I have just found out about Facebook’s ‘secret’ weapon planned for its IPO very soon. It’s called Loyal3, a way for Facebook users to buy its shares using $10 in their Facebook account.
So why is this a secret weapon? Loyal3, which seemed to have come up from nowhere, has a SEC approved model, and an agreement with NASDAQ to allow any user to buy any shares of listed companies through Facebook with 3 clicks. Users basically buy the stock directly from the company (no brokers, no fees), and you pay the average daily price (no trading).
But what is the business model? If everything is free to consumers, the companies pay the bills, just like at Google. I assume the business model is creating liquidity for NASDAQ and then getting a volume rebate directly from the exchange, so their entire business relies on basically market making the price at night every night (buy or sell anytime but get average daily price) and fees from companies .
This will allow Facebook to “advertise” to its 800 million user base that they can subscribe to Facebook shares, and Facebook users buy ipo shares. Users can then pay $10-2500 a month to get Facebook shares without the need to open another account. Facebook can get 10 million users to pay 10$ per month, and 10 million x $10 are small numbers compared to what they can probably do. If this gets big, it will become biggest IPO ever done – The IPO of internet like I envisioned a year ago. This can make Facebook the largest company in the world faster than anyone can imagine.
Assuming Facebook will use this feature, it will take no time for this to catch on with other internet companies, starting with Google and Zynga offering their users to buy their stocks, which will probably be followed by every listed company.
If this is going to work, then everybody is going to buy their favorite companies’ stocks very soon, on and off Facebook, for $10 a month, and we will see the NASDAQ reaching 5000 very fast, probably by the end of 2012. And like the bankers are saying we are entering the biggest Bull Market of the century .
I will go and buy NASDAQ and Facebook shares now…