How many billionaires were created after Facebooks IPO?
Facebook, born at Harvard University just eight years ago, is a real company with large cash flows and significant profits: It earned $1 billion last year on $3.7 billion in revenue, according to its IPO prospectus. . Using a discount factor of 5%, a profit margin of 29% and 3.5 USD of revenues per user per year yields a value of facebook of 15.3 billion USD in the base case scenario, 20.2 billion USD in the high growth scenario and 32.9 billion USD in the extreme growth scenario. Accordingly, this would imply that facebook would need to increase its profit per user before the IPO by a factor of 3 to 6 in the base case scenario, 2.5 to 5 in the high growth scenario and 1.5 to 3 in the extreme growth scenario in order to meet the current, widespread, high expectations.
