Facebook Inc went public last Friday with a big-bang initial public offering (IPO) of shares that valued the company at more than $104 billion (R566,600 crore). While the share on the first day of listing gained a mere 37 cents from its IPO issue price of $38 per share, there is little doubt that the clamour for shares led to a pre-listing frenzy.
Now, consider that at more than 122 times its annual earning, Facebook shares tower above Google’s price-to-earnings ratio of around 18. The Facebook IPO is clearly a case of pricing the distant future of company based on sheer potential — and a perceived one at that. Not surprisingly, tongues wagged.
A BBC producer called me up to ask: “Would you buy this share?” And I said: “Yes, in sheer gratitude.”
As I see it, the advertising potential of Facebook is in doubt as it could erode privacy of customers or make the site more intrusive. But I have had so much fun on Facebook in the past four years that I joke that more than future gains, I would be happy to buy some shares as payment for the pleasure I have had already.
At a serious level, I think there is some truth in this. The scramble for FB shares was in large measure to the fact that the IPO became something of a party that no one wanted to miss out on. My take is that customers of Facebook (there are 900 million users) felt an emotional connection — and this prompted them to want to turn share holders.
In his book The Third Wave futurologist Alvin Toffler coined the term “prosumer” when he predicted that the role of producers and consumers would begin to blur and merge.
I should think that the Facebook IPO may be ushering in the phenomenon of “shareholder-customers” — with a blurring of the divide between shareholders and customers. I like to call this category as “shustomers”. Based on old-world yardsticks of financial returns, there is a big if hanging on Facebook.