Facebook IPO: The Complete Guide

Facebook took social media by storm on Wednesday after the company filed the preliminary prospectus for its long-awaited initial public offering. The company is seeking to raise $5 billion.

SEE ALSO: Facebook IPO: Reactions from the Social Web (and Zuckerberg)

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Still not sure what all of this means? If you haven’t already had a chance to read the document, we’ve embedded it below. For a breakdown on everything you need to know about Facebook’s IPO, read further.

Facebook S 1

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Inside Look


Within the document, some huge numbers about the company were revealed — from 845 million active users, to 2.7 billion daily likes and comments.

After initial news of the filing broke, a more extensive look at the document reveals hard evidence of the company’s business, growth, competition and a bit about what’s in store for the future. Certain terms, such as “advertising” and “mobile” appear more than 100 times throughout.

Advertising: 123

As we learned by reading the S1 document, Facebook relies heavily on advertising for revenue. “Advertising” comes up 123 times, matched only by “Mobile” (also with 123 mentions). Interestingly, Facebook is not really making much money from mobile but still considers it a key component for future development.

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However, there is one thing missing — Facebook did not include how many shares it plans to sell, or the price, but that information will be added before it hits the market, likely this May.

The several-hundred-page document is some heavy reading, but Facebook also used illustrative screenshots and diagrams to explain its business mission and how it plans to raise $5 billion.


Salary


Facebook CEO Mark Zuckerberg pulled in a base salary of almost $500,000, and COO Sheryl Sandberg and CFO David Ebersman both made $300,000 each.

However, these executives are earning a lot more than just their base salary. Sandberg was the highest-paid employee at Facebook in 2011, raking in a total of $30.87 million when you include stock awards.

Zuckerberg’s total earnings were $1.49 million — $700,000 of which was in costs related to private plane use “chartered in connection with his comprehensive security program and on which family and friends flew during 2011.”

However, since he owns 28.4% of the company, he is worth significantly more. Zuckerberg’s salary will fall to $1 annually, starting Jan. 1, 2013.

If Facebook manages to raise the $5 billion, it will be on a shortlist of biggest tech IPOs of all time, and Zuckerberg’s net worth will skyrocket.


Advertisers and Partnerships


Facebook announced it generates a “substantial majority” of its revenue from advertising, more specifically from its partnership with Zynga. The gaming company contributed 12% of Facebook’s $3.71 billion — that’s almost $500 million.

SEE ALSO: Facebook IPO Reveals How It Made $3.71 Billion in 2011

The gaming company’s dependence on Facebook as a source of revenue has been commonly viewed as a risk for Zynga investors. But the Facebook filing shows just how interdependent the companies really are.

Some have claimed that online advertising — which is due to surpass print ads in the U.S. for the first time this year, according to eMarketer — is the real reason behind Facebook’s IPO.


Risk Factors


Risks with advertisers and partnerships are a few things that could “materially and adversely affect” Facebook. As required by law, the filing included a list of 35 things that could kill the company.

Ten big ones are below.

1. Competitors

“Users increasingly engage with competing products.”

Image courtesy of Flickr, Mukumbura

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The comprehensive assessment includes potential issues, such as competition from Google, Microsoft and Twitter, as well as other social networks that may not even exist yet. The company also brings up common concerns of users, such as changes in U.S. government laws that would restrict access or bugs giving access to private information.


Social Mission


Within an honest assessment, there was also a letter from Mark Zuckerberg to potential shareholders that emphasized Facebook “was built to accomplish a social mission.”

Uniting People

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By law, when the company officially goes public later this year, it is then obligated to create more value for its shareholders. This brings up the future of the company — where Facebook is headed five or ten years from now. It’s something yet to be fully grasped.

However, as we have previously noted, “Stocks perform over a long haul; not over days, but over weeks, months, years.” Although it’s much too early to know what the future holds for a public Facebook, this could potentially take social networking to a more professional level, outside of the “bubble.”


How Does Facebook Compare to the World’s Biggest IPOs?


Note: The proceeds are recorded in actual dollars at the time of public offering, and are not adjusted for inflation.

1. General Motors

Headquartered in Detroit, MI, GM owns Chevrolet, Buick, Cadillac and GMC.

Proceeds: $23.1 billion

Year: 2010

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This story originally published on Mashable here.

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