New York (Indiana’s NewsCenter) - Just days before Facebook plans to file its Initial Public Offering, General Motors has announced it's pulling out of the social media giant. That will cost the company about $10 million a year in advertising.
Ellen Braitman with Bloomberg said, “GM says it has not been effective for them doing ads on Facebook. Bloomberg gave a call to other auto makers.”
For example, Ford said they are continuing to do ads, and they are actually spending more on Facebook.
What it really raises is the question of how effective Facebook is going to be? Jerome Cleary is betting Facebook will continue to be good business. He's never bought a stock in his life, but that will change Friday when his favorite website goes public.
“I've read things that say you should invest in companies you like or know,” Cleary said. “I know this company very well. I really decided this is going to be my big splurge.”
Facebook announced it will make 25 percent more shares available than what it was initially believed. If they get the $38 a share they are seeking for, the company would be valued at $104.2 billion.
Still, GM's announcement raises doubts because the IPO price is based among other things on its potential to draw future advertising. “Advertising of course is just one way but, certainly a big way that the company can potentially make money as it tries to become a public company and sell shares to investors,” Braitman said. “You know what do investors want to see they want to see sales growth. They want to see profit growth and this had been one of the questions in terms how well Facebook will be able to do that.”
If Facebook is able to get $38 a share it would become the second biggest IPO ever behind only Visa in terms of money raised.
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