 57% voting authority with 28% ownership!

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