Facebook boosts IPO size by 25 pct, aims for $15 bln


  • Business
  • Wednesday, 16 May 2012

Facebook, founded eight years ago by Mark Zuckerberg in a Harvard dorm room, will add about 85 million shares to its IPO, floating about 422 million shares in an offering expected on Friday, the source told Reuters on Tuesday, declining to be identified because the information was confidential.

The expanded size, coupled with Facebook's recently announced plans to raise the IPO price range, would make Facebook the third-largest initial share sale in U.S. history after Visa Inc and General Motors.

Facebook declined to comment on the increased offering size, which was first reported by CNBC on Tuesday.

The social networking company is drumming up massive demand for the IPO even as slowing revenue and user growth spur questions about the long-term Facebook story.

"This is much more a spectacle, a media event and a cultural moment than it is an IPO," said Max Wolff, an analyst with GreenCrest Capital. "This is not a game of models and fundamentals at this point."

GM's announcement, while ill-timed, should not seriously hurt Facebook's IPO reception for now as it may not be representative of advertisers' overall attitude, said Brian Wieser, an analyst with Pivotal Research Group.

"The demand for the IPO probably won't be affected materially by this," said Wieser. But he noted that there were probably a lot of calls between underwriters and investors following GM's announcement.

Facebook raised the target price range to between $34 and $38 per share in response to strong demand, from $28 to $35, according to a Tuesday filing.

The increased price range made it very unlikely that Facebook shares would double on their first day of trading as they might have if the company had come out at the low end of its initial price range, Wolff said. He expects a first-day gain of about 10 percent.

"No rational person thought they were buying the stock for $28," said Wedbush Securities analyst Michael Patcher, noting that Facebook had traded as high as $44 in the secondary markets in recent months.

Facebook said in its latest filing that it arrived at the higher IPO price range after one week of marketing the offering -- part of a cross-country road show in which CEO Zuckerberg has taken the stage to lay out his vision for the company's money-making potential and its top priorities.

LONG-TERM GROWTH

Before the IPO size was increased, Facebook would have raised about $12.1 billion based on the midpoint price of $36 and the 337.4 million shares on offer originally.

Facebook's IPO comes as some investors worry that the company has not yet figured out a way to make money from a growing number of users who access the social network on mobile devices such as smartphones. Meanwhile, revenue growth from Facebook's online advertising business, which accounts for the bulk of its revenue, has slowed in recent months.

With some 900 million users, it had $1 billion in net income on revenue of $3.7 billion in 2011.

The company has also extended the time frame for its $1 billion acquisition of mobile app maker Instagram, projecting that the deal would close in 2012 instead of the second quarter as it had previously indicated.

It provided no reasons, though a source familiar with the matter told Reuters last week that the U.S. Federal Trade Commission has reached out to Google and Twitter as part of the agency's standard review for deals of that size.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights
   

Next In Business News

Zafrul: Govt to strengthen fiscal position, broaden revenue base
MEDAC: MSMEs suffered RM40.7b losses in 2020
Frontken 2Q earnings climb to RM24.74mil on strong semiconductor demand
MRT to announce date for MRT 3 tender after strong interest
CTOS Digital buys minority stake in RAM for RM10m
MAG proposes one warrant for four shares to raise RM84.9m
Mild optimism on China rebound, vaccination rates
Ringgit opens higher as US keeps policy status quo
IJM Corp shares inch up on 15 sen dividend plan
How courage has led a local pet store to digitalise and thrive

Stories You'll Enjoy


Vouchers