Free Essay

Case

In: Business and Management

Submitted By xiaowlp
Words 7400
Pages 30
For the exclusive use of L. Wang, 2016.

W12453

FACEBOOK, INC: THE INITIAL PUBLIC OFFERING (A) 1

Ken Mark wrote this case under the supervision of Professors Deborah Compeau, Craig Dunbar and Michael R. King solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.
Copyright © 2012, Richard Ivey School of Business Foundation

Version: 2014-03-13

INTRODUCTION

“The entire market is waiting for the emergence of Facebook as a publicly traded company,” said Jonathan
McNeil, lead analyst at CXTechnology Fund (CXT), as he spoke to the fund’s investment committee on
May 16, 2012. The highly anticipated pricing of the Facebook initial public offering (IPO) was underway, and in three hours, McNeil was scheduled to provide the lead underwriter, Morgan Stanley, with CXT’s final indication of his interest in the deal. Gesturing to Facebook’s preliminary prospectus (“Red Herring”),
McNeil continued, “We have done our analysis, and we would like to present our recommendation on whether or not to buy shares in Facebook’s IPO.”
Having been marketed with an initial price range in the high $20s to mid-$30s per share, the price talk for
Facebook’s IPO had been increased to $34 to $38, valuing the eight-year-old company at over $100 billion. This price would make it the largest IPO of the year and the second largest IPO in U.S. history. The deal appeared to be oversubscribed with heavy interest from institutional and retail investors alike. But the valuation — at nearly 100 times trailing 12-month earnings and 26 times trailing 12-month sales — seemed expensive, even by technology standards. Yet, Facebook had changed the way consumers interacted online, spearheading the rise of social media. This explosive growth seemed poised to alter the way firms spent their advertising dollars, and Facebook was well-positioned to capture a growing share.
COMPANY HISTORY AND OVERVIEW

Facebook was not originally created to be a company. It was built to accomplish a social mission
— to make the world more open and connected.
Mark Zuckerberg, Facebook preliminary prospectus, May 16, 2012
Facebook was launched in February 2004 by Mark Zuckerberg and four roommates at Harvard University.
The site was named after the popular directories circulated by different Harvard residences that featured a student’s picture beside his or her face. Facebook was designed as a social utility to allow friends to
1

This case has been written on the basis of published sources only. Consequently, the interpretation and perspective presented in this case are not necessarily those of Facebook or any of its employees.

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

For the exclusive use of L. Wang, 2016.
Page 2

9B12N031

connect with each other over the Internet. After an initial run-in with the university administration, the
Harvard site took off, leading Zuckerberg to expand to other U.S. and Canadian universities. By mid-2004,
Zuckerberg had dropped out of Harvard, incorporated Facebook and moved operations to Palo Alto,
California, where the company attracted its first investor, PayPal co-founder Peter Thiel. By year-end
2006, Facebook was open to anyone over 13 years old, had attracted an estimated 12 million users and was the seventh most heavily trafficked site on the Internet.
In March 2006, Zuckerberg declined an offer to sell the company for $750 million, arguing it was worth $2 billion. 2 His optimism was confirmed in October 2007 when Microsoft bought a 1.6 per cent stake for
$240 million, valuing Facebook at $15 billion. 3 Facebook continued its rapid growth, doubling its active users to 200 million between August 2008 and April 2009. 4 To help manage the firm’s growth, Zuckerberg brought in seasoned executives Sheryl Sandberg as chief operating officer and David Ebersman as chief financial officer. In September 2009, Zuckerberg blogged that Facebook had reached 300 million users and was cash flow positive. Facebook’s users continued to grow at an extraordinary pace, passing 500 million users by July 2010, 800 million by September 2011 and 900 million by April 2012. Exhibit 1 provides a timeline that tracks Facebook’s growth.
Over this period, Facebook had raised capital from angel investors such as Mark Andreessen, Reid
Hoffman and Mark Pincus, and venture capitalists such as Accel Partners, Greylock Partners and Meritech
Capital Partners. Based on transactions reported on SecondMarket Inc. and SharesPost — both online platforms for trading shares privately pre-IPO — Facebook’s implied value in December 2010 was between $41 billion to $57 billion, triple the amount since the Microsoft investment. 5
Given the rising popularity and visibility of social media companies, financial market participants knew it was only a matter of time before Facebook went public. The initial Red Herring circulated by the underwriters in February 2012 announced Facebook’s plans to sell an unspecified amount of Class A common stock. The principal purposes of the IPO were to create a public market for the existing shareholders and to enable future access to the public equity markets. The proceeds would be used for working capital and other general corporate purposes.
FACEBOOK’S BUSINESS MODEL

Facebook provided an Internet platform that allowed its users to share comments, upload photos and recommend experiences (likes) to friends and family. Citing an industry report from August 2011,
Facebook’s prospectus boldly stated that its goal was to connect all two billion global Internet users. For the fiscal year ending December 31, 2011, Facebook generated $1 billion in net income on total revenues of $3.7 billion, an increase of 65 per cent and 88 per cent respectively from a year earlier. Exhibit 2 provides Facebook’s consolidated financial statements.
Advertising accounted for 98 per cent of Facebook’s revenues in 2009, 95 per cent in 2010 and 85 per cent in 2011. Facebook offered advertisers the opportunity to segment and target its users based on their demographic information, expressed interests and social connections. Facebook required users to disclose their authentic identity online. Any information uploaded to Facebook became the property of the firm.
2

http://www.businessweek.com/stories/2006-03-27/facebooks-on-the-block, accessed October 20, 2012. http://blog.facebook.com/blog.php?post=72353897130, accessed October 20, 2012.
4
Ibid
5
http://www.bloomberg.com/news/2010-12-17/facebook-groupon-lead-54-rise-in-value-of-private-companies-reportfind.html, accessed November 3, 2012.
3

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

For the exclusive use of L. Wang, 2016.
Page 3

9B12N031

Facebook mapped the connections between users and their friends and recorded the products or services that they had “liked” in an extensive, proprietary database. Using this database, advertisers could target customized services and products based on users’ preferences and connections. Facebook called this feature “social context” and believed that advertising based on social context would be better received by consumers. Global advertising spending was estimated at $588 billion in 2011 and projected to reach $691 billion by 2015. 6 Online advertising was projected to rise from $68 billion in 2010 to $120 billion in 2015.
The balance of Facebook’s revenue was generated by its payments business, which came almost exclusively from the sale of virtual goods used in social games sold through the online gaming company,
Zynga. Fees generated by these payments were $13 million in 2009, $106 million in 2010 and $557 million in 2011. In 2011, consumers purchased $9 billion worth of virtual goods from gaming and social networking sites and this market was forecast to grow to $14 billion by 2016.
Facebook’s site was available in more than 70 different languages, and the company had offices or data centres in more than 20 countries. Geographically, about 56 per cent of Facebook’s 2011 revenues originated in the United States, down from 62 per cent in 2010. The majority of non-U.S. revenue came from Western Europe, Canada and Australia.
MAUs, DAUs and ARPU

Facebook categorized its users into monthly active users (MAUs), who visited the website in the last 30 days, and daily active users (DAUs), who were daily visitors. As of year-end 2011, Facebook reported 845 million MAUs, of which 161 million were based in the United States. While growth of U.S. MAUs was slowing, growth was picking up in emerging market economies such as Brazil and India. Facebook viewed
DAUs and the ratio of DAUs to MAUs as a measure of user engagement. During December 2011,
Facebook reported 483 million DAUs worldwide, an increase of 48 per cent versus a year earlier. DAUs as a percentage of MAUs increased from 54 per cent in December 2010 to 57 per cent in December 2011.
Facebook also tracked users who accessed the site via a mobile app or mobile-optimized version of the website (mobile users). Increased mobile usage was a key contributor of growth with more than 425 million mobile MAUs in December 2011. Growth was driven by greater smartphone penetration in the
United States and product enhancements across several mobile platforms. At the time of its IPO, Facebook could not display ads to mobile users. Increased use of this medium therefore threatened to cannibalize
Facebook’s online advertising revenues unless it found a way around this obstacle.
Facebook’s success in monetizing its customer base was measured by the average revenue per user
(ARPU). Facebook defined ARPU as total revenue divided by the average of the MAUs at the beginning and the end of the year. Facebook’s ARPU was $5.11 in 2011. Exhibit 3 plots the growth of Facebook’s
DAUs, MAUs, mobile MAUs and ARPUs over time.
COMPETITIVE LANDSCAPE

In the social networking space, Facebook competed on a global scale with MySpace, Google+, Twitter and
LinkedIn. Facebook also faced stiff regional competition from Tencent, Renren and Sina Weibo in China;

6

http://www.sfgate.com/business/article/Global-Advertising-Industry-to-Reach-US-691-6-2455969.php, accessed October
12, 2012

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

For the exclusive use of L. Wang, 2016.
Page 4

9B12N031

mixi in Japan; Cyworld in Korea; Orkut (owned by Google) in Brazil and India; and vKontakte in Russia.
Each company had a different business model and targeted specific customer segments.
From 2005 until early 2008, MySpace had been the most visited social networking site in the world. The company was founded in late 2003 and bought by News Corporation less than two years later for US$580 million. In June 2006, MySpace had surpassed Google as the most visited website in the United States. By
2008, MySpace generated revenues of $800 million. Facebook overtook MySpace in the number of unique worldwide visitors in April 2008 and in the number of unique U.S. visitors in May 2009. The number of
MySpace users had been declining steadily ever since. The lesson from MySpace’s rise and fall was not lost on McNeil, who had seen how easily a market leader could relinquish its lead.
Google was started in early 1996 by two Stanford PhD students and went public in August 2004. Google had an advertising-based business model and generated almost all of its $38 billion in 2011 revenues from selling pay-per-click and site-specific advertising. With over 53,000 employees and a huge cash pile,
Google could move rapidly. It had launched its own social networking service, Google+, in June 2011 and had already attracted 100 million active users by March 2012. 7
Founded in 2006, Twitter’s microblogging service allowed users to send messages of up to 140 characters and had attracted over 500 million active users by year-end 2012. 8 Twitter earned revenues from advertisers wanting to appear as part of a user’s Twitter feed. 9 By December 2011 Twitter was valued at
$8.4 billion although it remained privately owned. Twitter had forecast revenues of $110 million in 2011, up from $100 million in 2010. 10
LinkedIn provided a social networking website for professionals that allowed them to post their employment history, then link their profile to other users with whom they had a professional connection.
Founded in December 2002, LinkedIn had 175 million registered users by 2012, with revenues of $522 million and net income of $12 million. 11 Users could access a basic version for free or pay $25 to $50 a month to access a premium version that allowed them to exchange messages and request introductions.
Outside the social networking space, Facebook competed for advertisers’ dollars against leading online businesses such as Microsoft, Yahoo!, Amazon and eBay.
ECONOMIC AND MARKET CONDITIONS

Facebook’s IPO was moving forward during an improving — but still fragile — global economic environment. The world economy was still recovering from the 2007–09 global financial crisis, which had morphed by 2010 into a European sovereign debt crisis. The U.S. economy was slowly recovering with gross domestic product (GDP) forecast to grow by 2.2 per cent in 2012, up from 1.7 per cent in 2011, but still below the 3.3 per cent annual average from the 1980s and 1990s. U.S. unemployment remained stubbornly high above 8 per cent, while political partisanship in Washington ahead of the November 2012 presidential election threatened to derail the recovery. In particular, there were concerns that Democrats and Republicans would not be able to reach a consensus to fix the “fiscal cliff” — a series of tax and
7

http://google-plus.com/5746/google-crosses-100-million-active-users-in-march-2012-according-to-larry-page/, accessed
October 20, 2012.
8
http://www.mediabistro.com/alltwitter/500-million-registered-users_b18842, accessed October 20, 2012.
9
http://news.cnet.com/8301-1023_3-57394477-93/the-$1-per-month-twitter-business-model/, accessed October 20, 2012.
10
http://online.wsj.com/article/SB10001424052748703716904576134543029279426.html?KEYWORDS=twitter, accessed
November 7, 2012.
11
http://press.linkedin.com/about, accessed November 7, 2012.

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

For the exclusive use of L. Wang, 2016.
Page 5

9B12N031

spending cuts that would automatically take effect at year-end. The picture abroad looked no better with
Europe falling back into a recession while the powerhouse emerging market economies of China, Brazil and India showed signs of faltering.
The U.S. stock markets had seen a strong run-up over the year to May 2012, with the S&P 500 Index rising
21 per cent from its lows in November 2011. Faced with the deteriorating economic outlook and political gridlock in the United States and Europe, investors had turned bearish, with the S&P 500 Index falling by
5 per cent in the first half of May. The tech-heavy NASDAQ 100 Index rose 17 per cent from midDecember 2011 to mid-May 2012 but seemed to have stalled recently. Exhibit 4 charts the recent performance of the NASDAQ 100 Index, the S&P 500 Index and the Internet Software & Services segment. The market volatility and continuing economic uncertainty had left the global IPO markets in the doldrums. During the first quarter of 2012, global IPO activity fell to $14.3 billion, down significantly from $46.6 billion during the first quarter of 2011. Exhibit 5 charts the number of IPOs from 2004 to 2012.
McNeil and his team had carefully analyzed the performance of recent IPOs by LinkedIn, Groupon and
Zynga (see Exhibit 6).
In May 2011, LinkedIn had issued 7.84 million shares at $45 each for gross proceeds of $353 million, valuing the firm at $4.3 billion. 12 Due to the popularity of the deal, LinkedIn had increased its price talk from a range of $32 to $35 to a range of $42 to $45 on the day before the pricing. 13 Despite pricing the deal at the high end of the range, LinkedIn’s shares rose by 109 per cent on the first day of trading to close at
$94.25. LinkedIn’s shares rose over the next year to $110.56 for a total gain of 146 per cent.
The “deal-of-the-day” coupon company Groupon went public in November 2011, raising $700 million in the largest U.S. tech IPO since Google. Due to strong investor demand, Groupon’s underwriters had increased the number of shares offered from 30 million to 35 million and had priced the shares at $20, above the initial range of $16 to $18. 14 This price valued the three-year-old company at $12.7 billion. 15
Groupon’s shares rose 43 per cent on its first day of trading. After one week, its shares were still up by
21.3 per cent, but by mid-May its shares had fallen to $12.17, a loss of about 39 per cent post-IPO.
Finally, the online gaming company Zynga went public in December 2011, selling 100 million shares at
$10.00 per share. The deal was priced at the high end of the price talk of $8.50 to $10.00 and valued the four-year-old company at $7 billion. 16 Zynga’s share price fell by 5 per cent on the first day of trading, and by mid-May its shares were trading at $8.56, 14.4 per cent below the IPO price.
OTHER DEAL TERMS

McNeil and his team pored over Facebook’s Red Herring to gain vital information about the offering (see
Exhibit 7). A number of items caught their attention.

12

http://blogs.computerworld.com/18311/linkedin_ipo_stock_price_45_valuation_4_3b_date_5_19_symbol_lnkd, accessed
November 7, 2012.
13
http://socialtimes.com/linkedin-ipo-7-84m-shares-at-32-35-each_b61483, accessed October 20, 2012.
14
http://www.reuters.com/article/2011/11/04/us-groupon-idUSTRE7A352020111104, accessed October 20, 2012.
15
http://digital-stats.blogspot.ca/2011/11/groupons-ipo-values-company-at-1265bn.html, accessed November 7, 2012.
16
http://money.cnn.com/2011/12/14/technology/zynga_ipo_price/index.htm, accessed November 7, 2012.

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

For the exclusive use of L. Wang, 2016.
Page 6

9B12N031

Sales By Current Shareholders
The Red Herring dated May 15 stated that Facebook was planning to sell 421,233,615 shares of Class A common stock. Of this amount, Facebook was issuing 180,000,000 shares with the remaining 241,233,615 shares sold by existing stockholders. As a result, Facebook would raise $6.1 billion to $6.8 billion while insiders would receive $8.1 billion to $9.1 billion.
While McNeil knew an IPO was the moment for venture capitalists to take some money off the table, the sales by Zuckerberg and other insiders had to be taken into consideration. Exhibit 8 provides a list of shareholders and how many shares each was selling in the IPO (not including shares to be sold if the underwriters’ option was exercised in full). McNeil noted that there were five “lock-up” periods specifying when insiders could sell additional shares, ranging from 91 days to 366 days after the IPO. These lock-ups affected a total of 1.872 billion shares out of the 2.138 billion that would be outstanding post-IPO (see
Exhibit 9).
Dual-Class Share Structure
Facebook had two classes of common shares, Class A and Class B, which had the same claim on the firm’s earnings but different voting rights. Each Class A share was entitled to one vote while a Class B share was entitled to 10 votes. Not surprisingly, the Class A shares were being sold in the IPO while the Class B shares were held exclusively by Facebook insiders and would remain unlisted. Assuming that 180,000,000 new Class A shares were issued in the IPO, Facebook would have 635,881,796 Class A shares and
1,502,203,241 Class B shares outstanding, with Class A shareholders controlling 4 per cent of the votes and Class B shareholders controlling the remainder. Through his ownership of Class B shares, Zuckerberg would directly and indirectly control 56 per cent of the votes. The Red Herring explained what this meant:
Mr. Zuckerberg has the ability to control the outcome of matters submitted to Facebook’s stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that other stockholders support, or conversely this concentrated control could result in the consummation of such a transaction that other stockholders do not support. 17
Zuckerberg had shown his willingness to use this control in the month prior to the IPO when he purchased
Instagram — a popular online photo service — for $1 billion in cash and Facebook stock. Facebook’s board of directors had not been aware of the purchase until after the agreement had been reached. 18
Fees Payable To The Underwriters
Morgan Stanley was acting as lead underwriter for Facebook’s IPO, with J.P. Morgan and Goldman Sachs as joint leads, with 30 other co-managers. The lead underwriters managed the entire IPO process, from the preparation of the filing documents, organization of the roadshow, coordination of the book building, negotiation of the final pricing and distribution of the shares to their new owners. While the typical underwriting fee for an equity IPO was 3 per cent to 7 per cent of the amount being raised, Facebook would only pay 1.1 per cent reflecting both the size of the IPO and the prestige of Facebook.
17

“Facebook FORM S-1/A,” Red Herring, May 16, 2012, .p. 22. http://www.informationweek.com/security/privacy/facebooks-history-from-dorm-to-ipo-darli/240000615?pgno=12, accessed October 20, 2012.

18

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

For the exclusive use of L. Wang, 2016.
Page 7

9B12N031

Underwriters had to manage numerous potential conflicts of interest in an IPO. They sought to build relationships with companies such as Facebook in the hopes of advising them on additional capital raisings or potential mergers and acquisitions. Facebook would want a successful IPO that raised as much capital as possible with the share price rising afterwards, setting the stage for future secondary offerings. The underwriters often had equity analysts who would initiate coverage of the company and issue price targets for the stock as well as an investment recommendation. The underwriters earned their fees by selling stock to their institutional and retail customers who wanted to buy the shares for as low a price as possible.
Customers were particularly anxious to buy shares in “hot” IPOs where the shares were expected to “pop” on the first day by up to 35 per cent. In the event the issue did not “pop,” underwriters were expected to offer price support, which meant maintaining a floor price for the issue.
The underwriters had an overallotment option (“greenshoe”) that allowed them to sell up to an additional
15 per cent of the offering. The underwriters could sell a total of 484 million shares even though they only had an allotment for 421 million. This greenshoe meant that the underwriters could effectively short 63 million shares. If the IPO was successful and the issue price rose beyond the offering price, the underwriters would exercise the greenshoe option with Facebook to cover their short position. If the issue was unsuccessful and the trading price threatened to fall below the IPO price, the underwriters would buy up shares in the market to cover their short position, providing price support for the issue. The underwriters would earn fees of 1.1 per cent on any shares sold in the IPO.
FACEBOOK’S PRICE TALK

Facebook had filed its first Red Herring on February 1, 2012, but the underwriters did not go out to investors with a formal price range until early May. At that time, the talk was in the range from the high
$20s to mid-$30s per share. As momentum picked up and market conditions continued to improve, the underwriters launched the roadshow on May 7 with an eye to pricing the deal during the week of May 14.
The amended preliminary prospectus filed on May 9 indicated that Facebook would sell 337,415,352 shares at a price between $28 and $35 per share. The amendment also indicated that the trend of
Facebook’s DAU growth outpacing growth in the number of ads delivered had continued during the start of the second quarter of 2012. This trend was due to the increased usage of Facebook on mobile devices, in which display advertising was limited. As was customary, the preliminary prospectus contained no projections or other forward-looking information.
The roadshow kicked-off with an investor presentation at the Sheraton Hotel in New York City featuring
Zuckerberg, Ebersman and Sandberg. Led by Morgan Stanley, the road show included cross-country stops in cities where major institutional investors were located, including Boston, Chicago, Denver and Palo
Alto. Facebook also released a YouTube video targeting retail investors. The roadshow wrapped up on
Friday, May 11.
The lead underwriters were actively soliciting investor interest through their sales teams. McNeil had been contacted by all three underwriters asking for his participation and interest. McNeil noted that the proposed price range was below the high of $44 per share that had been reached in March, based on a private deal posted on SharesPost. 19 McNeil heard that there was significant institutional and retail demand for the deal, which he knew was only a preamble to the underwriters trying to raise the price range. At the same time, the lead managers seemed keen to keep the firm’s final IPO price conservative enough so that the shares could see a “pop” on the first day of trading. It was well documented that companies typically left money on the table, particularly when the price range was increased during the marketing of the IPO (see Exhibit
10).
19

http://blog.sfgate.com/pender/2012/05/18/see-where-facebook-stock-traded-before-the-ipo/, accessed October 20, 2012.

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

For the exclusive use of L. Wang, 2016.
Page 8

9B12N031

On May 11, CNBC reported that Facebook’s IPO was “many, many” times oversubscribed, setting the stage for a push to price the shares at the high end of the range. 20 Not everyone was convinced. One
Morningstar analyst stated that “the valuation at the proposed offer price leaves limited upside for longterm fundamental investors.” 21 Despite such skeptical comments, on May 14 the lead underwriters had raised Facebook’s IPO range to $34 to $38, citing “overwhelming demand by investors.” 22 At the same time, the number of shares being sold had been increased to 421,233,615 shares, with all of the additional shares being sold by Facebook insiders.
VALUATION

McNeil’s team relied on two basic approaches to value companies: a discounted cash flow (DCF) analysis and the use of market multiples from comparable firms and recent transactions. DCF analysis was a tool familiar to all equity analysts, but McNeil knew from experience how sensitive it could be to the assumptions used. It was difficult to apply to fast-growing companies where much of their value was tied up in patents and other intangibles. Not wanting to rely solely on the underwriters’ valuation, McNeil had been following the blog of a well-known academic, Professor Aswath Damodaran of the NYU Stern
School of Business. 23 Damodaran’s DCF for Facebook is shown in Exhibit 11.
On his blog, Damodaran stated that he believed Facebook had the opportunity to dominate its market. If it did, he suggested his price estimate could be “too low.” But he added two caveats. First, at a valuation of
$75 billion, the market would expect Facebook to become a phenomenal success with anything less viewed as a failure. Second, he was concerned that Zuckerberg’s controlling stake in the company meant that other shareholders would not have meaningful input into Facebook’s strategic choices.
Not wanting to go into his briefing unprepared, McNeil had asked his team to put together the market multiples of a broad set of publicly traded companies (see Exhibit 12). The list ranged from social networking to Internet services to online retailers to mobile phone manufacturers. McNeil knew from experience that using multiples was part art and part science. The key was to identify the right set of comparables and the right set of ratios.
MAKING A DECISION

McNeil knew that CXT’s investment committee wanted to hear about the potential for Facebook to deliver above average total returns. Given that Facebook did not pay any dividends, this return would have to come from capital appreciation. Ultimately, Facebook had to increase its sales and manage its costs to grow its bottom line while fending off competitors and building barriers to entry. Even if he was enthusiastic about Facebook’s long-term prospects, McNeil wondered about the risk of overpaying for
Facebook’s stock. On the other hand, he did not want to miss out on what seemed like a great opportunity to buy into the premier social networking site. Facebook was undoubtedly an important player in the U.S. technology sector. The only question was whether it was also a good investment.

20

“Facebook IPO Said ‘Many, Many’ Times Oversubscribed — CNBC,” Dow Jones News Service, May 9, 2012.
“Curb Your Facebook IPO Enthusiasm, Morningstar Says,” Dow Jones News Service, May 11, 2012.
22
“Facebook Raises Price Range to $34 to $38,” Dow Jones News Service, May 14, 2012.
23
Aswath Damodaran’s DCF valuation is taken from his website at: http://aswathdamodaran.blogspot.com/, accessed
October 20, 2012.
21

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

For the exclusive use of L. Wang, 2016.
Page 9

9B12N031
Exhibit 1
FACEBOOK — TIMELINE

Year

Highlights


2004

2005








2006










2007






2008





2009





2010





2011




February. Founded under the name thefacebook.com at Harvard
University
September. Introduced the Facebook Wall, a forum for users to post messages to their friends
Began to expand to colleges and universities around the country
Recorded $382,000 in revenue
May. Grew to support more than 800 college networks
September. Added high school networks
October. Added international school networks and introduced photos Recorded $9 million in revenue
April. Launched Facebook Mobile
May: Expanded Facebook’s availability to workplace networks
August: Rolled out the first version of Facebook API
September: Opened registration broadly; introduced News Feed
November: Launched Share features on 20 partner sites
Recorded $48 million in revenue
May. Launched the Facebook Platform with 65 developers and 85 applications November. Launched self-service ad platform and Facebook
Pages
Recorded $153 million revenue
April. Introduced Chat for users to instant message with their friends. December. Launched Facebook Connect, the next iteration of the
Facebook Platform.
Expanded to 23 languages offered including French, German, and Spanish.
Recorded $272 million in revenues.
February. Introduced the Like button, which lets users connect with things they care about both on and off Facebook
May. Launched Facebook Payments
Recorded $777 million in revenue
April. Introduced Graph API, a new programming interface for the
Facebook Platform, and Social plugins, a set of easy-to-use modules allowing anyone to integrate with the Facebook Platform
October. Launched Groups, a shared space for users to discuss common interests
Recorded $1,974 million in revenue
September. Introduced Timeline, an enhanced and updated version of the Facebook Profile
September. Launched the next iteration of Open Graph
Recorded $3,711 million in revenue

Monthly Active
Users (MAUs) at year-end

1 million

6 million

12 million

58 million

145 million

360 million

608 million

845 million

Source: Facebook FORM S-1/A, Red Herring, May 16, 2012.

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

For the exclusive use of L. Wang, 2016.
Page 10

9B12N031
Exhibit 2
FACEBOOK — CONSOLIDATED FINANCIAL STATEMENTS

US dollars in millions
Consolidated Statements of
Operations:

Year Ended
December 31, 2009 2010 2011

Three Months Ended
March 31, 2011 2012

Revenue
Costs and expenses:
Cost of revenue
Marketing and sales
Research and development
General and administrative
Total costs and expenses
Income from operations
Interest and other income (expense), net
Income before provision for income taxes

$777

$1,974

$3,711

$731

$1,058

223
115
87
90
515
262
(8)
254

493
184
144
121
942
1,032
(24)
1,008

860
427
388
280
1955
1,756
(61)
1,695

167
68
57
51
343
388
10
398

277
159
153
88
677
381
1
382

Provision for income taxes
Net income

25
$229

402
$606

695
$1,000

165
$233

177
$205

$122

$372

$668

$153

$137

1,020
1,366

1,107
1,414

1,294
1,508

1,240
1,488

1,347
1,526

Basic

$0.12

$0.34

$0.52

$0.12

$0.10

Diluted

$0.10

$0.28

$0.46

$0.11

$0.09

Net income (loss) attributable to Class A and Class B common stockholders
Number of shares used for EPS (millions):
Basic
Diluted
Earnings (loss) per share attributable to
Class A and Class B common stockholders

Consolidated Balance Sheets:
Cash and marketable securities

As of
March
31, 2012

Pro forma
Pro forma for stock for stock options + options IPO

$3,910

$3,910

$10,311

Working capital

3,655

3,980

10,381

Property and equipment, net

1,855

1,855

1,855

Total assets

6,859

7,184

13,585

Total liabilities

1,587

1,587

1,587

Total stockholders’ equity

5,272

5,597

11,998

Source: Facebook FORM S-1/A, Red Herring, May 16, 2012.

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

Q3
2009

101

112
117
62
69
360
360

64
63
29
29
185
185

Q4
2010

1.77
0.76
0.31
0.16
0.87

129

130
138
81
83
431
432

82
79
39
35
234
235

Q1
2010

1.87
0.9
0.36
0.23
0.94

155

137
151
96
98
482
482

85
85
45
42
257
257

Q2
2010

1.93
0.84
0.36
0.22
0.90

196

144
167
113
126
550
550

92
94
54
54
293
294

Q3
2010

.

Source: Facebook FORM S-1/A, Red Herring, May 16, 2012.

2.77
1.25
0.46
0.33
1.26

245

154
183
138
133
608
608

99
107
64
58
327
328

Q4
2010

FACEBOOK — KEY OPERATING STATISTICS

Exhibit 3

Note: ARPU = total revenue divided by the average of the MAUs at the beginning and the end of the year.

Average revenue per user (ARPU):
US & Canada
Europe
Asia
Rest of World
Worldwide

Mobile MAUs:
75

Monthly average users (MAUs):
US & Canada
68
81
Europe
71
85
Asia
22
32
Rest of World
35
44
Worldwide
197
242
Total
196
242

50

99
101
48
57
305
305

40
39
13
16
108
108

35

53
50
20
22
144
145

Q2
2009

Quarter

Q1
2009
Daily average users (DAUs):
US & Canada
35
Europe
35
Asia
9
Rest of World
14
Worldwide
92
Total
93

Page 11

2.49
1.19
0.43
0.31
1.14

288

163
201
156
161
680
681

105
120
72
74
372
371

Q1
2011

2.84
1.33
0.50
0.38
1.26

325

169
212
174
183
739
738

117
127
85
87
417
416

Q2
2011

2.80
1.34
0.56
0.40
1.24

376

176
221
196
207
800
800

124
135
98
100
457
457

Q3
2011

3.20
1.60
0.56
0.41
1.38

432

179
229
212
225
845
845

126
143
105
109
483
483

Q4
2011

9B12N031

2.86
1.40
0.53
0.37
1.21

488

188
241
230
242
901
901

129
152
119
126
526
526

Q1
2012

For the exclusive use of L. Wang, 2016.

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

For the exclusive use of L. Wang, 2016.
Page 12

9B12N031
Exhibit 4
PERFORMANCE OF STOCK INDICES, 5 YEARS ENDING MAY 2012

150
NASDAQ 100
Internet software & services

Indexed to May 15, 2007 = 100

125

S&P 500

100

75

Mar-12

Jan-12

Sep-11

Nov-11

Jul-11

Mar-11

May-11

Jan-11

Nov-10

Jul-10

Sep-10

May-10

Jan-10

Mar-10

Nov-09

Jul-09

Sep-09

May-09

Jan-09

Mar-09

Nov-08

Jul-08

Sep-08

May-08

Jan-08

Mar-08

Sep-07

Nov-07

Jul-07

25

May-07

50

Internet Software & Services is measured by the iShares Dow Jones U.S. Technology exchange-traded fund.
Source: Yahoo Finance, ca.finance.yahoo.com/, accessed November 9, 2012.

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

For the exclusive use of L. Wang, 2016.
Page 13

9B12N031
Exhibit 5
MARKET STATISTICS ON US IPOS

Source: Dealogic, Thomson Financial, Ernst & Young, http://www.ey.com/Publication/vwLUAssets/2012_Q1_Global_
IPO_update/$FILE/2012_Q1_Global_IPO_update.pdf; accessed October 2, 2012.

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

For the exclusive use of L. Wang, 2016.
Page 14

9B12N031
Exhibit 6
RECENT TECHNOLOGY IPOS

Total Return
Company

Ticker

IPO date
(in 2011)

Price Range

IPO price ($)

LinkedIn

LNKD

May 19

$32 to $35; revised to
$42 to $45

45.00

$353 million 109.4%

91.9%

45.6%

Groupon

GRPN

Nov 3

$16 to $18

20.00

$621 million 43.0%

21.3%

-5.3%

Zynga

ZYNG

Dec 16

$8.50 to $10

10.00

$1 billion

-5.0%

-6.1%

-11.3%

Gross
Proceeds

1st
Day

1st
Week

1st
Month

Sources accessed October 2, 2012: http://www.reuters.com/article/2011/05/19/us-linkedin-ipo-risks-idUSTRE74H0TL20110519 http://www.nyse.com/press/1305802537651.html http://articles.marketwatch.com/2011-10-21/markets/30759863_1_groupon-online-deals-zynga http://latimesblogs.latimes.com/money_co/2011/11/groupon-ipo.html http://articles.latimes.com/2011/dec/17/business/la-fi-ct-zynga-ipo-20111217 http://techcrunch.com/2011/12/02/zynga-sets-price-range-for-ipo-at-8-50-to-10-per-share

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

For the exclusive use of L. Wang, 2016.
Page 15

9B12N031
Exhibit 7
THE FACEBOOK OFFERING

The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer to sell these securities and neither we nor the selling stockholders are soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)
Issued May 16, 2012

421,233,615 Shares facebook CLASS A COMMON STOCK
Facebook, Inc. is offering 180,000,000 shares of its Class A common stock and the selling stockholders are offering
241,233,615 shares of Class A common stock. We will not receive any proceeds from the sale of shares by the selling stockholders. This is our initial public offering and no public market currently exists for our shares of Class A common stock.
We anticipate that the initial public offering price will be between $34.00 and $38.00 per share.
We have two classes of common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except voting and conversion rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to ten votes and is convertible at any time into one share of Class A common stock. The holders of our outstanding shares of Class B common stock will hold approximately
95.9% of the voting power of our outstanding capital stock following this offering, and our founder, Chairman, and CEO,
Mark Zuckerberg, will hold or have the ability to control approximately 55.8% of the voting power of our outstanding capital stock following this offering.
Our Class A common stock has been approved for listing on the NASDAQ Global Select Market under the symbol “FB.”
We are a “controlled company” under the corporate governance rules for NASDAQ-listed companies, and our board of directors has determined not to have an independent nominating function and instead to have the full board of directors be directly responsible for nominating members of our board.
Investing in our Class A common stock involves risks. See “Risk Factors ” beginning on page 12.

Underwriting Discounts and Commissions

Price to public
Per share
Total

$
$

$
$

Proceeds to Selling
Stockholders

Proceeds to Facebook
$
$

$
$

We and the selling stockholders have granted the underwriters the right to purchase up to an additional 63,185,042 shares of Class A common stock to cover over-allotments. The Securities and Exchange Commission and state regulators have not approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

MORGAN STANLEY J.P. MORGAN

GOLDMAN, SACHS & CO.

BofA MERRILL LYNCH BARCLAYS ALLEN & COMPANY LLC
CITIGROUP CREDIT SUISSE DEUTSCHE BANK SECURITIES
RBC CAPITAL MARKETS WELLS FARGO SECURITIES
Source: Facebook FORM S-1/A, Red Herring, May 16, 2012.

This document is authorized for use only by Lupeng Wang in Valuation in Corporate Finance taught by Liu Yang, University of Maryland from January 2016 to March 2016.

4,207,500

1,325,775

36,711,928
65,947,241
40,109,645
36,656,372
55,026,235
5,313,920
40,355,223
32,784,626
4,713,920
49,630,486

144,418,008
5,016,794
37,274,529

201,378,349
94,567,945

5,166,794
5,166,794
144,418,008
18,581,901

533,801,850
541,994,071
1,075,795,921

0
42,395,203
42,395,203

Class A
Shares
Owned
Post-IPO

201,378,349
44,724,100

Class B
Shares
Owned
Pre-IPO

Class A
Shares
Owned
Pre-IPO

35,487,149
29,049,020
36,751,311
4,304,637
33,356,443
26,227,701
3,771,136
30,430,166

7,929,092
80,600,514

7,929,092
9,297,884

503,601,850
430,293,407
933,895,257

Class B
Shares
Owned
Post-IPO

FACEBOOK —SELLING STOCKHOLDERS IN THE IPO

Exhibit 8

1.4
5.2

Similar Documents

Premium Essay

Case

...CPET 575 Management of Technology Technological Innovation Case I-1 Elio Engineering, Inc Lecture Note & Summary by Professor Paul I-Hai Lin Pages 13-31 of Text Book: Robert A. Burgelman, Clayton M. Christensen, and Steven C. Wheelwright, Strategic Management of Technology and Innovation, 5th edition, McGrawHill, 2009. Case I-1 Elio Engineering Inc. 1 Outline       Origin of Elio Engineering Seat Mechanism Technologies Industry and Regulatory Environment Technological Barriers and Risks Capabilities Requirements for Players in Automotive Seats and Comparative Company Profiles Decision Time Case I-1 Elio Engineering Inc. 2 1 Origin of Elio Engineering Paul Elio  Hari Saknkara   Technical Capabilities • JCI Benchmarking Department • JCI Structural Design and Analysis Department 1996 -1998 • A patent: revolutionary bike design • Failed venture   Technical Capabilities: 1988 – 1997, JCI’s Structural Design & Analysis Department MBA training 1998 Summer Intern at Booz Allen Hamilton, a management consulting firm  Feb. 1998 • A new seat design “No Compromise”  Feb. 1999 Case I-1 Elio Engineering Inc. 3 Origin of Elio Engineering 1998  First venture meeting: Paul & Hari, at Venice, CA  Agenda • ABTS (All-Belts-To-Seat) • Announcement & comments  A cost effective new seat design - a special class of ABTS Utilizing new technology Resulting structure: Low cost, Light weight, Strong • Features ...

Words: 3130 - Pages: 13

Premium Essay

Case

...THE ON OT C OP YO CASE STUDY HANDBOOK RP OS T ON OP YO RP OT C OS T THE ON OT C Write Persuasively About Cases OP CASE STUDY HANDBOOK How to Read, Discuss, and William Ellet Harvard Business School Press Boston, Massachusetts YO RP OS T Copyright 2007 William Ellet All rights reserved Printed in the United States of America 11 10 09 08 07 5 4 3 2 1 No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to permissions@hbsp.harvard.edu, or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163. The copyright on each case in this book unless otherwise noted is held by the President and Fellows of Harvard College and they are published herein by express permission. Permission requests to use individual Harvard copyrighted cases should be directed to permissions@hbsp.harvard.edu, or mailed to the Permissions Editor, Harvard Business School Publishing, 60 Harvard Way, Boston, MA 02163. ON OT C Case material of the Harvard Graduate School of Business Administration is made possible by the cooperation of business firms and other organizations which may wish to remain anonymous by having names, quantities, and......

Words: 96750 - Pages: 387

Premium Essay

Case

...Assignment 1, 2013 – Case Studies Tutorial-based group assessments Due: See ‘Due Dates for Case Study Submission’ section Marks: 30% of the total marks for the unit Background – Learning with Cases Harvard University, probably the most famous source of teaching cases, describes these resources as follows: “Teaching cases – also known as case studies – are narratives designed to serve as the basis for classroom discussion. Cases don’t offer their own analysis. Instead, they are meant to test the ability of students to apply the theory they’ve learned to a ‘real world’ situation … where good accounts of specific events can help exemplify and illuminate theory” (Harvard, 2000). The use of cases based on or around real organisations and/or current issues provides an entirely different approach to learning from that of lectures or more conventional tutorial exercises, where students solve specific problems in isolation from the world of business. Case preparation is a significant part of both undergraduate and postgraduate business study – particularly in the English-speaking world – and it is important to learn to do it effectively and efficiently. I have provided two introductory readings to help you with this process: “Learning Information Systems with Cases” (a pdf file available from your KXO223 MyLO resources) and “Notes on Writing a Case Study Report” (included in this document as Appendix A). Please begin by reading these carefully. Cases are usually based......

Words: 15979 - Pages: 64

Free Essay

Case

...case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case case......

Words: 3640 - Pages: 15

Premium Essay

Case

...Join now! Login Support Other Term Papers and Free Essays Browse Papers Business / Timbuk2 Case Study Timbuk2 Case Study Term Papers Timbuk2 Case Study and over other 20 000+ free term papers, essays and research papers examples are available on the website! Autor: santhanam.vikram 09 December 2013 Tags: Words: 723 | Pages: 3 Views: 86 Read Full Essay Join Now! CASE STUDY: TIMBUK2 1.) Consider the two categories of products that Timbuk2 makes and sells. For the custom messenger bag, what are the key competitive dimensions that are driving sales? Are their competitive priorities different for the new laptop bags sourced in China? Some of the competitive advantage which are the key factors of Timbuk2 bags are:-  Quality  Durable  Reliable  Not prone to defects  Custom made bags for each of the customers  The quick delivery of bags  The rave review which the company gets for its bags i.e. it basically carries a good name in the market  For its laptop bags, even though they are manufactured in china, the designing is done in San Francisco. so the exclusivity remains  Cost effective manufacture of laptop bags in china  Being able to adopt to changes in demand and fashion By manufacturing the bags in china the company saved the manufacturing cost but lost their niche of manufacturing and selling in America itself. The general perception of it being a Chinese product led to customers felling......

Words: 564 - Pages: 3

Premium Essay

Case

.../InstructorResourceManual.pdf‎ The case was prepared by Mark S. Beasley, Ph.D. and Frank A. Buckless, Ph.D. of North Carolina State University and .... Case 1.1: Ocean Manufacturing, Inc. Ocean Manufacutring Inc The New Client Acceptance ... www.studymode.com/.../ocean-manufacutring-inc-the-new-client-accept...‎ Ocean Manufacturing, Inc.: the New Client Acceptance Decision: Case 1.1 Ocean ... Problem Solution: Harrison-Keyes Inc. Ayodeji Ajayi University of Phoenix ... Ocean Manufacturing, Inc.: The New Client Acceptance ... www.freecasestudysolutions.com/case-study-Ocean-Manufacturing-Inc-...‎ Case 1.1 Ocean Manufacturing, Inc.: The New Client Acceptance Decision Ocean Manufacturing, Inc. is recommended as a ... ORDER NEW SOLUTIONS ... Solution Manual for Auditing Cases An Interactive Learning ... testbanksfor.com › All test banks and solution manuals‎ Download Solution Manual for Auditing Cases An Interactive Learning Approach 5th Edition by Beasely. Solution Of Ocean Manufacturing Inc Free Essays 1 - 30 www.papercamp.com/group/solution-of-ocean-manufacturing.../page-0‎ Free Essays on Solution Of Ocean Manufacturing Inc for students. ... ACCT 805AE Case 4 Ocean Manufacturing, Inc The Osprey Group Feb 21, ... Auditing: r c aSe S t h at diSc uSS topicS rel ated to thiS Section 1.1 Ocean Manufacturing, Inc. . Case 1 1 Ocean Manufacturing Inc Free Essays 1 - 30 www.papercamp.com/group/case-1-1-ocean-manufacturing-inc/page-0‎ Case 1.1 Ocean Manufacturing, Inc.:......

Words: 447 - Pages: 2

Premium Essay

Case to Case

...CASE STUDY 2 I. THE ARALIN TEACHER Mrs. Boots De Vola was assigned to teach the first section in third year level. She assumed that she is an effective and efficient teacher in Araling Panlipunan because of that. There are many teachers qualified and much deserving to teach the star section. Now, the students are complaining of the expenses regarding projects, special projects and the way she behave in classroom. II. HISTORY AND BACKGROUND OF THE FACTS Mrs. Boots De Vola have underwent the process of being LSB teacher, PSB teacher, before she was declared as regular teacher in Banana National High School. It has been five years that she handled Aralin in section one. There are congruency on each year complaint but since the students are afraid of failing her subject they remained quiet. I seldom hear news about her projects and the money she collected from her advisory class. Every single mistake has an specified amount to be collected as fine, but the students don’t know where these money will be spent. Another concern about Mrs. Boots De Vola is the way she handled and treated her students. She always nag and shout to students, for her it’s the way of disciplining her students. Some of the students chose to dropped schooling because they felt being degraded and they do not have money for everyday fine. Lately, a mother asked her about the special project of her son amounting one hundred thirty pesos. The project was properly discussed, but we found out that......

Words: 699 - Pages: 3

Premium Essay

Case

...ACE INSTITUTE OF MANAGEMENT Affiliated to POKHARA UNIVERSITY CASE STUDY ON "Managing Motivation in a Difficult Economy" Prepared by Submitted to Raju Karki Shanker Raj Pandey Rama Satyal Ramesh KC Sandeep Amir Kansakar Sanjeev Shrestha THEORETICAL BACKGROUND Motivation is the process that accounts for an individual intensity, direction and persistence of efforts towards attaining a goal. It is the result of interaction between an individual and the situation. Motivated person says "Nothing is impossible” and put his best effort on the task assigned. The different organizational topics covered on the case are as follows:- a. Organizational Justice:- Organizational Justice is the overall perception of what is fair in the workplace. Disruptive Justice is the employee's perception of fairness of the amount and allocation of rewards among individuals. e.g. How much we get paid relative to what we think we should be paid? Similarly, Procedural Justice is the perceived fairness of the process used to determine the distribution of reward. For employees to see a process as a fair, they need to feel they have some control over the outcome and that they were given an adequate explanation about why the outcome occurred. Finally, Interactional Justice is an individual's perception of the degree to which she is treated with dignity, concern and respect. b. Diversity and Age:- Workforce diversity can be studied under two headings:- i.......

Words: 1602 - Pages: 7

Premium Essay

Case

...Case study notes This case has been updated to include the Apple iPad. Principally this is case explores the issue of licensing and how successful firms can become unsuccessful. It is not a case about Apple and why it has become successful. This case study explores the rise of the Apple Corporation. The Apple iPod is one of the most successful new product launches in recent years, transforming the way the public listens to music, with huge ramifications for major record labels. More than 50 million MP3 players are expected to be sold in 2005; over a third more than last year. Mobile phones have long been regarded as the most credible challengers to MP3 players and iPods. The launch of digital download services via mobile phones illustrates the dramatic speed of convergence between the telecom and media industries, which many observers expect to usher in a new era of growth for mobile phones. Users are willing to pay more for additional services and many analysts predict that mobile phone handsets will eventually emerge as the dominant technology of the age, combining personal organisers, digital music players and games consoles in a single device. Indeed, Microsoft founder Bill Gates has predicted that mobile phones will supersede the iPod as the favoured way of listening to digital music. The launch of the Apple ipad in 2010 makes this case even more topical. This should form the basis of supplementary questions at the end of the case: How will the iPhone succeed? What......

Words: 16512 - Pages: 67

Premium Essay

Cases

...Income-tax has stated a case for our opinion on the four questions of law submitted in para 15. Question (4) deals with the genuineness of the alleged loans, but in para 33 the Commissioner explains the basis on which he has submitted this question, although in one sense it may be said to be a question of fact. Turning to the facts it appears that in the year 1921 the assessee formed four private companies which I will call family companies for convenience of reference, although in fact no other member of his family took any direct benefit thereunder. The names of these four companies were Petit Limited: The Bombay Investment Company Limited: The Miscellaneous Investment Company: and the Safe Securities Limited: Each of these companies took over a particular block of investments belonging to the assessee. But as the modus operandi was substantially the same in each case it will suffice to follow out the fortunes of Petit Limited. Taking then Petit Limited as an example, this family company was incorporated about April 12, 1921, with a nominal capital of rupees ten millions divided ultimately into 9,99,900 ordinary shares of Rs. 10 each and one hundred preference shares of Rs. 10 each carrying a fixed cumulative preferential dividend of six per cent. Its issued and subscribed capital consists of 3,48,604 fully paid ordinary shares all held by the assessee, and three fully paid preference shares held by three persons who are alleged in para 24 of the case to be his......

Words: 8140 - Pages: 33

Premium Essay

Case

...Rules on Criminal Procedure, to wit: “Sec. 5. Arrest without warrant; when lawful. — A peace officer or a private person may, without a warrant, arrest a person: (a) When, in his presence, the person to be arrested has committed, is actually committing, or is attempting to commit an offense; (b) When an offense has in fact just been committed, and he has personal knowledge of facts indicating that the person to be arrested has committed it; and (c)When the person to be arrested is a prisoner who escaped from a penal establishment or place where he is serving final judgment or temporarily confined while his case is pending, or has escaped while being transferred from one confinement to another. Under Section 5 (a), as above-quoted, a person may be arrested without a warrant if he “has committed, is actually committing, or is attempting to commit an offense.” In the case at bar, Appellant Doria was caught in the act of committing an offense. When an accused is apprehended in flagrante delicto as a result of a buy-bust operation, the police are not only authorized but duty-bound to arrest him even without a warrant. There is no rule of law which requires that in "buy-bust" operations there must be a simultaneous exchange of the marked money and the prohibited drug between the poseur-buyer and the pusher. Again, the decisive fact is that the poseur-buyer received the marijuana from the accused-appellant. 2. The warrantless arrest of appellant Gaddao, the search of......

Words: 9859 - Pages: 40

Free Essay

Case

...add-on. Initial paper work took some time, so the new patients were asked to come earlier so that the work could be completed on time. Also informing the new patients to adhere to appointment timings was a usual practice to avoid delays. What procedures were followed to keep the appointment system flexible enough to accommodate the emergency cases, and yet be able to keep up with the other patients’ appointments? It is often observed that doctors misuse the time and often emergency cases are taken as excuses for not adhering to the schedule. It was important to make the system flexible to adjust the emergency cases as well as to adhere to the timelines and get back to schedule. In case of real emergencies like fractures or caesarean section etc., all other appointments could be dropped; however in case of small issues, the doctor was expected to come back on track as early as possible and give the patient a choice to wait or reschedule the appointment. Also the assistant of the doctors were ordered to keep some open slots throughout the day for the patients suffering acutely. This time was also used to look into the emergency cases....

Words: 318 - Pages: 2

Free Essay

Case

...Siyu Zhang Case 2 Feb.22 Paperback writer The professor’s book title, Criminal Intent, does not have any kind of legal protection. In order for literary or artistic expression to be protected from copying it must meet three requirements by law. The requirements for obtaining legal protection on this kind of material include the following: it must be original, it must be fixed in a durable medium, and it must show some level of creativity. In this case, Criminal Intent was obviously published in a durable medium; however its level of originality and creativity are minor at best. On the other hand, the titles of the Rolling Stones songs are entitled to legal protection. First of all, titles such as Honky Tonk Woman and 19th Nervous Breakdown would probably be considered more creative and original than in the case with Criminal Intent. Therefore, the Rolling Stones song titles meet all three requirements for protection of artistic expression. Also, this protection would be largely due to the popularity the songs achieved when they were released. The Federal Trademark Dilution Act of 1995 aims to protect trademarks from unauthorized uses even when it is unlikely to confuse consumers. Under Trademark law, an expression may be given protection if it acquires a secondary meaning, meaning that the term or expression has become closely associated with a particular company (in this case, these specific song titles being associated with Rolling Stones). For these......

Words: 660 - Pages: 3

Premium Essay

Case

...Assignment Questions for Harvard Cases 3. Hilton Manufacturing Company In Exhibit 3 of the case, change the description for estimating variable portion of "Compensation" and use 5% of direct labor cost rather than 5% of direct labor and indirect labor cost as indicated in that Exhibit 3. Again, DO NOT USE 5% of DL and IDL costs. A product cost is itself a product of a cost accounting system. To use product cost information in decision making, a manager must understand the nature of the cost measurement system that has been used to estimate a product cost and be able to evaluate whether or not the product cost at hand is appropriate for the decision which is about to be made. A second objective is to provide practice in considering whether or not assumptions about cost behavior are critical to decisions and to expand the notion of contribution beyond the simple idea of price minus variable cost per unit. A third objective introduces the concept of breakeven analysis, not by focusing on the point where no profit is earned but rather as a tool to consider whether or not one of two price points might be preferred. Finally, the last assignment question invites you to consider factors that lead to profitability. You begin your analysis by focusing on two issues raised in the assigned questions. The first is whether the decision not to drop Product 103 as of January 1, 2004 was wise. In addition, you are asked to analyze what would have been the impact on......

Words: 1312 - Pages: 6

Free Essay

Case

...A few tips from Bain & Company: • • • • • Don't get thrown by the interviewer's questions. The interviewer is your ally and uses questions to get a better understanding of your thought process--not to stump you. Be concise. If asked for the top two issues, confine your response to two items. Provide logical back-up for your answers. Be sure to explain what case facts led you to a conclusion, and how you reasoned from those facts to your conclusion. Don't be afraid to ask clarifying questions. If you don't understand the case facts, it will be tough to ace the interview. Relax and have fun. You should learn a lot about yourself through the case interview process. A few tips from Mercer Management: • • • • There is no "right" answer. We are not looking for a specific answer. We are trying to gain some insight on your thought process. Ask questions. We do not expect you to know anything about the industry presented in your case. We do expect you to ask good questions. Think out loud. The point of the case interview is to understand how you think. Structure your answer. We're looking for an organized pattern of thought to attack the problem, not a disparate set of ideas. Help us see how you order your thoughts and ideas, moving from one to the next in order to address the question. While use of a framework may be helpful in this area, be careful if you use one. We want to understand your thought process, not see that you've memorized someone else's framework. (And never use a......

Words: 382 - Pages: 2