For a Post-IPO Facebook, Lots of Cash and Possibilities
Last month, Mark Zuckerberg unilaterally decided to shell out $1 billion for Instagram, a social network based on mobile photos. By end of day Friday, Facebook's CEO Mark Zuckerberg will have even more money to throw around.
According to Facebook's filings with the Securities and Exchange Commission, the company expects to have about $10.3 billion in cash after it sells stock to the public, along with a valuation that could top $100 billion.
So what is Facebook going to do with all that cash?
In its official filings, Facebook says there are no specific plans for the money; it will be used for working capital, general corporate purposes, and mundane uses like paying tax on employee stock grants. But let's face it: $10 billion is a lot more than Facebook needs to pay the electric bill and make good with Uncle Sam.
With that kind of money (and some stock), Zuckerberg could eventually make a run at that other social network, Twitter. He could buy enough patent protection that tech companies like Yahoo would be more careful about making legal attacks. And he could buy lots of startups; former Facebookers Dustin Moskovitz at Asana and Dave Morin at Path are just a couple of examples of the innovative entrepreneurs who are taking social technology to new places.
"Facebook's got essentially the "Brewster's Millions" problem. They've got so much money already, with just the cash that they're throwing off from operations, that they don't actually need the money that they're going to raise in this IPO," says Rocky Agrawal, an independent analyst. That said, if Zuckerberg does decide to get bold, "I would love to see Facebook get into TV, I would love to see Facebook get into the payments space."
There are downsides to moves like that, of course. Like focus. John Malloy, a venture capitalist at BlueRun Ventures, says especially with a sudden windfall, Facebook must be careful to be choosy about where it invests.
"The most important thing is they should figure out what are the areas that are core," he says. "The areas that are core, they have to make acquisitions. They would want to own those."
Mobile is a prime example — which explains that Instagram buy.
Of course, Zuckerberg has all but ruled out making billion-dollar moves like that anytime soon. "We don't plan on doing many more of these" huge acquisitions, Zuckerberg said in a blog post, "if any at all."
Of course, a few months ago, Zuckerberg probably didn't plan on shelling out a billion for a mobile app, either. So things can change.
-By CNBC's Jon Fortt