Abstract

This case is about the IPO of Facebook and the company’s future growth strategies. In 2012, Facebook embarked on an IPO to meet regulatory requirements as well as raise the funds needed for future expansion. Facebook hoped to use the funds raised from the IPO to expand further by acquiring smaller companies, developing new technologies, and recruiting talented people. It was facing stiffer competition in the market as established rivals such as Google had launched their own social networks like ‘Google +’. As Facebook’s attempts to expand into other internet services like ‘Email’ were not fruitful, it decided to focus more on social networking to expand its business. It started to concentrate more on mobile advertising and introduced a new initiative called ‘sponsored stories’ to effectively tap the mobile channel. In order to further expand its reach, Facebook also started to focus more on emerging markets as the developed markets were getting saturated. But despite all the initiatives to expand its business, the share price of Facebook began to continuously underperform after the company came out with its IPO. This case is meant for MBA/MS students as a part of the Financial Management curriculum. It can also be used in Entrepreneurship/Strategic Management curriculum.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand issues and challenges in venture financing, especially for later stage companies.
• Understand the issues and challenges faced by the companies in expanding their businesses in a highly competitive market dominated by established players.
• Discuss and debate how Facebook can use the funds it raised through the IPO to fuel its future expansion.
• Discuss the new strategies that Facebook should follow to expand its reach in emerging markets.

Keywords

Venture capital, Venture financing, Private placement, Initial public offering, Growth strategy, Competition, Social networking, Emerging markets, Entrepreneurship, Strategy, Facebook, Google, Microsoft