Facebook sets richest tech IPO in motion

Posted at 05/18/12 3:54 PM

NEW YORK - Facebook on Friday is to make the richest-ever share offering for a technology firm, raking in billions of dollars it could wield to dethrone Google as king of the Internet.

Facebook stock priced at $38 per share was to begin trading under the symbol "FB" on the Nasdaq, giving the world's leading social network a dizzying value of $104 billion at its initial public offering (IPO) of stock.

Investors were keen to own pieces Facebook, which grew from a Harvard dormitory project in 2004 to an online community with more than 900 million denizens.

Facebook reportedly planned to go public hacker style with an all-night software bending bash to culminate with co-founder Mark Zuckerberg remotely ringing the Nasdaq opening bell.

Employees were to join in a "hackathon" to start late Thursday at Facebook's offices in the Silicon Valley city of Menlo Park and continued until the IPO at which 421 million shares of common stock will be sold.

Facebook itself is selling 180 million and holders of previous shares are selling 241 million.

Facebook was on course to raise $16 billion with the IPO, behind only that of financial giant Visa in 2008, according to Renaissance Capital. The addition of a possible stock "over-allotment" could boost the total to some $18.4 billion.

At a market worth of $104 billion, Facebook would be among the most valuable US firms, ahead of sector giants like Amazon ($98 billion) and Cisco ($89 billion), and more than twice the value of Ford Motor Co. ($38 billion). But it remains behind Google ($203 billion) and Apple ($495 billion).

Under the share plan, co-founder Mark Zuckerberg will hold 55.8 percent of the voting power, and some 18.4 percent of the value of Facebook. The 28-year-old controls the firm through a dual class stock structure.

Wall Street and investors around the globe have been girding for a Facebook IPO frenzy.

In the past few days, Facebook boosted the estimated price for the shares, and added to the number of shares being offered from insiders.

London bookmakers anticipated a stampede. At the betting firm Spreadex, clients have been speculating that shares could rise above $56 after their first day.

Wedbush Securities analyst Michael Pachter believed that despite the large number of shares being offered, Facebook stock price will climb quickly in trading.

"I would guess it trades a lot higher, and settles in the mid-40s (dollars)," Pachter told AFP.

Spreadex noted that among other tech IPOs, LinkedIn rose 109 percent the first day while Groupon surged 31 percent. Social game maker Zynga lost ground on its first day.

But Spreadex spokesman Andy MacKenzie said that "we have had some customers holding back based on their belief that Facebook shares may well fall in value after the furor over the initial launch has died down."

Lou Kerner, founder of The Social Internet Fund, said he expects a strong response.

"US institutional demand has been good, the retail and global demand has been overwhelming," he said.

London-based Hargreaves Lansdown Stockbrokers said Facebook may have a hard time living up to lofty expectations but pointed out that it is "a relatively developed company which can display 'real' income and profit."

"There are extremely high expectations for the company's prospects and perhaps on that basis it deserves the punchy valuation it has been given, the brokerage said in a note to clients.

But the brokers said Facebook faces challenges including how to make money from the growing base of mobile users.

The IPO's net proceeds to the company were estimated at $6.4 billion. The rest of the cash goes to Facebook insiders and others who made early investments in the social network, and to cover the IPO costs.

The Wall Street Journal said 57 percent of shares will be from insiders, which is an unusually high percentage. Under Wall Street rules, investors have to wait six months to sell any shares not offered at the IPO.

Some analysts predicted Facebook's stock price will jump quickly to $44 a share but the long-term outlook is less clear.

At the heart of the debate about the wisdom of owning a piece of Facebook is how much revenue it takes in.

Revenue vaulted to $1.06 billion in the quarter which ended March 31 -- an improvement year-over-year, but down about six percent from the previous quarter.

According to Experian Hitwise, Facebook.com received nine percent of all US Internet visits in April 2012. It had 1.6 billion visits a week and averaged more than 229 million US visits a day for the year-to-date.

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