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ECONOMICS REPORT - Facebook Stock Goes on Sale

Friday, May 18, 2012 -- Views:

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This is the VOA Special English Economics Report.

Facebook is the world's biggest social network. It has over nine hundred million users worldwide. And it reported three point seven billion dollars in sales for last year.

The company has been privately held since two thousand four. That was when Mark Zuckerberg and several classmates at Harvard University started Facebook as a business. But on May eighteenth, Facebook becomes a publicly traded company. That means its shares will be listed on the NASDAQ stock exchange, and sold to the public.

Interest in the stock has been building since Facebook announced details of its initial public offering, or IPO, earlier this year. The IPO will make billionaires of the company's founders, including Mr. Zuckerberg. Eduardo Saverin, a co-founder, has been strongly criticized for giving up his United States citizenship. He will avoid a fifteen percent tax on the value of his shares by claiming to be a citizen of Singapore.

This week, Facebook told the Securities and Exchange Commission that it wanted to increase the number of shares being offered to over four hundred twenty million. The company had earlier said it planned to offer three hundred thirty-seven million. The starting price has been set at between thirty-four and thirty-eight dollars -- also an increase. Now, some financial experts say Facebook could raise sixteen billion dollars, making it one of the biggest IPOs ever.

Facebook says most of its money comes from online advertising. But the company also says it expects to earn money from fees charged on the sales of virtual goods. These are digital products used in social games, not physical goods. Facebook says it sees important income coming from this new market, which could reach fourteen billion dollars by twenty sixteen.

Not everyone is pleased. General Motors ended its advertising agreement with Facebook this week. The carmaker said it did not see results from the millions of dollars it spent on advertising with Facebook.

And Facebook has been criticized for some recent business decisions. It offered one billion dollars to buy Instagram, an application for sharing photographs. The deal requires government approval and has yet to be finalized.

So is Facebook worth the price of the stock? That will be for investors to decide.

And that's the VOA Special English Economics Report. I'm Barbara Klein.

Reader's Comments (0):
don't hope too hard on the facebook.the kind of technological stock is always overrated.
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