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Facebook set for first earnings report

26 Jul 2012

Facebook is set to reveal its first ever quarterly earnings later on Thursday after a less than successful first few months as a public company.

The firm launched on the Nasdaq on 17 May after years of hype around its flotation, with investors falling over themselves to purchase shares in the firm which now boasts almost one billion members.

However, the launch proved a flop, with the Nasdaq suffering from technical problems that made it hard for share owners to sell their holdings, while the share price ended the first day up on a measly $38.23 per share from its launch price of $38.

After this investor anger over rumours of tip-offs being given to those in big banks led the price to drop to as low as $25 although it has risen again to $29, although this has still wiped billions off the company's initial valuations.

The firm is also facing investigations by the Securities and Exchange Commission and the Financial Industry Regulatory Authority into the events around its flotation.

Victor Basta, managing director of financial advisors Magister Advisors, said Facebook could struggle to ever reach the hype around its launch price of $38 unless it addresses several key issues.

"For Facebook, developing a way to make money from mobile, and capture more of the advertising revenue running through its platform, is crucial to restoring value," he said.

"Otherwise it can never recapture even its IPO price, let alone show a return to shareholders."

No doubt Facebook will be hoping its financial figures prove to investors that the firm has a viable long-term financial strategy and causes its share price to rise.

The firm will also be hoping to prove it can take on the might of Google, which last week posted bumper financials, underlining the dominance of the firm's position in the advertising market, an area Facebook could threaten in the future.

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Dan Worth

Dan Worth is the news editor for V3 having first joined the site as a reporter in November 2009. He specialises in a raft of areas including fixed and mobile telecoms, data protection, social media and government IT. Before joining V3 Dan covered communications technology, data handling and resilience in the emergency services sector on the BAPCO Journal

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