Facebook IPO, Valuation

Facebook will officially debut on the Nasdaq Stock Market (listed as "FB") on 18th May 2012.


IPO price is expected to be $28 to $35 per share. Of course the trading price on 18th May is expected to be even higher than the IPO price.

Basic Numbers
Revenue: $3.7B
Profit: $1B
Users: 845M
IPO Target: $12B (different numbers reported by articles, from 5B to 13B)
IPO Price (expected): $28 to $35
IPO Shares issue (estimated):  343M (using $12B divided by $35 per share)
Total Class B shares: >2B

Why IPO - Use of Proceeds

"The principal purposes of our initial public offering are to create a public market for our Class A common stock and thereby enable future access to the public equity markets by us and our employees, obtain additional capital, and facilitate an orderly distribution of shares for the selling stockholders. We intend to use the net proceeds to us from our initial public offering for working capital and other general corporate purposes; however, we do not currently have any specific uses of the net proceeds planned. We may use a portion of the net proceeds to us to satisfy a portion of the anticipated tax withholding and remittance obligations related to the initial settlement of our outstanding RSUs, which will become due approximately six months following the completion of our initial public offering. Additionally, we may use a portion of the proceeds to us for acquisitions of complementary businesses, technologies, or other assets. However, we have no commitments with respect to any such acquisitions or investments at this time.

Pending other uses, we intend to invest the proceeds to us in investment-grade, interest-bearing securities such as money market funds, certificates of deposit, or direct or guaranteed obligations of the U.S. government, or hold as cash. We cannot predict whether the proceeds invested will yield a favorable return. Our management will have broad discretion in the application of the net proceeds we receive from our initial public offering, and investors will be relying on the judgment of our management regarding the application of the net proceeds." 

This basically says that facebook doesn't really need the money, so it could be a case of cashing out by the key stakeholders.

Dividend Policy
"We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings for use in the operation of our business and do not intend to declare or pay any cash dividends in the foreseeable future."

Patents
For such a prominent company, Facebook seems to have limited patents and IP.

"As of December 31, 2011, we had 56 issued patents and 503 filed patent applications in the United States and 33 corresponding patents and 149 filed patent applications in foreign countries relating to social networking"
 
"We are currently, and expect to be in the future, party to patent lawsuits and other intellectual property rights claims that are expensive and time consuming, and, if resolved adversely, could have a significant impact on our business, financial condition, or results of operations"

Business Prospect
Given its wide reach and context awareness of its users, the advertising potential of Facebook is huge and could be greater than Google.

Summary
This looks like a speculative trading target since it is not a dividend play and it already has rich valuation.