Whether Facebook Can Benefit from the Changing Between Private Limited Company to Public Limited Company Essay

Facebook is a social net working service, which is started in the United States by Mark Zuckerberg with his friends in 2004. The website’s membership was initially limited by the founders to Harvard students, but was expanded to other colleges, and gradually globalization. In 2012, the fonder of Facebook, Mark Zuckerberg decide to convert the structure of Facebook from private limited company to public limited company. Facebook values shares at ?24 each, and that its shares would began trading in New York on 18th of May 2012. It is seem that Facebook would be worth ?66bn at this price.

The following will analyse whether Facebook can benefit from the changing between private limited company to public limited company. Ltd is the short for Private Limited Companies. Plc is the short for Public Limited Companies. Ltd is a legal structure that a small business usually chooses it to start, while Plc is much bigger than the scope of Ltd. The capital of start a private limited company will often be ?100, actually there is no minimum capital requirement for setting up a private limited company. However, the capital of starting a public limited company is at least ?50,000.

Both Ltd and Plc can be owned by one entrepreneur, and others can invest it as an investor. But Ltd usually operates by a family or a small group of friends, and the shares of Ltd only can sell between family and friends. So Ltd cannot be floated on the stock market. This means Ltd cannot raise capital from the general public. Plc is floated on the stock market; there is no limited on the members of buying shares. It is easy that Plc can raise a number of extra finance. A legal requirement for these two types of companies is that they must state ‘Ltd’ or ‘plc’ after the company name, for example Phones 4U Ltd or British Airway PLC.

The biggest advantage of being Ltd and Plc is that the company has limited liability. This means the owner and the company are different in law. So if a company is fail, the owners have no personal liability for debts. They can only lose the money they have put into the business and do not have to lose their own assets. Facebook choose to be a Ltd company as it beginning, because Mark Zuckerberg and his classmates aer students on that time.

So they do not have enough money to set up a plc company. And the aim of Mark Zuckerberg making facebook is that he just wants the make the distance of eople become closer than before. And make the communication of people convenient. There are many advantages and disadvantages of Ltd and Plc. If a company chooses to be an Ltd, they can get money by selling their shares despite they can only sell shares to friends and family. This might be easy for the company to control the shares selling. That means Mark Zuckerberg only sell the shares of facebook to his classmates and family before its flotation. So he can choose which people do his shareholder. Ltd also can easier to attract investors because of the security of limited liability.

The business is continuity to exist even one of the owners died or sick. However, being an Ltd has negative effects as well. The business cannot sell on the stock market means that they can not gather so much share capitals. This is a reason why Mark Zuckerberg decided to sell the shares on the stock market. The accounts of the business must be public, and the profit should share with the shareholders. The decision making is not just by one person. Sometimes it is a good thing for solve problems, but there is also a potential disagreement among shareholders.

When a company is choosing to be a Plc company, they can get money by selling their shares as well. But the difference is Plc is floated on the stock market, so they do not have the limited on the shares selling, they can sell shares to the general public. On the other hand, this might be difficult for the company to control the shares selling. Similar to Ltd, Plc is continuity too. And the weakness is also like a Ltd. The main difference between Ltd and Plc is the size of business. It is said that in the end of 2011, the company income is $3. 7 billion, up 88% on the previous year.

The net income is $1 billion; increase nearly 400 million, measured in percentage is increasing by 65%. (http://www. ftchinese. com/story/001042946). It is very successful for facebook to increase so quickly as an Ltd in a few years. When it turn to the plc, the size of the business become much bigger than before. Facebook shares ended their first day of trading at $38. 23, barely above the company’s initial pricing of $38. Shares in the social network rose more than 10% to $42 within minutes of trade beginning, before quickly falling back. (From: http://www. bbc. co. uk/news/business-18125532).

It is seems that Facebook does not has a good start on the flotation. Facebook flotation means the structure of Facebook from Ltd to Plc. The benefit for this decision is Facebook can get more money form the general public. Facebook has a lager number of customers; the expansion of facebook will bring them a dramatic increase in profits. However, flotation can bring facebook a amount of investors and capitals despite they cannot control the shares selling. When it is Ltd before, Mark Zuckerberg can control and choose who can buy she shares of facebook, maybe his family and his friends.

But, now, everyone can buy shares of facebook. And when it become Plc, means that facebook is open to the public, the media will also focus on the operation the business. Whether profit or loss, the facebook has no choice to expose to general public. And it is also influence the attractive of investors. The main way of facebook gather profit is come from the advertising. The value of advertising is trust. Many advertising agency suspect the return of investment from facebook, they do not decided advertised by facebook. This would be a hard hit for facebook.

Not only the profit, but also the development and expansion of facebook will affected by this hit. In general, Mark Zuckerberg decide to convert the structure of Facebook from private limited company to public limited company will beneficial the facebook in a short-term, but in the long run, I do not consider that facebook can get a very good benefit. Facebook is the most popular social net working service in the world; it has become inseparable of people. Facebook has hundred of millions of users. So it is looks like Very promising, when facebook is flotated on the stock market, a amount people will buy the share of facebook.

Then facebook will get an amount of capital and profit of selling shares. However, the way of facebook obain profit is depend on the advertising. The figure said that the profit come from advertising accounted for 83% on the total revenue. (http://www. ftchinese. com/story/001042946). So if the advertising agency has find the new way to advertise, the facebook will fail. And in recent, there are so many advertising on the Internet, we cannot distinguish is it real or not, so parts of people will not buy thing according to the effects by the Internet. It is a problem for facebook.

If people do not have influence by the advertising on facebook, the advertising agency will also do not put the money on the facebook. And when the facebook become Plc, the media will focus the operation of facebook. And the profit will be the biggest objective of facebook. This is because the media and the journalists will criticize the company. They will compare the profit and revenue of facebook this year and last year. If facebook do not well than last year, everyone will know about it, so this will be the underlying problem. The aim of Mark Zuckerberg making the facebook is just make communication of people convenient.

He never knows facebook will such successful in today when he make the website of facebook with his classmates. Although, gathering profit is not the aim of Mark Zuckerber, however, when facebook is floated on the stock market, it will not controlled by Mark Zuckerberg anymore. If facebook always loss money, it will not survive on this market. So if facebook want to be successful or making profit in a long run, it might need to create new profuct which is charge. That means facebook must find a new way to make money, not just depend on the advertising.

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