Facebook’s IPO Shares May Be Five Times
Andrew Harrer/Bloomberg
The Interactive Advertising Bureau (IAB) MIXX 2010 conference and expo during Advertising Week in New York.
The Interactive Advertising Bureau (IAB) MIXX 2010 conference and expo during Advertising Week in New York. Photographer: Andrew Harrer/Bloomberg
Facebook Files to Raise $5 Billion in Biggest Internet IPO
David Paul Morris/Bloomberg
Facebook would follow a crop of social-media companies that went public in 2011, the biggest year for U.S. Internet IPOs in more than a decade, according to Bloomberg data.
Facebook would follow a crop of social-media companies that went public in 2011, the biggest year for U.S. Internet IPOs in more than a decade, according to Bloomberg data. Photographer: David Paul Morris/Bloomberg
Facebook Mark Zuckerberg
Kim Kulish/Corbis
Mark Zuckerberg, Facebook CEO, at the Computer History Museum in Mountain View Calif.
Mark Zuckerberg, Facebook CEO, at the Computer History Museum in Mountain View Calif. Photographer: Kim Kulish/Corbis
Facebook Inc. (FB), the social-
networking website that in eight years changed the way the
world communicates, filed to raise $5 billion in the largest
Internet initial public offering on record.
Facebook, whose meteoric rise spawned an Oscar-winning
film and captivated Wall Street, yesterday named Morgan
Stanley as the lead underwriter on the IPO, while reporting a
24-fold increase in sales over the past four years to $3.71
billion in 2011.
The planned IPO dwarfs Google Inc. (GOOG)’s 2004 offering and
tests whether social-networking providers deserve market
values that rival such established companies as McDonald’s
Corp. (MCD) and Caterpillar Inc. The Menlo Park, California-based
company is considering a valuation of $75 billion to $100
billion, people with knowledge of the matter said last week.
“The $100 billion valuation that’s being tossed around
just puts it at a level we’ve never seen,” said Jeffrey Sica,
chief investment officer of Morristown, New Jersey-based Sica
Wealth Management LLC, which oversees $1 billion. “They have
to be able to show that not only do they deserve to be at
that level, but they have multiple channels to create new
revenue.”
Sales Surge
Co-founded in 2004 by then 19-year-old Mark Zuckerberg,
Facebook has grown into the world’s dominant social-
networking site, squelching competitors such as MySpace Inc.
with its more than 800 million users. While Facebook’s sales
almost doubled last year, the company faces increasing
competition from rivals such as Google, which debuted its own
social-networking service last year, and short-message social
site Twitter Inc., the filing shows.
A $100 billion market capitalization would value
Facebook at 26.9 times trailing 12-month sales, more than
double Google’s valuation when the search-engine operator
went public in 2004. Facebook recruited Chief Operating
Officer Sheryl Sandberg, a former Google executive, in 2008
to help expand the company globally.
Facebook didn’t specify the number or price of shares it
will offer, and the $5 billion amount is a placeholder used
to calculate fees and may change. The U.S. Securities and
Exchange Commission’s public website suffered a slowdown
yesterday as traffic surged, forcing the agency to bring on
additional capacity, according to spokesman John Nester.
Facebook Bankers
The stock would trade under the symbol FB on either the
Nasdaq Stock Market or the New York Stock Exchange. The
company plans to use the proceeds for working capital and
other general corporate purposes.
In addition to Morgan Stanley, Facebook hired JPMorgan
Chase Co., Goldman Sachs Group Inc., Bank of America Corp.,
Barclays Plc and Allen Co. to manage the IPO.
Net income last year surged by almost two-thirds to $1
billion, the filing showed. Last year, Facebook said it
expects U.S. regulators to require that it disclose financial
results by April 30, 2012, if the company hadn’t gone public
by then. Facebook decided to wait until 2012 for its IPO to
give Chief Executive Officer Zuckerberg more time to gain
users and boost sales, people familiar with the matter said
in 2010.
Zuckerberg, 27, is the company’s top holder with 28.4
percent of the shares, the filing shows. He also has proxy
agreements with fellow stockholders that potentially give him
voting control over more than half the shares.
Social-Media IPOs
Accel Partners remains the top outside stakeholder with
11.4 percent of the investor votes, while Dustin Moskovitz,
one of Zuckerberg’s co-founders, holds 7.6 percent voting
power.
Facebook would follow a crop of social-media companies
that went public in 2011, the biggest year for U.S. Internet
IPOs in more than a decade, according to Bloomberg data.
Nineteen companies raised $6.6 billion in 2011, the most
since 101 raised $11 billion in 2000, the data show.
Professional-networking site LinkedIn Corp. (LNKD), music-streaming
service Pandora Media Inc., daily-deal site Groupon Inc. and
social-gaming company Zynga Inc. all sold shares last year.
In outlining its potential risks in the filing, Facebook
cited hacker attacks, regulatory scrutiny, a shift to mobile
technology and rivals such as Google+. The company also said
it would face competition in China if it manages to gain
access to that market, where its site is currently blocked.
Mobile Technology
Facebook is increasing its focus on mobile technology to
take advantage of the shift to smartphones and tablets. It
expects its next 1 billion users to come mainly from mobile
devices, rather than desktop computers.
The company made at least 10 acquisitions in 2011,
including group-messaging service Beluga in March. In
addition to buying startups, Facebook has enabled hundreds of
others to get off the ground by offering an easy, cheap and
fast way for them to reach millions of potential customers,
said Shervin Pishevar, a managing director at Menlo Ventures
in Menlo Park, California.
“There will be a lot of $1 billion-plus companies built
on these platforms,” said Pishevar, who owns Facebook shares.
Venture firm Accel Partners first led a $12.7 million
investment in Facebook in 2005. Other investors include
Microsoft Corp. and PayPal co-founder Peter Thiel, as well as
Greylock Partners.
Top Investors
As the site’s popularity grew, banks, hedge funds and
mutual fund companies started buying stock. In January 2011,
Facebook said it raised $1.5 billion in a financing round led
by Goldman Sachs that valued the company at $50 billion.
Goldman Sachs, funds managed by the firm, and Digital Sky
Technologies bought $500 million of stock, while Goldman
Sachs offered $1 billion of shares to non-U.S. clients.
While Facebook has steadily added users since its
creation, it has faced increased scrutiny over its protection
of user data. In November, the company agreed to settle
privacy complaints with the Federal Trade Commission. The
move may help allay criticism that it doesn’t do enough to
shield the information it prods users into sharing.
To contact the reporters on this story:
Brian Womack in San Francisco at
bwomack1@bloomberg.net;
Ari Levy in San Francisco at
alevy5@bloomberg.net
To contact the editors responsible for this story:
Jennifer Sondag at
jsondag@bloomberg.net;
Tom Giles at
tgiles5@bloomberg.net
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Article source: http://www.bloomberg.com/news/2012-02-01/facebook-files-to-raise-up-to-5-billion-in-ipo-of-social-networking-site.html