IPOs, Initial Public Offerings: pre & post IPO

Facebook punts, stalls & trips down the IPO path

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Today’s Facebook (FB) filing [S-1] with the SEC raises several questions.

  • Can FB reinvent itself at this point?
  • Can FB manage its income statement with a focus on costs?
  • Can FB even be classified as a growth company anymore?
  • Is FB worth 50 times last year’s earnings?

Looking at March 2012 quarter results, where’s the growth?

  • Operating income and net income are both the lowest in six quarters
  • Net profit margin is by far the lowest in seven quarters
  • All major income statement metrics are down comparing FB’s March 2012 quarter with the December 2011 quarter, which yes is seasonally high, however…

And because FB is in the pre-IPO quiet period
FB/Zuckerberg can’t say anything other than ‘trust me’

As the old Wendy’s commercial said ‘where’s the beef?’

Compare March 12 qtr with Dec ’11 qtr

Sept 10

Dec 10

March 11

June 11

Sept 11

Dec ’11

March 12

Red Flags

Revenue ($mm)

$467

$731

$731

$895

$954

$1,131

$1,058

Down

Change from previous qtr

8%

57%

0%

22%

7%

19%

-6%

Operating income ($mm)

$216

$437

$388

$407

$414

$548

$381

Down

Change from previous qtr

-1%

102%

-11%

5%

2%

32%

-30%

Operating income % of revenue

46%

60%

53%

45%

43%

48%

36%

Down

Net income ($mm)

$131

$251

$233

$240

$227

$302

205

Down

Change from previous qtr

2%

92%

-7%

3%

-5%

33%

-32%

Net income % of rev

28%

34%

32%

27%

24%

27%

19%

Down

Change from previous qtr

-6%

22%

-7%

-16%

-11%

12%

-27%

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