Oh Facebook, how you’ve changed since the beginning…The biggest internet-company IPO is coming up. For the last several weeks, Facebook has begun preparing for it’s inevitable initial public offering estimated to take place in early May. Facebook has begun to cease trading of private shares on private exchanges. They are also preparing a roadshow to attract institutional investors for pension plans, mutual funds & hedge funds.
The recent development here is the ‘Book’s acquisition of Instagram for $1 billion in cash and stock. Many wonder how on earth the social photo app can be worth so much, but beneath it all there are 2 reasons why. The obvious first is their upcoming IPO. The second is that Facebook wants to become more dominant in terms of photo sharing and mobile markets overall. Instagram has a massive userbase. In terms of investing, Forbes says:
…investors may have been wondering, Why are we buying into a massive IPO for an Internet company with no clear (or massively successful) mobile strategy? Even if Instagram is not ultimately successful within Facebook, for big buyers in the IPO, it now looks like Facebook has a legitimate property in the space with tons of growth. This doesn’t mean Facebook bought Instagram just to appease these institutional investors. But it was a factor.