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.
{{/usCountry}}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.
{{/usCountry}}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.