The Facebook IPO Primer

If you are interested in the upcoming Facebook IPO, or Initial Public Offerings in general, look no further than The Facebook IPO Primer. Written by Nancy Miller and produced by eWallstreeter.com, this 42 page e-book is so well done it will make your head spin. When Tim Berners-Lee invented the Web browser and took HTML to another level, he had this type on an interactive product in mind. It's a concise, compact, informative piece of work that knows no bounds.

The document is divided into four sections, each one a learning experience in its own right. Readers can jump to each chapter depending on what it is they are looking for. Even as an experienced investor, I read the book cover to cover, and not only did I learn some things about Facebook, but it also refreshed my memory about past manias.

If you are novice investor, Part I will be of great importance to you. Not only does it give a brief history of Internet IPOs beginning with Netscape, but it also discusses technical terms associated with the process: road show, primary offering, and most importantly, secondary offering. There's a trade-off when jumping in on first day of trading, and the author highlights the pros and cons of investing at this juncture. She points out that many companies that were supposed to put your portfolio in a higher orbit ended up being flameouts.

Part II could be dubbed: 'Everything you wanted to know about Facebook, but were afraid to ask'. It delves into the Facebook culture, what their mission is, the possible backlash of having too much information about you and their collision course with Google (GOOG). Here is an excerpt from the text: "Google remains a formidable competitor. It may have the whiff of an underdog but it’s bearing its teeth. It, too, is entering the world of social gaming. And it is charging just 5% fees versus 30% over at Facebook for the use of its platform.".

There is a lot of discussion about Google, which I found extremely informative, not so much about Google and Facebook, but just about the entire Internet sector as a whole. The Big Brother aspect to Facebook, as they mine your digital footprints for prospective advertising dollars, was equally as fascinating. Their lifeblood is peer-to-peer social networking, but let's face it, you're not valued as a $100 billion company without some sort of financial incentive as altruistic as they may seem.

The third section of The Facebook IPO Primer gets down and dirty with the econometrics of the company from the S-1 statement. Here are some bullet points I found helpful:

• Revenues in 2011 topped $3.7 billion, up 88% from 2010, but not as torrid as the 154% gain posted in 2010.
• Net income in 2011 was a cool $1 billion, up 65% from 2010; net income grew more than twice as fast, by 164%, in 2010.
• Earnings per share rose to 52 cents in 2011, up from 34 cents in 2010 and 12 cents in 2009.
• Facebook is a lean machine: costs and expenses were nearly $1.8 billion, just 47% of revenues.
• The company has an incredible war chest of cash - nearly $4 billion.

This just scratches the surface of some of the data that the author presents. Much more fun than reading an IPO prospectus. Additionally, she breaks down the valuation of the company from five different scenarios in easy to read and understandable language. The final chapter is a laundry list of links to a variety of credible Internet articles that will enable you to delve further into the subject if you are so inclined to do so.

The Navy Seals motto is, "The more you sweat in training, the less you bleed in battle.". If you are interested in investing in Facebook, or any IPO, it's always best to do your homework before you go overboard. This e-book doesn't pull any punches, and succinctly boils down the entire Facebook investment story in 42 pages. The Facebook IPO Primer currently is on sale on Amazon (AMZN) for under $4. It's a great tool for investors of all stripes. I am very happy I read this, and has a prominent place in my digital library. It's a keeper.