The biggest IPO in tech history is appearing to be smaller than people thought according to a recent report from Bloomberg. With growth prospects for their advertising model raising warning flags, the company has been strict with their policy of not allowing revenue to get in the way of user experience.
To the all-important long-term investors, this is terrifying.
To the fast-moving investors who see Facebook as an opportunity to ride the initial wave of enthusiasm, it isn’t much better news.
There is little doubt that the stocks will start at one price and shoot up in the short term. There is growing evidence that the site will then experience a sell-off as a lower-than-expected amount of long-term money will be put into the company. Facebook will need to rely on sustainable growth if their shares are to exceed the initial boom of the first month or two on a 12-18 month stretch. If not, this could turn into the worst IPO in tech history.
For their part, the overall numbers aren’t too bad. First quarter sales climbed 45% year over year but did not grow as fast as 4th quarter 2011. Marketing costs are increasing (a side-effect of the IPO talks) causing profits to fall 12% to $205 million. Still, the company is in control of its own destiny. It won’t matter to them as a company where the stock prices rest, at least not for the first year. The infusion of cash will be enough to keep innovation going and give them the ability to make big moves such as buying Bing.