Facebook filed for a $5 billion initial public offering (IPO) on Wednesday and is expected to go public in the middle of this year. There is no definite price per share of FB (the official stock ticker) yet, but the IPO will likely push Facebook to a staggering $100 billion valuation. Facebook was valued at $89 billion based on recent trades on Sharespost, a secondary market for stocks of privately held companies.
Although initial reports had pegged the IPO at $10 billion, sources familiar with the matter said that $5 billion is just a preliminary target and the offering will be increased in the coming months depending on investor demand.
Morgan Stanley was picked as the leading underwriter in what is described as thebiggest IPO coming from Silicon Valley, a record held by Google for its $1.67 billion IPO back in 2004. Other underwriters for this highly anticipated IPO includeJPMorgan Chase & Co., Goldman Sachs Group Inc., Bank of America Corp., Barclays Plc and Allen & Co.
With 533.8 million shares or 28 per cent of the company under his name,Facebook co-founder Mark Zuckerberg will be worth around $28 billion once the company debuts in the stock market. He will become the fourth richest American, preceded only by Bill Gates, Warren Buffett, and Larry Ellison, based on the Forbes 400 list as of September 2011.
Major stockholders of Facebook include co-founder Dustin Moskovitz (133.8 M shares or 6%), Jim Breyer of Accel Partners (201.4 M or 10 %), Digital Sky Technologies (10%), T. Rowe Price (5.2%), Paypal co-founder Peter Thiel (44.7 M or 3%), Microsoft ( 1.3%), Li Ka-shing (.75%) and Marc Andreessen of Netscape (3.6 M shares), among others.
Zuckerberg will reportedly sell an undisclosed number of shares in the IPO but will continue to reign supreme in the company since he will retain 57 per cent of its voting share power. Effective January 1, 2013, Zuckerberg’s compensation will be reduced to just $1, just like Steve Jobs.
Facebook had a profit of $1 billion last year out of $3.71 billion in revenues. Itsbiggest source of income is advertising, at 85 per cent, while the rest come from social gaming and other fees. Zynga reportedly contributes 12 per cent to the social network’s revenues.
While revenues increased by 88 per cent and profit is up by 65 per cent compared to 2010, Facebook’s costs and expenses are increasing faster than its revenue. Still, many analysts think that Facebook had barely scratched the surface when it comes to generating revenues from its 845 million members, 57 per cent of whom are daily active users.
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