What’s Facebook to Do With All That Money?

June 23, 2012

Unlocking Word Meanings
Read the following words/expressions found in today’s article.

1. Initial Public Offering (n.) 
[ih-nish-uhl puhb-lik aw-fer-ing, of-er-] – first sale of company shares to the public which makes a private company a public company
Example: Investors do business strategies when a new Initial Public Offering of a company is announced.

2. startup (n.) [stahrt-uhp] – a new company that has a high potential for growth or profit
Example: Google and Apple are large tech companies that used to be startups.

3. acquisition (n.) [ak-wuh-zish-uhn] – something or someone that has been bought or gained
Example: In 2006, Disney bought Pixar which is one of its most profitable acquisitions.

4. venture (n.) [ven-cher] – a new activity, project or business
Example: Nowadays, tech companies are investing in mobile application ventures.

5. mobile (n.) [moh-buhl, -beel] – cellular phone, the industry related to cellular phones
Example: People like to take pictures on their mobile and posting them on Facebook or Twitter.

Read the text below.
Facebook faces a problem that most companies would like to have: What to do with so much money?

Earlier this year, Facebook decided to buy Instagram, the popular social network that allows people to share photos taken on their mobile phones. Analysts expected Facebook to earn even more money after selling its stocks to the public last May 18.

The company was expected to earn around $10.3 billion from the IPO (Initial Public Offering), increasing its value to more than $100 billion.

With all that additional cash, the company could buy startups like Path, or other social networks like Twitter. However, Facebook says the money won’t be used for anything other than working capital and general corporate use.

Zuckerberg insists in a blog post that they won’t be making any more huge acquisitions. In its official filings, Facebook has no concrete plans on how to spend the money outside of its operations. All the money will be used as a working capital and general corporate purposes including paying taxes.

Rocky Agarwal, an independent analyst, says Facebook does not really need the money from the IPO, but he would love to see Facebook invest in television and the payment space.

Venture capitalist John Malloy, on the other hand, thinks Facebook should be careful about its investments, especially after the IPO. He says Facebook should concentrate on its core areas and only invest in things related to those core areas. One of its core areas is mobile, which explains why Facebook bought Instagram.

Viewpoint Discussion
Enjoy a discussion with your tutor. 

Discussion A

·         If you were part of Facebook’s management, how will you spend the company’s money for more profit?
·         Would you invest your money in internet businesses like Facebook or Twitter?

Discussion B

·         Have you ever tried buying stocks? Why or why not?
·         What are the things that one should think of before buying a company’s stocks?


June 23, 2012