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Facebook IPO - the new normal?

It used to be that an IPO was:
  1. The first major liquidity event for shareholders
  2. A means to raise growth capital
  3. The first time a company was "market priced" due to (1).
Because private market trading is now so prevalent, even small companies can achieve liquidity early in their lifecycle, with significant trading volume.  This also means that the companies will have fairly accurate market pricing.  If anything, they may be overpriced as the private trading system attracts earlier, higher risk investors.

The secondary markets also provide a means for companies to attract early growth capital...with a lot less hassle than an IPO.  Companies will probably stay on secondary markets until they are more mature, meaning more of the upside value will have been realized before they go public.

This is certainly the case with Facebook.  They are mature, they are profitable, and they raised a lot of their growth capital already.  The IPO (rumored to be raising $10B) is more about establishing a war chest so that they can compete with existing war chests (Google, Microsoft, etc.).  The evolution to the social web has just begun, so this is a smart move.




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