Facebook Pushes IPO Ahead, Value Set Above $70 bn
Facebook moved closer toward its hotly anticipated share offering Thursday, setting a price range that values the social network below some expectations but establishes it as one of the most valuable tech firms.
An updated regulatory filing called for shares to be priced between $28 and $35, which would value the California firm between $70 billion and $87.5 billion.
The market value would be below some estimates of $100 billion and put Facebook behind giants such as Amazon and Cisco, but well ahead of some big names like Hewlett-Packard.
It would also make the social network the most valuable U.S. Web company at the time of an IPO, topping Google's $23 billion valuation in 2004.
At the midpoint of the price range, the sale of 337 million shares would generate $10.6 billion, making Facebook's offering the largest IPO of a tech firm and one of the biggest for a U.S. firm.
The net proceeds for Facebook at that price would be $5.6 billion, excluding fees and commission, as well money from shares sold by holders of the previously issued stock, based on a filing with the Securities and Exchange Commission.
The pricing still could change ahead of the offering, based on demand seen from investment bankers.
Lou Kerner, an independent analyst specializing in social media firms, said he expects the share value will rise to $38 to $40 per share as the IPO generates momentum.
"They may put out something lower than that for the initial range, so that they can move it up and create the heat," he told Agence France Presse.
Facebook will trade under the symbol "FB" on the technology-heavy Nasdaq. Trading was expected to be launched May 18, according to news reports.
Under a dual-class stack structure, Facebook founder and chief executive Mark Zuckerberg will retain 57.3 percent of the voting power of the shares. The Wall Street Journal said his stake would be worth as much as $18.7 billion.
Zuckerberg, who according to the filing gets a base salary of $500,000 annually, will see that reduced to $1 in 2013, the filing said. The 27-year-old who created Facebook at Harvard is to sell a portion of his shares, mainly to pay taxes. That would net him $951 million at the midpoint price.
Facebook offered no specific use for the massive cash injection but said it would "create a public market" for shares "and facilitate an orderly distribution of shares for the selling stockholders."
It added that proceeds would be used "for working capital and other general corporate purposes; however, we do not currently have any specific uses of the net proceeds planned."
The timing of Facebook's much-anticipated IPO was put in doubt after the company spent a billion dollars on hot photo-sharing smartphone application Instagram and another $550 million to buy patents from Microsoft.
Those kinds of major purchases by a company typically require updated IPO paperwork.
The social networking star last month reported that its quarterly profit slipped to $205 million despite a surge in revenue as it bumped up research and promotion expenses ahead of its stock market debut.
Revenue nearly doubled to $3.7 billion in 2011, with most of it coming from targeted advertising gleaned from personal information shared by the hundreds of millions of users of the platform.
The new filing said the firm hopes to boost revenues and profits, mainly from advertising.
"Advertising on the social web is a significant market opportunity that is still emerging and evolving," it said. "We believe that most advertisers are still learning and experimenting with the best ways to leverage Facebook to create more social and valuable ads."
The number of people using Facebook had risen to 901 million by the end of the quarter, Facebook said.
Facebook is the leading social network in all but a handful of countries with notable exceptions of China and Russia.
Depending on the final value, the IPO would be one of the largest of a U.S. firm on Wall Street, behind the 2008 offering of Visa ($17.8 billion) and General Motors in 2010 ($15.7 billion), according to Renaissance Capital. At the midpoint it would be the same amount of the third largest, AT&T, which raised $10.6 billion in 2000.
The offering is underwritten by several banks led by Morgan Stanley, JP Morgan and Goldman Sachs.
Based on the estimated market value, Facebook would rank behind Amazon and Cisco, each worth over $100 billion, but ahead of Hewlett-Packard ($48 billion) and struggling Yahoo! ($19 billion).