Sample GMAT Graphics Interpretation Question (Raising Capital for the Facebook IPO)
The chart lists out 10 well known tech, internet, and social media companies. Facebook's IPO is listed at the top and the remaining companies are listed in order of the dollar amount of capital that was raised for its IPO.
Before Facebook, Google raised the largest amount of money. Specifically, it raised $2 billion. Price at $35, Facebook would raise close to $11.8B, dwarfing all the other compaies shown by a large amount.
The chart displays intervals of $200M. Some of the older companies have a slightly lighter shaded bar to indicate the dollar amount it raised adjusted for today's 2012 prices. For example, it would make senes that the oldest company, Apple, raised $101M in 1980 dollars. But adjusted for 2012 prices, that $101M is actually equivallent to today's $281M.
Adjustments for companies that went public in 2011 was not necessary since 2011 prices are not too different from 2012. These 2011 companies included Zynga, Groupon, and LinkedIn.
Facebook IPO News
Of course, we now know that Facebook's IPO was priced outside of the $28-$35 range. In fact, it was priced at $38 and traded up towards $42 on the first day of trading before pluging in the coming weeks below the low end of its initial IPO pricing range of $28.
Facebooks' share price fall impacted the valuation of other startups trying to get funding shortly after the Facebook IPO. One could argue that it was smart for fellow internet companies Groupon, LinkedIn, Pandora, Zynga, and others to rush their IPO and get it done before Facebook goes IPO. These companies were able to ride the wave of bullish investor sentiment.
Shortly after the Facebook IPO, startup valuations went done and it became that much harder for entrepreneurs to value their company as high as they would like.
What are YOUR thoughts on Facebook's valuation at the time of the IPO? Share your thoughts to the right.
source: GMAT Pill
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