18 May 2012
No.1 online social network Facebook IPO priced at US$ 38 per share, valuation at US$ 104 Billion
Facebook has priced its initial public offering at $US38 a share, giving the world's No. 1 online social network a $US104 billion valuation in the third largest offering in US history.
The offering puts the eight-year-old company, founded in a Harvard dorm room, a valuation akin to that of Amazon, and exceeding that of Hewlett-Packard and Dell combined.
Predictions on how much the stock will rise on the first day of trading vary greatly, with some experts saying anything short of a 50 per cent jump would be disappointing. Other IPO watchers say the large size of the float, coupled with a raised price range, could reduce first-day gains to as little as 10 per cent.
"I think anything over 50 per cent will be considered a successful offering - anything under that would be underwhelming," said Jim Krapfel, analyst at Morningstar. "A lot of retail investors are not concerned about valuation. That's what is going to drive the first day pop."
Lee Simmons, industry specialist at Dun & Bradstreet, had a more modest forecast.
"You've got a large offering at an increased price, so a huge pop may be difficult to achieve. I'd think a 10 to 20 per cent pop over the offer price is expected," Mr Simmons said. "When you're talking about doubling or a pop the size of LinkedIn, it's more difficult to achieve because Facebook is just offering more shares ... The others were smaller floats, under 10 per cent, so you had this artificial feeding frenzy."
Shares of professional networking company LinkedIn's doubled on their first day of trading.
On Wednesday, Facebook increased the size of the IPO by almost 25 per cent to 421 million shares, a 15 per cent float.
Another social media company, Zynga, an online games developer that makes lots of games for Facebook users, fizzled in its debut and ended down 5 per cent on its first day of trading.
No one said they were expecting a fall in Facebook's stock when it starts trading on the Nasdaq later today.
For the Harvard dorm-born social network that reimagined how people communicate online, the stock sale means more money to operate the data centres that hold the trove of status updates, photos and videos shared by Facebook’s 900 million users.
It means more money to hire the best engineers to work at its sprawling Menlo Park, California headquarters, or in New York City, where it opened an engineering office last year.
And it means early investors, who took a chance seeding the young social network with start-up funds six, seven and eight years ago, can reap big rewards. Peter Thiel, the venture capitalist who sits on Facebook’s board of directors, invested $US500,000 in the company back in 2004.
He’s selling nearly 17 million of his shares in the IPO, which means he’ll get some $US640 million.The offering stands to value Facebook, whose 2011 revenue was $US3.7 billion, at as much as $US104 billion. The sky-high valuation has its skeptics.
Google, whose revenue stood at $US38 billion last year, has a market capitalisation of $US207 billion.
‘‘There seems to be somewhat of a hype around the stock offering,’’ says Gartner analyst Brian Blau in somewhat of an understatement.
There are a few reasons for the exuberance. One is the IPO’s sheer size. Investor appetite for the stock will likely propel Facebook’s valuation above other well-known companies such as Kraft, Disney and even Amazon.com.
Secondly, it’s personal.
‘‘It’s probably one of the first times there has been an IPO where everyone sort of has a stake in the outcome,’’ Blau says. While most Facebook users won’t see a penny from the offering, they are all intimately familiar with the company, so it resonates as something they understand.
And then there’s CEO Mark Zuckerberg, who just turned 28 on Monday. He has emerged as the latest in a lineage of Silicon Valley prodigies who are alternately hailed for pushing the world in new directions and reviled for overstepping their bounds.
He’s counted the late Apple CEO Steve Jobs among his mentors and he became one of the world’s youngest billionaires - at least on paper - well before Facebook went public.
A dramatised version of Facebook’s founding was the subject of a Hollywood movie that won three Academy Awards last year, propelling Zuckerberg even further into the public spotlight.- Reuters AP