Facebook’s initial public offering, plagued by trading errors and a 16 percent drop in the share price, will push more individual investors out of a stock market they already distrust after the financial crisis.SAN FRANCISCO – Facebook is baring its business soul.
The unveiling came late Wednesday when the company that depends on people to share their lives online filed its plans to raise $5 billion in an initial public offering of stock. As with almost anything crafted by a bunch of lawyers and bankers, the 197-page prospectus that Facebook filed with the Securities and Exchange Commission is filled with boilerplate legalese and mind-numbing numbers.
But there were some juicy details in there, too.
Above all, the documents confirmed what everyone had been hearing: Facebook is very profitable and getting stronger. The company Mark Zuckerberg started with some friends in 2004 has seen its annual revenue soar from $777 million in 2009 to $3.7 billion last year. Facebook’s earnings have grown at a similar rate, ballooning from $122 million in 2009 to $668 million last year.
Facebook ended 2011 with $3.9 billion in cash. That’s a relatively small amount compared with the nearly $45 billion that Google Inc. has in the bank.
Facebook’s prosperity has been fueled by a steady expansion of its audience, making its website an attractive marketing vehicle for ads, which account for most of the company’s revenue. Facebook ended last year with 845 million users, up 39 percent from 608 million at the end of 2010.
Facebook has become so addictive that more than half its audience – 483 million users – log in every day.
Facebook’s revenue total disappointed some. One reason: The company generates about $4.39 in revenue per user.
“That is a surprisingly low number,” said University of Notre Dame finance professor Tim Loughran, who studies IPOs. Google’s annual revenue of nearly $38 billion works out to more than $30 per user of its services.
