May 17, 2012

Update: Facebook’s historic Initital Public Offering (IPO) is set for this Friday, May 18th.  A very interesting video from Money.com is embedded below.

Originally post February 2, 2012

Will Mark Zuckerberg become a trillionaire?

Not quite.

Facebook has been at the center of most of our college experiences.  In college, you would find out about parties on Facebook. You meet a girl, go home, and Facebook her. You needed help on homework, Facebook someone in your class. It was a revolutionary social network for college and it has grown to take over the world.

This week marks the long and over anticipated IPO filing of Facebook.  The Facebook IPO could value the company at $75 to $100 billion.

An IPO stands for the initial public offering. It is the first time a company goes “public”. It allows any investor to buy stock and own a portion of the company. Some CEOs decide their company’s stocks pay dividends on quarterly profits; it is unsure whether Facebook’s stock will do that. (For example, Google and Apple stock pays no dividends.)

When Apple (APPL) filed its IPO, shares began at $22 per share.  Today Apple’s stock price is $456.48 per share. If you would have bought 100 Apple shares for $2,200, thirty years later they would be $45,648. That’s a return on investment of 1974%. That is cray!

An IPO is largely used by companies to raise money. However, Facebook is filing its IPO for different reasons.  Because Facebook has reached the maximum amount of private investors, it must publicly release its financial statements. This doesn’t necessarily force Facebook to go public, but it might as well.

With the Facebook IPO, Mark Zuckerberg stands to make $24 billion. Not a trillionaire, but that’s not too bad.