Facebook is going public and it's pricing itself at $96 billion. If the social-media darling actually pulls in that much cash at its initial public offering, it will make stock market history. But questions linger.
Facebook plans its IPO for May 18. If the company debuts at the near-$100 billion mark, it would be worth more than Hewlett-Packard , McDonald's and Amazon.com out of the gate even though it produces no products, has few physical assets and posts only a small percentage of its revenue as profit.
But Facebook's IPO could falter. The company has made some recent moves that are causing some to question the leadership. Then there are privacy concerns that could affect revenue, as well as questions about long-term revenue growth.
Red Flags Rising
We asked Rob Enderle, principal analyst at the Enderle Group, to offer his take on Facebook's chances to meet analyst expectations at its IPO. Like others, he's keeping a close eye on how recent events, including the leadership style of founder and CEO Mark Zuckerberg, might affect investor decisions.
"You certainly don't want to put a large investment into a company that is poorly led. Part of the problem is the Instagram acquisition," Enderle said. "Zuckerberg acquired a $1 billion company with 11 people without any board involvement or any help, really. So it creates the specter of an out-of-control CEO, and that's a problem."
Beyond the Instagram buy, Enderle also pointed to issues around revenue growth. Facebook revenue appears to be slowing. Others argue that consumers are growing tired of too many social networks. Will it put a damper on the IPO?
"It depends on what happens when Facebook finally goes public. Right now this is just a lot of noise but it's raising red flags and it doesn't take a lot for this market, which is pretty flighty any way, to decide to step back and wait it out," Enderle said. "It certainly doesn't make for a stronger IPO in any case. It creates the increasing likelihood that they may not have a strong IPO."
Zuckerberg's Character Questioned
Jeff Corbin, CEO of KCSA Strategic Communications, is a valuation expert and has been an investor relations professional for 15 years. He also has some thoughts on the Facebook IPO. The fact that Zuckerberg might -- keyword "might" -- show up at some of the roadshow events troubles him. He's also troubled by a few other issues. (continued...)