Mendoza School of Business

Investors aren’t all sold on Facebook IPO

Published: February 2, 2012 / Author: David Popper

The following is an excerpt from an article in The Los Angeles Times that quotes Finance Professor Tim Loughran on Facebook’s initial public offering (IPO) of stock. To read the entire article visit: Investors aren’t all sold on Facebook IPO

Facebook Inc. has opened its books to eager investors, but some don’t like what they see.

Profit margins have been shrinking. Costs have been rising. And the stock structure means that founder Mark Zuckerberg controls 57% of the voting shares, giving him near-dictatorial power over the company’s future.

Other potential problems: Facebook does not operate in China, the world’s largest social networking market. The company’s regulatory filing this week also showed that it makes little money from advertising on mobile devices, which may soon be the primary way users access the Internet and visit social networks.

“Mobile advertising simply doesn’t have the legs that online advertising has,” said Nate Elliott, an analyst at Forrester Research. “If all the users moved to mobile, there’s no guarantee they could make anything like what they’re making now.”


“Enormous growth prospects have already been placed into this stock, and it’s difficult to meet those kinds of expectations,” said Tim Loughran, a finance professor at the University of Notre Dame.


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