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Facebook gets ready for IPO, sets price range at $28 to $35
On Thursday, all eyes were on Facebook, as it announced a proposed price range of $28 to $35 per share for its initial public offering.
According to media reports, at the high end, this could raise as much as $11.8 billion. If the underwriters sell the extra stock reserved for overallotments, the IPO will value Facebook at $79.3 billion at the high end of the price range.
This means, with the success of this IPO, Facebook will make history for clocking numbers much higher than any other Internet IPO in the past, even Google in 2004, which raised $1.9 billion.
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Facebook gets ready for IPO, sets price range at $28 to $35
According to New York Times, the company is in process of finalising its prospectus, as it gears up for a number of road shows organised to meet potential investors in cities like New York, Boston, San Francisco, Chicago, and Baltimore.
The road show will also help the company and its bankers to estimate investor demand, which will help them to set a final price. If all goes as per the plan, Facebook is expected to freeze on a final price on May 17 and make it public debut on May 18.
The filing on Thursday is the first time Facebook officially indicated where its shares will be valued. The company is expected to begin trading on the Nasdaq, under ticker "FB," in two weeks.
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Facebook gets ready for IPO, sets price range at $28 to $35
Investors and the industry have been eagerly awaiting the Facebook IPO. They are drawn in by the prospect of strong growth, given the popularity of the social networking site.
It is reported that Facebook has more than 900 million users. And, its daily active users, a measure of engagement, increased by 41 per cent, to 526 million.
Even though, revenue continues to rise, profits dipped in the first three months of the year, falling 12 per cent, to $205 million, the excitement around the IPO is still high.
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Facebook gets ready for IPO, sets price range at $28 to $35
Facebook's CEO Mark Zuckerberg, who turns 28 this month, is planning to sell 30.2 million shares, worth $951 million. But it is reported that Zuckerberg will still keep a tight control over the company even after the IPO.
According to the reports, he will control about 58 per cent of the company's voting power. This means he will take a final call on the biggest decisions facing the company, even after it goes public.
The other big sellers include Accel, a global venture and growth equity firm, which is selling about 19 per cent of its stake. While, Russian billionaire Yuri Milner's DST Global is selling about 20 per cent of its holdings.
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Facebook gets ready for IPO, sets price range at $28 to $35
Also, Goldman Sachs, which organised a large financing round for Facebook just last year, is also unloading 20 percent of its stake, or 13.2 million shares.
There is no doubt that the hype surrounding Facebook's IPO is enormous, and it won't be completely wrong to expect that the shares will soar in early trading. But analysts are doubtful of the strength of Facebook's business model and its growth prospects.
Facebook had revenue of more than $1 billion in 2011, according to its SEC filing.