CORPORATE FINANCE

Alya Nabyla | Bayu Puntho | Dina Arfadiani | Pius Hubert | Ryanfeiza
background
financial through IPO
why did fb go public ?
1 As Facebook realized that it tends to exceed 500 
shareholders, it would trigger a requirement to start 
publicly releasing financial details

Securities and Exchange Commission rule from 1964 that  2 Facebook can raise funds 
3 Facebook raises its 
says that any private company with more than 500 
"shareholders of record" must adhere to the same financial  from a broader base of 
disclosure requirements that public companies do investors
reputation and amplifies 
Enough resources to develop  its brand value
new products and invest in 
their business
To attract more users and 
expands the market share
FB become more competitive
fb valuation prior IPO
fb valuation prior IPO
Fair Value per FB's Share (est.)
DCF (70%) MCM (30%)
DCF MCM Average
Upper Limit $    45.98 $    16.99 $    37.28
Bottom Limit $    28.15 $      6.46 $    21.64
discounted cash flow method (DCF)
2011 2012E 2013E … 2020E 2021E Terminal
Base Year 1 2 9 10 Year
Assumptions
Revenue Growth Rate = 40.0% 40.0% … 9.4% 1.7% 1.7%
EBIT (Operating) margin = 45.7% 44.6% 43.5% … 36.1% 35.0% 35.0%
Tax Rate = 40.0% 40.0% 40.0% … 36.0% 35.0% 35.0%
Reinvestment = 66.7% 66.7% … 66.7% 66.7% 100.0%
Cost of Capital = 10.0% 10.0% … 8.4% 8.0% 8.0%

Free cash flow to firm ($ millions)
Revenues = 3,711 5,195 7,274 … 42,144 42,861 43,589
EBIT = 1,695 2,318 3,167 … 15,200 15,001 15,256
EBIT (1‐Tax) = 1,017 1,391 1,900 … 9,728 9,751 9,917
Reinvestment = 990 1,385 … 2,405 478 729
Value of firm = 74,231.6
FCFF = 400.9 514.7 … 7,323.5 9,273.2 9,187.9
‐ Debt = 1,214.9
Terminal Value = 145,840
+ Excess Cash = 1,512.0
Present Value Value of equity = 74,528.7
Cumulative discount factor = 0.9089 0.8261 … 0.4392 0.4067 0.4067 ‐ Cost of equity options (after tax) = 3,840.6
PV of FCFF and TV = 364.4 425.2 … 3,216.7 3,771.3 59,311.6 Value of common equity = 70,688.1
Pre‐IPO number of shares (millions) = 1,958.1
Estimated value / share = $        36.10
Price talk = $        38.00
Price as % of value = 105%
discounted cash flow method (DCF) con’t
Sensitivitas Analisis Pesimis Konservatif Optimis
Revenue Growth Rate 35% 40% 45%
PV of Free Cash Flows (bn) $     13,083.79 $     14,920.07 $     17,029.61
PV Terminal Value(bn) $     45,581.14 $     59,311.58 $     76,543.90
Value of Firm (bn) $     58,664.93 $     74,231.65 $     93,573.51
Value of Common Equity (bn) $     55,121.43 $     70,688.14 $     90,030.00
Number of Shares (mn) 1,958.09 1,958.09 1,958.09
Fair Value per Share $            28.15 $            36.10 $            45.98
Bottom Limit Upper Limit
multiple comparable method (MCM)
Facebook Alphabet Inc. Microsoft Corp. Albata Inc.
Ticker FB GOOGL MSFT AABA
Stocks Price $    38.00 $           322.95 $               25.96 $            16.13
Net Income 2011 1,000 9,737 23,150 1,049
Total stockholders' equity 2011 4,899 58,145 57,083 12,540
Number of shares 1,958 644.93 8,490.00 1,274.00
EPS 0.51 15.10 2.73 0.82
Book Value 2.50 90.16 6.72 9.84
P/E 74.41 21.39 9.52 19.59
P/BV 15.19 3.58 3.86 1.64
Average as multiple 

Est. EPS Est. BV / Share Multiple Value

P/E $      0.38 16.83 $             6.46 Bottom Limit
P/BV $               5.61 3.03 $           16.99 Upper lImit
post IPO

Causes and Effects
Technical difficulties in NASDAQ occurred 
during IPO’s Exchange. System glitch 
caused by strong demand and overload 
capacity on NASDAQ System 

Facebook underwriter is hiding the facts 
that Facebook’s revenue growth will 
decreased in 2012, based on year to year 
comparison using 2012 Balance Sheet with 
2011 Balance Sheet. Estimated EPS is 
decreasing from 0.51 to 0.38 on 2012.
recommendation
FOR BUYER / POTENTIAL SHAREHOLDERS
1Due to public enthusiasm for 

2
Facebook's IPO, its share price 
tends to rise instantly. We 
Because the estimated intrinsic value of 
recommend that we take this 
Facebook is below the open price of its IPO 
opportunity for short‐term 
of $ 38, it can be interpreted that there is a 
trading.
high probability that Facebook's stock price 
will fall below the open price after public 
enthusiasm has dropped. After the price 
drops, this is an opportunity to buy shares. 
The buyer must analyse the future trends of 
the stock price constantly, and then make a 
decision when to buy and sell shares. 
3
Wait for Q2 report to see the 
We recommend not to overbuy Facebook  comparison of yoy to Q2 in 
shares. In addition to Facebook shares,  previous year. If the growth is 
Buyers must add shares of other companies  above 45% (refers to sensitivity 
to their investment portfolios to reduce risk. analysis), it is recommended to 
buy because the valuation is 
above the price of IPO.
recommendation
FOR FACEBOOK
1In anticipation of slowing 
revenue growth due to shifting 
users from desktop to 

2
smartphone which reduced click 
ads, Facebook need to pay 
attention to ad space that can be 
displayed on mobile phones like  As a social networking company,
for example on Instagram
 
Facebook should maintain creativity 
and increases the ability to innovate 
in order to maintain a large number 
of users
3 In recent years, Facebook has 
been involved in several lawsuits 
due to user privacy issues, which 
have a negative impact on the 
company. Facebook needs to find 
an effective solution to make 
users and shareholders believe in 
the privacy provided
 thank you.
Questions, anyone?
 REFERENCES

Koh, A., Ang, S., Ehrhardt, M., & Brigham, E. (2014). Financial Management: Theory and Practice, An Asia Edition.

https://techcrunch.com/2011/01/10/facebook‐5/

https://archive.nytimes.com/www.nytimes.com/interactive/2012/05/17/business/dealbook/how‐the‐facebook‐offering‐compares.html

https://www.sec.gov/Archives/edgar/data.htm

https://www.treasury.gov/resource‐center/data‐chart‐center/interest‐rates/Pages/TextView.aspx?data=yieldYear&year=2012

http://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/wacc.htm

https://www.statista.com/statistics/664840/average‐market‐risk‐premium‐usa/

https://marketingland.com/emarketer‐google‐wins‐back‐hold‐top‐rank‐in‐digital‐marketing‐revenue‐38207

https://ycharts.com/financials