What is Facebook worth Revisited - Latest Earnings Report - Employee Stock Lock-Up Expiring Shortly

Facebook released their financial results on Thursday.  Facebook’s  growth figures in their first quarter   as a public company following their IPO would have been impressive for most companies.  Nonetheless,    

Facebook stock took ­­ a  face plant following   the earnings release.  Below is a second quarter summary of their financial results. On Friday, Facebook closed at $23.71.  This gives them a market capitalization of $44.5 billion.  Click to enlarge the table.  CEO Zuckerberg may stay under the radar for the next several weeks.  

 

 The $95 to $100 billion  IPO pundits are taking a low profile.  Probably focusing on their tweeting.

In May, GreenCrest Capital’s Max Wolf felt that Facebook's  financial numbers suggested a valuation of $60 billion.  This is 37%   less than the $96 billion Facebook was thinking of.  His figure as of July 27, is off by only $15 billion, on the high side. 

Also in May,  Anup Srivastava, an assistant professor of accounting information and management, Kellogg School of Management, ran a valuation model and arrived at  a base case valuation  of $25 billion.  “This is based on the firm’s revenues reaching approximately $21 billion in ten years’ time from approximately $4 billion today, and the firm maintaining a high return on assets of approximately 20 percent.”   His model, as of July 27, is off by only $19 billion, on the low side.  The last link at the bottom of this blog leads to Srivastava’s original article in “Expertly Wrapped” an online publication by Kellogg faculty. This also provides  a link to his valuation model.  Discounted cash flow analyses can be a good thing!

As an amusing aside, average the two figures above by these individuals - $44.8 billion, off by only $0.3 billion !  A sample of two smartest guys in the room probably doesn’t qualify for wisdom of crowds status. 

Facebook will free up nearly 1.7 billion shares -  four times the number now trading,  beginning in August.  Provisions   currently barring  employees from selling their holdings will start.  Unfortunately for the employees, if they execute these immediately, they are taxed as regular income. 

Shares of online coupon purveyor Groupon Inc. declined 8.9% when its lock-up expired on June 1.  The stock dropped nearly 20% that week. Likewise, shares of online gaming company Zynga Inc. fell 7.9% when its lock-up expired on May 29. The stock price ended up falling    9.1% for the week.  Look for some sort of dip as Facebook employees start selling some of their stock,  and people continue accessing Facebook on their mobiles. No revenue for Facebook when they do this.

Real estate agents in Palo Alto,  Atherton, and Menlo Park (where Facebook is headquartered), are probably looking at Facebook’s stock price a lot more than mortgage lending rates. 

http://www.latimes.com/business/la-fi-facebook-shares-20120728,0,1045145.story

http://kensek.blogspot.com/2012/05/is-facebook-really-worth-96-billion-in.html

 

http://kensek.blogspot.com/2012/02/is-facebook-really-worth-100-billion-in.html

 

Avast Thursday Initial Public Offering Postponed

 From the Original Post - Updates at End of Blog

Antivirus software company Avast will have their Initial Public Offering (IPO) Thursday.  The ticker symbol will be AVST. The roadshow is about at an end! Palo Alto Networks' successful IPO Friday suggests that the IPO  market may be open again.

Avast plans to offer 9 million shares at between $9 and $11 each with this IPO. The price  may be tweaked on Wednesday. The lead underwriters for the IPO are UBS Investment Bank, Deutsche Bank Securities and Jefferies & Co.  Avast uses the freemium strategy for their antivirus software. Avast  develops anti-virus software, specializing in a free version of its product used by consumers. They then offer  upgrades that can be purchased.  Avast is number one in OPSWAT’s most recent world wide industry market share analysis for antivirus software. www.opswat.com

 

James Krapfel of Morningstar said Avast is going public at a time when “the company’s software is installed on 20% of the worldwide consumer and small business PCs.” Krapfel called Avast “a higher quality peer” to rival AVG Technologies AVG  with sales growing at twice AVG’s annual rate.

  

Below is a summary of some of their financial data, revenue, income, etc. Click on it to enlarge.

Avast’s freemium competitors include Avira, AVG Technologies, PC Tools, and Panda.  Microsoft offers a free version of antivirus but no paid versions.  The Avast current installed base in about 159 million. They most recently had 1.72 million downloads on www.download.cnet.com   last week.  

 July 29 updates - Avast was the most popular free  antivirus download on CNET  for the week ending July 29, with 1.69 million downloads.


Updates


 July 30 update - Avast was the most downloaded free AV product on download.com for the week ending July 29 with 1.69 million downloads.

July 25 update - Avast Software  postponed its IPO on Wednesday evening, citing poor conditions. 

AVG Technologies executive JR Smith told  the Financial Times on Thursday that the  IPO situation for CEE tech companies is likely to get worse before it gets any better. “We are a European software company and we are pretty close to what is going on here, and start-ups and those companies looking for additional capital investment will find it tougher for sure over the next 12 to 18 months.”

The Avast  S-1 filed with the SEC   can be viewed at the link below.   Informative reading.

http://www.sec.gov/Archives/edgar/data/1537133/000104746912007168/a2210121zf-1a.htm

 

For more information, go to

http://kensek.blogspot.com/2012/07/avast-files-for-90-million-initial.html

 

Is Facebook Really Worth $96 Billion in an IPO?

Facebook will be taking their IPO (Initial Public Offering) show on the road next week.  They’ll be visiting investment firms and banks to talk up the IPO and the figures developed by their “smartest guys in the room”.  Of course, these companies will be having their own smartest guys in the room listening to the pitch, looking at the numbers and trying to see if it makes sense.  Also, markets aren’t always rational.  Despite what the numbers say, when too many people are chasing too few shares and irrationality takes over, or when an IPO is priced  incorrectly, there could be a sizeable positive pop.

Moreover, blips in Q1 results are making some people nervous.  Q1 revenue was up 45% versus last year to $1.06 billion while net profit decreased 32% to $205 million.  Revenue growth in Q1 was up only slightly over Q4 2011. These are  not good things.  Other activities that have raised some concerns:

• Facebook agreed to pay $1 billion for Instagram, a company that makes it easy to share photos
• Facebook paid $550 million for patents filed by AOL and owned by Microsoft
• Facebook in March was hit with a lawsuit in March filed by Yahoo that alleged that Facebook   infringed on 10 Yahoo patents.  There are now 16 on the list. 

The figures Facebook filed with the US Securities Exchange Commission is to have an initial stock price   of $28 to $35 per share.  This would equate to a valuation of $70 billion to $88 billion. 

Sam Hamadeh of PrivCo thinks the IPO price will be between $38 and $40 per share.  "Facebook will mostly be given the benefit of the doubt ... but they still have a lot to prove," Hamadeh said.  "Especially after big IPO investors have been badly burned buying into the IPOs of Zillow, Groupon, and Zynga, all of which are trading well below their IPO prices.  They don't want to get burned again."

GreenCrest Capital’s Max Wolf believes that the financial numbers suggest a value of $60 billion.  This is 37%   less than the $96 billion Facebook is thinking of. 

Should Facebook go public at $28 share, initial investors like hi  tech investment fund FirstHand Capital would suffer an immediate paper loss.  They had purchased shares at $31 to $32 dollars and can’t sell their shares for six months after the IPO. 

BIA Kelsey’s Jed Williams stated that revenue would have to grow 41% annually over the next five years to justify Facebook’s   numbers.  This would suggest revenue almost 460% larger at the end of year five.

Morningstar believes that Facebook’s revenue would have to increase from 2011’s $3.7 billion with profit margins of 27% to $40 billion over the next six to seven years to justify the $96 billion valuation at time of initial public offering. 

According to Bloomberg - “Facebook is betting its growth prospects will persuade investors to pay 99 times earnings for its initial public offering, a higher multiple than 99 percent of companies in the Standard & Poor’s 500 Index.”

At the low end of the IPO range, Anup Srivastava, an assistant professor of accounting information and management, Kellogg School of Management has a base case scenario of $25 billion.  “This is based on the firm’s revenues reaching approximately $21 billion in ten years’ time from approximately $4 billion today, and the firm maintaining a high return on assets of approximately 20 percent.”

Different smartest guys in the room.  Different assumptions and models.  Different numbers.  And people are still trying to figure out how to value advertising revenue on mobile devices. The roadshow begins Monday.  Less than two weeks and then the IPO fun begins. I

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/05/03/BU3L1OD101.DTL#ixzz1twf3ZXjg

 

http://kensek.blogspot.com/2012/02/is-facebook-really-worth-100-billion-in.html