$104 Billion – Facebook’s valuation on the day of its IPO tops every other IPO in history and there is plenty of criticism that Facebook shares are overpriced. Yet there is no doubt that more than a dozen people will turn from paper billionaires into actual billionaires today and if history repeats itself, then there is reason to believe that the wealth of Facebook will spread and enable an renewed innovator ecosystem of considerable proportions. For developers, it will pay, literally, to pay close attention to this IPO, even if they do not own Facebook stock.
Facebook’s IPO is nearly five times the size of Google’s IPO in 2004, 85 times the size of Apple’s IPO in 1980, 150 times the size of Microsoft’s IPO in 1986, and more than 200 times the size of Amazon’s IPO in 1997. Even at modest success, going public will create wealth beyond imagination for those who took the risk of investing early into the social network. Among the most visible personalities and investors, there are:
- Mark Zuckerberg with 503.8 million shares and a value of $19.1 billion
- Accel Partners with 201.34 million shares ($7.65 billion)
- Dustin Moskowitz with 133.7 million shares ($5.08 billion),
- Juri Milner/Goldman Sachs with 131.4 million shares ($4.99 billion),
- Napster co-founder Sean Parker with 69.6 million shares ($2.6 billion),
- Clarium Capital’s Peter Thiel with 69 million shares ($2.6 billion),
- Facebook COO Sheryl Sandberg with 41.2 million shares ($1.6 billion) and
- Horizon Ventures with an investment worth slightly more than $1 billion.
These are, of course the values based on the $38 price per share.
Estimates, however, suggest that Facebook could gain up to 40% in value during today, based on the average first-day gain for a tech company of 32%. However, there is a clear sentiment that Facebook’s stock carries a reasonable risk for the average investor as there are questions about the company’s share price-to-earnings ratio, Facebook’s future ability to generate revenue due to the appeal of its advertising and the fact that initial investors will be cashing in today and withdrawing substantial portions of their investments. And still, we believe that today’s focus should not be on the monetary funds or the wealth that is generated today, but at the future opportunity they can enable.
Historically, massive IPOs and personal wealth have enabled the growth of ecosystems around them. IPOs have helped spur new personal investment from individual employees-turned-investors. These investors represent everything from very large scale, down to smaller angel investors, and include Microsoft’s co-founder Paul Allen and Google’s Paul Buchheit, who actively invest in innovation. Countless venture capital funds and angel investors have emerged based on IPOs and the personal wealth they created. We are optimistic that this will be the case with Facebook as well. With a big hand of cash now available, Facebook investors will themselves start to make bigger moves, but the innovation buzz is likely to happen on a smaller scale surrounding the social network.
Wealth rarely stays in the same place over a longer period of time. Developers paying attention to this wealth may soon find an unprecedented opportunity to fund their ideas and possibly the next Facebook.