Finance

Facebook IPO Likely to Value the Social-Networker Among the World’s Top Public Companies

Facebook IPO Could Value It Among Top Companies

(AP) — When Facebook makes its long-expected debut as a public company this spring, the social-networking company will likely vault into the ranks of the largest public companies in the world, alongside McDonald’s, Amazon.com and Bank of America.

The Wall Street Journal reported Friday that Facebook is preparing to file initial paperwork for an offering that could raise as much as $10 billion and value the company at $75 billion to $100 billion. The filing with the Securities and Exchange Commission could come as early as Wednesday, with an initial public offering of stock in three or four months.

The targeted amount would slot it among the world’s 25 largest IPOs, although as recently as November 2010, General Motors raised $15.8 billion when it shed majority control by the U.S. government.

The IPOs of 14 companies would rank higher than Facebook’s, according to investment adviser Renaissance Capital. Among them were Visa Inc.’s $17.9 billion IPO in March 2008, the largest for a U.S. company, and world-topper Agricultural Bank of China Ltd., which raised $19.3 billion in July 2010, not including extra shares issued to meet demand.

Facebook spokesman Larry Wu said the company will not comment on IPO-related speculation. The Journal had cited unnamed people familiar with the matter.

The Journal also said that Facebook was close to picking Morgan Stanley as the lead underwriter, which would be a setback for rival Goldman Sachs. Both declined comment to The Associated Press.

The buzz surrounding an outsized haul for Facebook’s founders, employees and early investors remains a hopeful sign for capital markets following a deep recession. At the reported price, Facebook’s IPO would be the biggest for a U.S. Internet company ever – topping the debut of one of its main rivals, Google Inc.

“We are expecting 2012 to be a year of recovery for the IPO market led by the Facebook IPO,” said Kathy Smith, Renaissance Capital’s principal.

The event will follow a string of tepid debuts by technology startups including social game maker Zynga and discount advertiser Groupon. The stocks of both companies are just pennies above their offering prices in December and November respectively. Zynga’s stock fell 5 percent below the IPO price on its first day of trading.

Facebook’s will be the most anticipated tech IPO since Google went public in August 2004. Not including shares sold by early investors, the Internet search giant raised $1.2 billion and grabbed a market value of $23 billion, the biggest so far for a U.S. Internet company. The IPO raised $1.9 billion, including shares sold by early investors and extra stock issued to meet the heavy demand. It‘s not known whether Facebook’s $10 billion target includes shares owned by early investors.

Facebook’s reported valuation of $75 billion to $100 billion compares with about $100 billion for McDonald’s Corp., $90 billion for Citigroup Inc. and Amazon.com Inc. and $75 billion for Bank of America Corp. It would exceed the market cap of $55 billion for Hewlett-Packard Co., one of the world’s largest technology companies by revenue.

Both Facebook and Google earn most of their money from advertising and are now competing to gain as much information as possible about their users to help advertisers target niche audiences.

According to eMarketer, Facebook is expected to grow its share of the U.S. display ad market to about 20 percent this year from 16 percent in 2011, above second-ranked Yahoo’s expected share of about 13 percent. For overall online ad revenue, Facebook is seen grabbing just 8 percent of the market this year, compared with 45 percent for Google.

EMarketer estimates that Facebook’s ad revenue will grow 52 percent to $5.78 billion this year and will reach $7 billion in 2013.

Despite presumably topping Google’s public launch, Facebook spent more time growing behind the veil of private ownership than its rival.

Facebook was founded by Mark Zuckerberg and his college roommates in 2004 and is debuting on stock markets in its eighth year. Google’s IPO came six years after being founded by Larry Page and Sergey Brin. When Google turned eight in August 2006, its market cap was roughly $116 billion. Today, the company is worth nearly $190 billion – down from a peak of about $235 billion in November 2007.

Investors may be asked to bet heavily on the belief that Facebook will continue to revolutionize the way people communicate around the globe. Even with Facebook’s heady growth rate, Google had ad revenue last year of more than five times what Facebook is expected to get in 2013. Yet it is Google that is mimicking Facebook in building a rival social network called Plus.

“There’s the general feeling that Facebook might be the future of the way the Internet works,” said eMarketer analyst Debra Aho Williamson.

Zuckerberg, 27, is already worth $17.5 billion, based on the latest estimates from Forbes magazine. Most of that wealth is drawn from the value of Facebook shares that have traded among a small universe of well-heeled investors that buy stakes in companies before they go public.

As the company gauges public demand for its stock, the number of shares offered and the price asked could change significantly. Groupon had to refile its securities paperwork repeatedly as regulators questioned some of its accounting methods. Even Google took in less than it hoped as people shunned an unorthodox auction-based offering.

John Fitzgibbon Jr., publisher of IPOScoop.com, said it’s too early to get excited.

“Until they actually put the ink on the paper and push it across the desk of the SEC, it’s all speculation,” he said.

The possible filing next week isn’t all that surprising.

Federal rules require companies with at least $10 million in assets and more than 500 shareholders to disclose its quarterly financial results and other details. The reporting requirement kicks in 120 days after the fiscal year in which a company exceeds the shareholder threshold for the first time.

Facebook’s fiscal year ends Dec. 31, so it has until late April 2012 to comply with this requirement, having hit the 500-shareholder threshold last year. Because it typically takes three or four months after filing paperwork to issue the IPO, a Wednesday filing would allow it to meet the deadline. If it happens in May, it could become a lucrative birthday gift for Zuckerberg, who will turn 28 that month.

Comments (18)

  • Mr.Fitnah
    Posted on January 30, 2012 at 8:41am

    Im pleased Im not involved with facebook.
    I will not have to pay to access my account as they will soon enough.
    I dont pay to play on the interweb.

    Report Post » Mr.Fitnah  
  • One Man Progressive Wrecking Crew
    Posted on January 29, 2012 at 8:45pm

    That‘s funny stuff because everyone I know is canceling their accounts like wildfire now that they’ve turned to manipulating their clientele and lying about their motives for this ‘info grab’ and who they’re sharing this info with. Not me

    This is nothing but Myspace and will be useless in 6 months or less. Anyone buying this IPO should have their license to trade revoked because everyone can see Facebook is a trendy app and nothing more. It’s heyday is over in America at least.

    Report Post » One Man Progressive Wrecking Crew  
  • POdVet
    Posted on January 29, 2012 at 10:58am

    Zynga games had a lousy IPO yet these rocket scientists expect Facebook to have a great one. If it wasn’t for people having multiple Facebook accounts to play Zynga games on, Facebook would have only about 1/2 of it’s registered users! Literally 90% of people I personally know who go on Facebook, do that to help themselves in those games! Some have as many as four or five accounts, all so they can send themselves gifts from game to game. And those not gaming, well they are just as likely to be scam artists out to rip people off using other people identities since Facebook refuses to do anything about it even after an account has been reported as being hacked and taken over or blatantly copied. My wife had that one done to her, someone copied her entire page after they had hacked into one of her friends accounts right down to her photo’s of our dog and made a new account. When she reported it to Facebook multiple times she got no response at all. I finally went to the fake persons page, contacted every one of my wifes friends from that impostors list and told them what had happened. The fake had been trying to run a scam!

    Report Post »  
    • jb.kibs
      Posted on January 29, 2012 at 12:07pm

      what’s even funnier, this just proves how stupid our economics is. how much money does facebook, THEMSELVES, produce? 0? it’s all advertising… and i don’t know a single person who clicks those ads… just because they are there does mean “people SEE them”. selective sight works like selective hearing. you know it, i know it, they know it. facebook itself makes 0 dollars. they charge 0 dollars to join, they have a 0 dollar membership fee, they loose money on servers, employees, etc… without advertising, which will die out eventually, facebook is techincally nothing. also, when facebook dies, a new one will rise in a matter of days.

      Report Post »  
    • One Man Progressive Wrecking Crew
      Posted on January 29, 2012 at 8:50pm

      “Zynga games had a lousy IPO yet these rocket scientists expect Facebook to have a great one. If it wasn’t for people having multiple Facebook accounts to play Zynga games on, Facebook would have only about 1/2 of it’s registered users! ”

      You’re exactly right, and also take all the fake accounts that trolls use to ‘comment’ all over the web so they don’t use their real names, and I’d bet only a 1/4 of their accounts are real individuals.

      Report Post » One Man Progressive Wrecking Crew  
  • Meyvn
    Posted on January 29, 2012 at 9:36am

    Meh

    Report Post » Meyvn  
  • Amherst Patriot
    Posted on January 29, 2012 at 8:30am

    Given that members of Congress will get offers to buy in before the public, this should make everyone in DC very happy. How about calling your members and asking if they will pledge NOT to take advantage of this wonderful “insider trading” opportunity.

    Report Post »  
  • grannyrecipe
    Posted on January 29, 2012 at 7:21am

    You may want to invest in Facebook but the first day its price drops dump it. It will absolutely go the way of Myspace. Every time a web site goes corporate it goes bust because there is just something about corporate paradigms that don’t cross over with the appeal of the free nature of social networks.

    I agree that the purpose of business is to make as much money as you can (without causing harm or damage) but when it comes to the internet and all you are doing is selling ad space and other connections and other non tangible things, they always end up crowding the user.

    Additionally, the next best web site is always on the horizon. Myspace is almost ready to pay someone to take it because Facebook came along and Facebook has the same fate in it’s future.

    Report Post » grannyrecipe  
    • TomFerrari
      Posted on January 29, 2012 at 10:02am

      I tend to agree w/ you…
      Somebody at the helm needs to have a major stake in the company – a major downside risk – a personal reputation – a family name.
      That is what keeps companies great !
      Look at Apple – Steve Jobs – When he left for a while, what happened? (I don‘t have high hopes for Apple’s future as of his passing.)
      SC Johnson – family owned – same thing – stays great.
      Mom and Pop retailers in our neighborhoods – stay great, or they disappear.

      Incorporating shields investors from personal risk, which creates an environment where they are motivated (usually) solely by STOCK PRICES – not by profit alone. Is there a correlation between stock price and profit? Usually, but, definitely not 1:1.

      I’m a hardcore capitalist, but I have long-term concerns over global corporations, who’se allegiance to the U.S. is questionable. Once they fully saturate a world market for their product, what is left for them? Look at GE. We split up smaller companies, but not GE. Wonder why? We refuse to allow AT&T to buy T-Mobile, but nobody raises a question about GE.

      Tech companies need to stay agile. Look at HP and Microsoft. Failure to (sufficiently) innovate has caused both of them significant issues. Tech is all about TOMORROW, less about today.
      Big ships are slow to turn.

      Report Post » TomFerrari  
    • Rowgue
      Posted on January 29, 2012 at 12:11pm

      @TOM

      Apple struggled after jobs left because jobs was engaged in an anti-apple smear campaign from the moment he left.

      He was an incredible salesman. Especially when what he was selling wasn‘t worth it’s weight in spit, like apple products and the bogus stories he was making up to smear the company after it dumped him.

      Report Post »  
    • jb.kibs
      Posted on January 29, 2012 at 12:16pm

      yep, NO ONE cares more about YOUR company than YOU…
      that is why family owned \ “ma and pa” shops are always quality service and goods. it’s THEIR name, THEIR store, THEIR friends\customers… public run companies ALWAYS, get complacent, cheap, etc.. ALWAYS. 100% of the time. i believe that you can not name 1 single company who used BETTER Quality\More reliable parts and had BETTER Quality\More reliable service after they IPO’d… if you can… then let me know, thx… i really believe public traded companies are like government run anything… committees always screw things up…

      Report Post »  
  • Rowgue
    Posted on January 29, 2012 at 3:04am

    People that feel the need to update other people about their activities every thirty seconds use twitter now. Facebook is obsolete and flailing.

    Report Post »  
  • sillyfreshness
    Posted on January 29, 2012 at 1:17am

    I don’t see how Facebook could be valued anywhere near 100 billion. They don’t make anything and I doubt they are bringing in that kind of money in advertising. Like GM which was hyped at it’s restart IPO at $38 a share, it quickly dropped. I think Facebook will screw a lot people after the initial offering. It’s value will quickly go downward from the 100 billion value. I won’t be investing in this IPO. Besides, I don‘t even like Facebook since it’s a stooge providing info to the government to spy on Americans.

    Report Post » sillyfreshness  
    • Theodwulf
      Posted on January 29, 2012 at 5:41am

      Looky there, the start of another Tech bubble, maybe that will distract peoples attention from the housing bubble , thta started to distract people from the last Tech bubble

      Report Post » Theodwulf  
  • endgamer
    Posted on January 28, 2012 at 7:15pm

    Will the ipo be offered to the public? Usually they are not. If it is I’m in for 5 grand.

    Report Post » endgamer  
    • doomytram
      Posted on January 28, 2012 at 7:21pm

      You would have to be a US Senator to get in early. The more money you have and the earlier you can pick up those options the better.

      Report Post » doomytram  
  • doomytram
    Posted on January 28, 2012 at 7:13pm

    Barry is going to take some of his 1.2 trillion and go large on FB. The IPO will go way over 100 billion.

    Report Post » doomytram  

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