Toaday, people lucky enough to be Facebook’s real friends – those who own a slice of the company – will become very rich indeed.
About 12 per cent of the stock is being auctioned off to new investors, which will raise around $18billion, valuing the company at $104billion.
Facebook’s founder Mark Zuckerberg, who turned 28 on Monday, owns a 28 per cent stake and is expected to be worth $29.1billion – and there are a couple of surprise beneficiaries too.
Here BBC presenter Emily Maitlis, who interviewed Zuckerberg last year, looks at what the sell-off really means.
Just eight years ago, no one had ever heard of Facebook. Today almost a billion people have signed up to the website.
The guy behind it is Mark Zuckerberg. He thought up the idea in his college dorm with a bunch of his best mates at Harvard and launched it in February 2004.
These days it doesn’t feel much like a student project — it is one of the hottest businesses in the world.
And today Zuckerberg is taking all his hard work and turning it into hard cash by selling Facebook shares on the US stock market for the first time.
The move could make Zuckerberg one of the top ten wealthiest Americans — since he owns more than a quarter of all the shares. This first sale will make the company worth about $104billion dollars. Imagine heading off for the weekend with an extra $29billion in your back pocket. It’s easy to get carried away with the hype.
But those in the business are starting to ask how a company that charges users absolutely nothing to sign up could be worth even a fraction of the huge numbers being thrown around.
Despite this, the shares are in short supply and lots of people are keen to get their hands on them, even if they don’t normally invest. In Silicon Valley they call this “dumb money”.
They mean that people like the sound of owning the shares — a kind of trophy — even if they know nothing about the industry.
So, big question: How do you avoid being a “dumb investor”.
The real secret is to look more closely at the company’s product.
Facebook is called a social network but what does that really mean?
Well, it starts by suggesting people you may know from what you have told it about yourself. You’re invited to connect to those people as Facebook friends.
The average user has 140 but we all know people who have thousands of virtual friends — imagine all those birthday reminders... The only content on Facebook is what their users put there — so it stands or falls on our willingness to keep posting new material for others to see.
When I met Zuckerberg last year, he told me his mission was to make the world more open and connected.
He said: “Everyone is going to have a much better experience when they’re doing things with their friends... your world just becomes a lot richer.”
Zuckerberg knows Facebook cannot afford to stand still. He admits the site only develops if people want to share more stuff and stay on the site for longer.
And somehow or other the Facebook founder has to get us to spend money as well.
One of the ways people do spend money on it is through the gaming sites. A little known fact is that nearly half of all the games people play online are done through Facebook. It is a business worth hundreds of millions of dollars. Then there’s advertising. As far as that goes, Facebook has a real trump card. When you place an ad on Facebook — which any of us can do on a normal laptop — you can target just the sort of people who you think will want your product.
Perhaps the biggest question for Facebook is how far it will use people’s personal information without their users feeling, well, “used”.
Its long-term value may depend on whether we feel comfortable with the site and feel our privacy is being protected.
Investors also want to know they can rely on the company not to change too much — but if Mark Zuckerberg remains as loyal to his site as he is to his five-year-old unflashy car — they won’t have much cause for concern.
In the film about Facebook, The Social Network, Zuckerberg’s friend Sean Parker encourages him to think big. He tells him: “A million dollars isn’t cool. You know what’s cool? A billion dollars.”
Today Zuckerberg might well be on the phone to Parker asking him: “So how cool is $100billion?”
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