Case 2 Questions: FACEBOOK, Inc IPO

| February 1, 2016

Case 2 Questions: FACEBOOK, Inc IPO

1 Please answer all questions. Be precise and answer to the point.
2 Approximately the answer to all the questions should be 8 to 10 typed pages.
3 Professional presentation is expected.
4. Extra research and analysis is rewarded.
5. The cases are group effort and are judged accordingly.
1. Business Model: How does Facebook make money? What are the value drivers of its business? What are their comparative advantages relative to other social networking companies?

2. Initial Public Offering: Why is Facebook going public? What are the normal methods, and normal costs of going public? What is the planned use of proceeds from the offering? What was going on in the U.S. IPO market prior to Facebook’s offering? What has been the performance of recent IPOs?
3. Valuation of IPOs: How do we value shares of high technology shares such as Facebook? (Read: Damodaran on Valuation!) How do we distinguish between primary offering of shares and secondary offering of shares by existing shareholders? What is the intrinsic value of a Facebook share? How does this valuation compare to the price talk from the underwriters?

4. Stock offering and Stakeholders: Should Regulators and other stakeholders be concerned (founder, management, corporate insider, underwriter, new shareholder or regulator) about Facebook or its stock offering? Why or Why not?
5. Recommendation: What is your recommendation for the CXTechology Fund which wants to invest in Facebook IPO?

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