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B&E This Fortnight
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Issue Date - 16/02/2012
Facebook IPO It was the top rumour of 2011, but it never came to pass. Now, however, web entrepreneur Mark Zuckerberg-owned Facebook looks all set to launch its initial public offering, for which many have been waiting with bated breath. The social network company, with 850 million users worldwide - more than the combined populations of the US, Brazil and Mexico - is expected to announce its plan for going public anyday now. For a firm that came into existence only seven years ago and only recently started making money - it reportedly pulled in $1bn last year - Facebook is looking to raise between $5 billion and $10 billion by selling shares in an IPO that will value the firm at somewhere between $75billion and $100billion. Many Internet firms have raised money by going public in recent times. Google raised $1.9 billion in 2004. More recently, Zynga raised $1 billion, Groupon raised $700 million and social network LinkedIn raised $353 million. Facebook’s business revenues have been a source of much speculation and its filing with the U.S. Securities and Exchange Commission will provide investors with their first glimpse into its business performance. The company’s ad revenue is expected to reach $7billion by 2013 and it has already become number one in online display advertising revenues, taking 16.3% of the market, says eMarketer, a research firm.
Apple’s cash pile

Apple CEO Tim Cook has a problem, a $98-billion problem. It has presented Cook with his first real public test as chief executive: figuring out what to do with the money. The mountain of cash currently is a much bigger overhang on Apple’s stock, widely considered to be undervalued. Apple now has $104 in cash per share. But as they say, with more money comes more problems. Apple’s current cash balance is a quarter of its $415-billion market capitalization. Most of Apple’s cash is tied up overseas - $64 billion of its $98 billion. The money, if brought into the United States, will be subject to a 35% tax, skimming over $22 billion off the top. Wall street analysts claim that Apple will pay a dividend to investors in 2012, but it is still not clear as to how the company will use its cash.

IMF’s 600-bn plan

Keeping in mind the euro zone debt crisis, the International Monetary Fund (IMF) is looking at increasing its war chest to more than double its present size by raising $600 billion. The funds will be directed towards providing financial relief to countries struggling with the fallout from the growing euro zone debt crisis. Out of the total amount, close to $500 billion will be for lending while $100 billion will be kept aside as a ‘protection buffer’. This assumes importance in the context that the IMF fears that the global economy risks facing a $1 trillion financing gap over the next two years if global economic conditions worsen considerably. . However, countries like the U.S., Canada, Japan and South Korea are opposing the idea saying that Europe must put more of its own money to resolve the sovereign debt crisis. It is highly probable that even China and Brazil might insist on a number of conditions before they support boosting IMF resources.

Tata-starbucks JV

Starbucks, which boasts of 17,000 outlets globally, has now set its sights on India. It is entering the country with a 50-50 joint venture with Tata Global Beverages. The joint venture company, with an initial investment of$80 million has been named as Tata-Starbucks Ltd. Starbucks will open its first coffee shops in Delhi and Mumbai by August or September this year and aims to have 50 outlets by the year end. The stores will be opened in Tata owned firms like Taj hotels as well as in malls, railway stations and airports.


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