Facebook: $100 Billion Company?

Facebook has revealed the target price per share for its initial public offering, in the range of $28-$35 per share, which would give the company a value of $96 billion. The lead underwriters are Morgan Stanley, J.P. Morgan Chase & Co. and Goldman Sachs, with additional participants including Bank of America Merrill Lynch, Barclays, Allen & Co., Citigroup Inc., Credit Suisse Group AG and Deutsche Bank. While only a relatively small portion of shares are actually going up for sale -- totaling perhaps $13.6 billion -- the IPO will gauge whether the market agrees with the overall valuation.

Given the huge buzz, qualifying as its own discourse, about the importance of Facebook and social media in general, a favorable response to the IPO seems likely. Still, a reasonable person has to wonder if Facebook is really worth a pile of money which, if counted out in $100 bills, would weigh 1,056 tons and occupy a volume of 1,085 cubic meters.

One way to approach the question is to compare Facebook, with 2011 revenues of $3.7 billion and profit of $1 billion, to some other big companies with valuations in a comparable range. On that note, I will put the question to people who are probably more business-savvy than myself. So do you, gentle reader, think Facebook is worth more than...

ConocoPhilips, the third-largest U.S. oil company, with a market capitalization of $69.44 billion, 2011 revenues of $251.2 billion, and profit of $12.4 billion?

Ford, the country’s second-largest carmaker, with a market capitalization of $42.2 billion, 2011 revenues of $128.2 billion, and profit of $8.8 billion?

General Motors, the world’s largest carmaker, with a market capitalization of $35 billion, 2011 revenues of $150.3 billion, and profit of $7.6 billion?

Hewlett-Packard, computer and technology company, with a market capitalization of $48.4 billion, 2011 revenues of $127.2 billion, and profit of $9.7 billion?

Citigroup, the country’s third-largest bank, with a market capitalization of $95.2 billion, 2011 revenues of $78.4 billion, and profit of $11.3 billion?

Boeing, the world’s largest aircraft manufacturer, with a market capitalization of $57.8 billion, 2011 revenues of $68.7 billion, and profit of $4 billion?

Archer Daniels Midland, the agribusiness behemoth, with a market capitalization of $21.8 billion, 2011 revenues of $81 billion, and profit of $2 billion?

Dow Chemical, the world’s second-largest chemical manufacturer, with a market capitalization of $38.8 billion, 2011 revenues of $60 billion, and profit of $7.8 billion?

Kraft, the food titan, with a market capitalization of $69.9 billion, 2011 revenues of $54.4 billion, and profit of $4.5 billion?

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1 comment about "Facebook: $100 Billion Company?".
  1. Khalid Low from Reindeer Company , May 4, 2012 at 4:03 p.m.
    This is not a question of valuation but capitalism and how the market is controlled. FB will raise money from people (with price manipulations & speculations from Wall Street) and when it fails (hopefully not) both Wall Street and FB founders, investors & the usual top dogs will end being very rich as is always the case. And if it happens to be as big as GM or Citi Group or Ford then they will be rescued by tax payers money (né Socialism) as we've seen in the past. Now back to digital advertising (and monetizing) as I digressed a little (ok maybe a lot). FB’s value is clearly there especially with the timeline format which when harnessed by a corporation can become the actual marketing voice they are looking for i.e the one stop shop for consumers and current customers looking to know more or find out about a specific brand as well as have a conversation about any topic/issues. That is FB’s value. The question of value based on IPO is subjective and in the end it is the under writers that stand to gain the most (as is always the case) with the media harping on about value, job creation, wealth created and impact on economy etc. The question you should be asking here Eric is FB’s value (not necessary monetarily) to advertisers, consumers and brands now that it is about to go public.