Facebook wants to attract about $10.6 billion through the largest IPO in history offer Silicon Valley, after which the largest social network in the world would reach a market capitalization close to Amazon, according to Reuters. The social network, a project that began eight years ago in the Mark Zuckerberg’s room at the Harvard campus, indicated a price range of $28-$35 per share, which would value the company at $77-$96 billion. The IPO reflects the company’s growth and optimistic expectations of its potential to make money.
“Certainly I’ve never seen an initial public offering of this magnitude,” said Lise Buyer, from the consulting firm Class V Group. Buyer, who worked on the Google IPO in 2004, says the question mark on a company already so big, which attracts so much money, is to what extent its days of strong growth are already history.
Facebook could attract up to $12 billion if sold at maximum price target. If after a very high demand Facebook decides to supplement the program, the funds obtained could reach up to $13.6 billion, according to the IPO prospectus, published by Facebook. The company will receive about half the amount, $5.6 billion of the estimated value of $10.6 billion at an average price. About $4.9 billion will come to the possession of current shareholders. Shares could be introduced for trading on May 18, according to a presentation to investors obtained by Reuters. Also, price range could be adjusted depending on the Wall Street’s reaction.
Analysts expect investors to be interested in Facebook stock, even though there were some concerns regarding long-term growth of the social networking company and the control held by founder Mark Zuckerberg. Facebook’s market capitalization will be 13-16 times higher than the estimates for this year’s revenue, said Max Wolff, an analyst at Capital GreenCrest. Google, the most powerful Internet search engine, is traded on the stock market now at 5.5 to 6 times its estimated earnings for this year, he said.
Facebook executives will start Monday a series of presentations to investors. They will begin in New York, and the tour will include cities like Chicago and Boston, set to conclude on the “ground” of Facebook, in Menlo Park, California. According to sources, Zuckerberg will participate in a series of presentations next week, even if they will be led by the Chief Operations Officer, Sheryl Sandberg, and Chief Financial Officer, David Ebersman.
Some investors believe that Facebook, with 900 million users globally, has set a target too conservative in terms of public offering. “The price range would probably be a tactic one. They will grow,” said an analyst. Facebook plans to sell 337.4 million shares, 12.3% of the company, through public offering.
Facebook investors will get richer after the IPO
Facebook gets only half, $5.6 billion, of the amount of $10.6 billion, calculated at a value price in the mid range of 28-35 dollars per action, targeted by the company for its IPO. The rest, about 4.9 billion dollars will get to privileged investors who were able to get hold of Facebook shares before the listing. The most important of these are the general manager of Facebook, Mark Zuckerberg, the firm Accel Partners, investor Peter Thiel, cofounder of PayPal, the DST company of Russian magnate Yuri Milner and investment bank Goldman Sachs. Mark Pincus, founder of Zynga gaming company, will receive almost $32 million.
The list of those who currently retain their stakes includes Sean Parker, founder of Napster and founding president of Facebook, Dustin Moskovitz, Facebook co-founder and former college roommate of Zuckerberg at Harvard, various company executives and the investment firm Andreessen Horowitz. Of shareholders, Accel Partners will sell the largest stake, for which it could get $1.2 billion if listing occurs at an average price of $31.5 of the range targeted by Facebook.
Zuckerberg will also sell an important package of shares, slightly under one billion dollars. According to Facebook, the head of the company will sells shares to pay taxes for the stake it holds. Zuckerberg will remain with shares of $17.6 billion, but will control 57.3% of the voting rights after listing, as a result of agreements with other shareholders.
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