On Friday May 18, the FB ticker finally started to trade at Nasdaq OMX. The 3rd largest IPO in US created social media frenzy and despite critics from the financial market 82 million shares where traded the first 30 seconds.
I love Facebook and use it daily to connect and communicate with friends and colleagues worldwide. But I have been skeptical to the company’s IPO since the rumors of going public started. Being a successful social media company with 800 million active users doesn’t automatically makes a good investment story.
Where Facebook (and many listed companies as well) fail is to answer the most fundamental questions from investors:
- Where does your revenue come from, today and within 5 years?
- What are your financial targets and strategy?
- What investments are needed to meet the targets and how will they be financed?
For an open IR communication?
To my initial liking, Facebook had chosen to complement the 240-pages prospectus with a 30 min long video featuring CEO Mark Zuckerberg, VP Product Chris Cox and COO Sheryl Sandberg and CFO David Ebersman, all explaining their Mission, Products & Platforms, Advertising, Finance and the Company’s future.
Being a social media company you would expect some innovation and for me the video is far more interesting, easy accessible and shareable than the PDF Prospectus.
The positive aspects of the video is that all persons are very comfortable in front of a camera, which not always is the case when it comes to top management. They all give very detailed and trustworthy explanations of the products, platforms and users.
But to my disappointment, only a few minutes are dedicated on from an IR-perspective the most important part; presenting Finance and Business model. And my three questions mentioned above remain unanswered.
Investors have since the IPO was announced questioned Facebook’s revenue model and advertising offer to companies. That GM two days before the IPO announced that they pull back their Facebook advertising, just confirms that this is the weak link in the company’s investment story.
Facebook could if they wanted have used the video format more effectively to explain their revenue generator and proactively answering questions that analysts and investors have been asking.
A couple of hours before the IPO, Facebook launched their IR website. I thought the site would provide more information about their investment story. But the website is more or less empty, reminding very little of the IR-site of the largest tech company in the world.
Yes, I am impressed about Facebook as a social network, but when it comes to their investment story and investor relations I am so far quite disappointed. I wonder if CEO Mark Zuckerberg’s statement “for an open and connected world” includes investors and financial transparency?
The FB IPO have been very well covered in social media, below you a selection of interesting stories:
CNBC: Facebook IPO: Big Volume, But Little to Show For It
NY Times: The Facebook Offering: How It Compares
Infographic: Facebook’s IPO By The Numbers
