Banks toss $8bn into Facebook's lap ahead of IPO
Not worried that FB's coughed to having fake users
Facebook has admitted that some of its 845 million accounts might be fake or duplicated user identities, but that doesn't seem to be worrying the banks since they have doubled the social network's loans to $8bn to take care of its market debut.
Facebook said in additional filings to the Securities and Exchange Commission (SEC) that it now has secured a $5bn credit facility for "working capital and other general corporate purposes" – up from a previous promise of $2.5bn. And just in case that doesn't quite cover things, it also secured a bridge loan, which will give it access to an additional $3bn specifically to fund its tax obligations.
After some pundit chatter about whether Facebook really had the number of active users it was claiming it had, the firm admitted that it couldn't really know for sure that all of its 845 million users worldwide were individual accounts.
"There may be individuals who have multiple Facebook accounts in violation of our terms of service, despite our efforts to detect and suppress such behaviour," the filing conceded.
"We estimate that false or duplicate accounts may have represented approximately 5 to 6 per cent of our monthly active users as of December 2011."
In the case of mobile users, canny folk pointed out that Facebook apps might be contacting the social network's servers for updates automatically without the user being active at all. Facebook also acknowledged this issue, but said it wasn't a big problem in its user count.
"We estimate that less than 5 per cent of our estimated worldwide daily active users as of December 31, 2011 and 2010 resulted from this type of automatic mobile activity, and that this type of activity had a substantially smaller effect on our estimate of worldwide monthly active users and mobile monthly active users," the filing said.
Facebook also had to point out that, since it last spoke to the SEC, it had started to have a little problem with Yahoo!, which is now claiming that the social network is infringing on some of its patents and it wants some licences fees now please, or it'll see Facebook in court.
"We presently are involved in a number of lawsuits, and as we face increasing competition and gain an increasingly high profile, including in connection with our initial public offering, we expect the number of patent and other intellectual property claims against us to grow," Facebook said.
"For example, on February 27, 2012, we received a letter from Yahoo! Inc that alleged that a number of our products infringe the claims of 13 of Yahoo’s patents.
"We are still in the process of investigating the allegations contained in the letter. To date, Yahoo has not commenced any legal action against us, but it may do so in the future," it added.
Clearly this risk isn't bothering Wall Street too much though, since with its 25 new underwriters, Facebook now has pretty much the whole Street backing its coming out party. The social network has most of the big boys in its stable, as well as some of the smaller financial houses, including Morgan Stanley, JP Morgan, Goldman Sachs, Merrill Lynch, Deutsche Bank and Wells Fargo, to name a few.
Facebook now has a total of 31 underwriters, which are the banks that get potential investors interested in a new issue and sell the stocks, guaranteeing a price for a certain number of the shares. ®
$8bn. So that's a dollar for every man, woman and child on the planet. Plus all the dogs, I think.
Of course, you'll want that back with interest. And you'll want it back in, say, 5-10 years. And you'll be paid back by Facebook's money-making expertise, which basically consists of Google Ads (of which Google only gets about $9bn a year itself - before costs).
So you're suggesting that ONE website on the planet is going to make, say 1/5th to 1/10th, of the money that Google sees from ads (not including costs) in pure profit that it can afford to pay you back. AND MORE, to keep running effectively. And for this state of affairs to continue (at both Facebook and Google, without ANYTHING changing in terms of customer numbers, etc.) until the company is sold at a profit and/or the loan is paid off.
That's a lot, considering that most people use Facebook for a bit of IM and for showing granny their baby pics.
I'd like to contrast this with a friend of mine recently who was refused by their bank to have a debit card (or credit card, or overdraft, or chequebook, etc. - only an ATM card) on their account when they earn a verifiable, reliable, and historical £50,000 a year at a job that took them 10 years to qualify for, and had no debts, when the bank next door (one of those bailed out by the government) offered her credit card, debit card, chequebook, mortgage, etc.)
Banks have a lot to answer for.
Facebook mostly created the 'fake account' problem for itself, by selling itself as a platform, especially for games, and especially for 'social' games.
You can play these games with all your friends, sure. Or you can create a handful of fake accounts to get all the benefits of 'playing with your friends' with none of the hassle. I know lots of people who do that - have four or five fake accounts they just use for playing games.
(No, that does not include me. I have better things to do than play games on Facebook. Yes, one of those things is posting in Reg comment threads. No, I didn't say the things were _very much_ better than playing games on Facebook...)
Re: Next big banking bail out?
Of course they've learnt something: if they gamble big-time with our money and fall flat on their @rses, the governments of the world will commit our money to bailing them out. Trebles all round!