Class Discussion and Video: The Facebook IPO

Teaching Tip:  Marketplace.org has a four-minute video titled, “What’s an IPO?”  It is definitely short enough that it can be shown in class or assigned as homework viewing outside of class.  Regardless of how it’s used,  it does a great job of explaining exactly what an IPO is.

In Chapter 12 of Turning Money into Wealth we discuss Initial Public Offerings or IPOs.  Generally when IPOs are discussed the company that is going public is a little known firm trying to raise cash so it can grow.  But at the beginning of February 2012, the firm that announced it is planning on selling stock to the public for the first time through an IPO is a household name – in fact, it’s one that you most likely know very well, Facebook.  It’s not just that there are around 845 million members around the globe, but many of those members are using it most of the time.

There are a bunch of great articles chronicalling the Facrebook IPO, and here are some of the best:

  • “Facebook Sets Historic IPO” from The Wall Street Journal – this link sends you to the article, and just below the title to the article are a number of tabs that will take you to a video about the IPO, a slideshow, interactive graphics on who’s who at facebook, and stock quotes of recent IPOs.
  • “Facebook IPO: A look at what we learned from the filings” from the Washington Post – this link sends you to an article where you’ll learn how much the main characters at Facebook make (you might want to be sitting down while you read this) and you’ll also learn about the strong relationship Facebook has with Zynga, the social gaming company.
  • “An open (Face)book” is a great video from Marketplace.org on the Facebook IPO.  One of the points it brings up is that Facebook now has to make money.
  • “Facebook IPO: How does Facebook make its money?”  So how does Facebook make money?  That’s what this article deals with.

Discussion questions:

  1. Would you buy shares of Facebook?  Why or why not?  Be prepared to discuss this in class.
  2. Do you have any idea what the company is worth?  How might you determine that?  Be prepared to discuss this in class.  Take a look at some recent IPOs in the graphic “IPO: Go, No-Go?” Are you surprised at their performance?  Why or why not? Be prepared to discuss this in class.
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