Tuesday, January 31, 2012

Facebook’s IPO pokes back

This week’s sign the apocalypse is near comes from the front page of the business/tech section and not from the usual suspect, the news section. Well, unless you live in Silicon Valley, then it’s often both, as is in this particular case. You see, Facebook’s inevitable IPO is quickly approaching, and many onlookers see it as the first volley in a whole new tech bubble. The tech community hasn’t had its collective panties in this much of a bunch since 1999.

While numbers are difficult to project in this “quiet period” in front of the stock offering, strong buzz on the street says we can expect $10 billion to be instantly raised, bringing the total valuation of the company to about $100 billion.

$100 billion.

That’s a lot of acres in Farmville, pokes to old high school friends, and status updates ranging from boring to boorish.

Facebook’s celebrity entrepreneur Mark Zuckerberg has been hesitant to go public in the past, and for pretty good reason. First, who wants to invite the scrutiny of Wall Street and its expectations? Moreover, who wants to share so much money when it could be all mine, mine, all mine (insert maniacal, evil laugh here)?

Of course, employees what some of those riches too, and speculation abounds as to that being the root of this week’s activities, and for good reason. When Facebook stock starts trading publically, fully one-third of Facebook’s 3,000 employees stand to become instant millionaires. At the same time, we’ll see a double-digit increase in number of the world’s billionaires.

Millionaires and billionaires, $10 billion and $100 billion. Before long, we start talking about some real money, huh?

Who knows what happens to the stock after it goes public. It will certainly be interesting to see its revenue streams fully disclosed, as well as its sure-to-be-staggering profitability. Who’s to say it’s not a $100 billion dollar company. But, what does that mean, anyway.

As a comparison, as of today the top of the corporate valuation mountain sees Apple and its market capitalization of $425 billion, with Exxon Mobil trailing along with a paltry $401 billion (note: market capitalization is simply the number of shares outstanding multiplied by the share price, and is a true representation of a company’s valuation, or worth). What’s notable is that both Apple and Exxon make something tangible and have lots of assets. Exxon alone carries almost $200 billion in Property, Plant, and Equipment on its Balance Sheet.

Compare that to Facebook, already 1/4th the size of the biggest of corporate titans. From outside, looking in, what exactly is it? 3,000 employees sitting at 3,000 desks, with a piece of real estate in cyberspace that is exactly like everyone else’s piece of cyberspace real estate, only much more visited. More visited to the tune of 800 million active users, with over 400 million of those hitting the site every single day, sharing 900 million objects that other Facebook users interact with.

Damn! And I thought the dollar amounts were big.

So, that’s what it has become. Our Facebook addiction has really grown into quite the beast, as well as a monkey on some of our backs. It’s not just a time-suck that destroys our relationships with the real people who live and work with us every day while we superficially keep up with the “friends” we haven’t actually seen or spoken to in decades, it’s actually the fuel that drives the engine that is destined very soon to be one of the most valuable companies on Earth.

It’s enough to make one stop playing Mafia Wars just long enough to ponder the next technology apple that will be piled on the technology apple cart, for that’s just what we do – pile on the apple cart. Soon, very soon, the valley will be rife once again with unshaven, T-shirt and jeans clad techies and entrepreneurs, all riding Razors and Segways to work, raising money on the shakiest of business plans - and sometimes just a catchy name, logo, or mascot - pandering to the get-really-rich dreams of the American and international venture capitalist.

Don’t believe me?

Three words.

Pets. Dot. Com.

Like we didn’t see that one spiraling down the toilet from day one. Well, I mean we would have if we had bothered to think about the folly of buying heavy bags of dog food and having it shipped to us instead of just stopping by the store and buying it cheaper and taking it home that same day, when our dog was hungry.

Facebook is truly an international cultural phenomenon and a true Americana example of entrepreneurism and risk taking, and who am I to begrudge that, even if I am just a wee bit jealous and can’t help but think, “Why didn’t I think of it, and why didn’t I think of it first, and if I did think of it first, why didn’t I do something about it?” No doubt, it’s here to stay, and stay in a big, big way.

But, what of the pretenders that follow, the other apples on the apple cart? One thing history illustrates is that apples tumble from upended apple carts, and they not always Apple, if you know what I mean. Do you have your shrewd investing eye, and wallet, on technology stocks? While there can be more than one, there usually is only a select few. Buyer beware the rest, particularly those not in first, for eventually someone holds the Pets.com bag and it’s filled with you-know-what.

Of course, I guess I could be wrong, as it’s just this guy’s opinion.

If you can’t find me on Facebook, hit me on Twitter @RayHartjen.

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