Post date: May 04, 2012 8:32:35 PM
NEW YORK CITY, NEW YORK, UNITED STATES (MAY 4, 2012) (REUTERS) - Facebook Inc aims to raise about $10.6 billion (USD) in Silicon Valley's largest initial public offering (IPO), dwarfing the coming-out parties of tech companies like Google Inc. and granting the world's largest social network a market value close to Amazon.com's.
The start of Facebook's highly anticipated road show is just days away, with investors ready to roll out the red carpet. CEO Mark Zuckerberg is expected to participate in the two-week road show ahead of the company's debut on the Nasdaq, which is expected for mid-May.
On Friday (May 4) some of the company's executives were already doing the rounds in New York ahead of the start of its road show on Monday (May 7). Executives were welcomed with banners and flags at JP Morgan Chase. They also visited Morgan Stanley and Goldman Sachs.
The eight-year-old social network that began as Mark Zuckerberg's Harvard dorm room project indicated an initial public offering price range of between $28 USD and $35 USD a share, which would value the company at $77 billion USD to $96 billion USD.
The size of the IPO reflects the company's growth and bullish expectations about its money-making potential as a hub for everything from advertising to commerce.
"The Facebook IPO is definitely being considered by most people within the industry as sort of the benchmark of all amazing IPOs to ever hit the market. Everyone's saying it's going to be the world's largest. There's no doubt it's going to be it. In the very beginning there's going to be a frenzy like which we've never seen," explained digital strategist and social media expert, Peter Shankman.
Facebook stands to raise as much as $12 billion USD at the upper end of its planned range. If an over-allotment or "greenshoe" option is triggered, the company could sweep up a maximum of $13.6 billion, according to a Thursday (May 3) prospectus.
Facebook is only getting about half, or $5.6 billion, of the estimated $10.6 billion that it would raise at the midpoint of its planned IPO range. About $4.9 billion will go to some existing shareholders.
Facebook's stock could begin trading as soon as May 18, according to a road show schedule obtained by Reuters. The offering's price range can be adjusted depending on Wall Street's response during the road show.
Shankman says the valuation is largely as a result of its near-billion followers.
"Facebook has managed to get the 'everyone else is here' concept down pat. Where else are you going to go? A social network isn't very social if it only has five people in there. Facebook has narrowed it down, 'We have a billion people! You're going to have to come back.' So I think they're counting on the IPO, the valuation of the IPO is on the concept that if a billion people or 1.5 billion people are using Facebook, advertisers will continue to flock to it. So far that's proven correct," he explained.
Facebook executives, including Zuckerberg, are due to hit the road on Monday (May 7), presenting their investment case to audiences. They will start in New York, go to other major cities such as Chicago and Boston, and end up on Facebook's home turf in Menlo Park, California, according to the schedule.
Zuckerberg is expected to participate in the two-week road show, a source has said, although Chief Operating Officer Sheryl Sandberg and Finance Chief David Ebersman will lead the briefings.
Dressed in a gray t-shirt and jeans, the copper-haired Zuckerberg appeared in a 31-minute road show video posted online. In the video, Zuckerberg predicted that in five years almost every software app would be integrated with Facebook.
Facebook generated the lion's share of its $3.7 billion in revenue last year from online advertising. It also collects fees when consumers use its special Credits currency to purchase virtual goods in social games such as Zynga's Farmville. The company has said it may expand the use of its payment business beyond games.
Facebook, which plans to list its stock on the Nasdaq under the ticker "FB" <FB.O>, has long tantalized investors with the prospect of a mega IPO.
"You've got to realize, there are two types of people watching this IPO," Shankman explained.
"There's Facebook internals, those are the employees who are counting the days until they're millionaires, in some cases billionaires and don't get it wrong -- Facebook is going to produce a lot of millionaires overnight. We're talking probably the largest collection of millionaires we've ever seen in the history of time in one place at one time," he added.
He then joked, "You bomb Facebook, you're going to take away 20 percent of the wealth right there in one day."
"The people who couldn't care less are the users. Nothing is going to change from Aunt Linda being able to post about Farmville or Johnny being able to post about his date the night before or someone posting they're going to an aerobics class. None of that's going to change just because Facebook has gone public...You could count six different times when all the nay-sayers said, 'Oh, that's it. I'm not going on Facebook anymore. They're going to lose all their cool.' Unfortunately they never seem to have. Every time people have predicted that, they've been wrong."
At the top end of the IPO range, Facebook would rival the market value of Amazon.com and Cisco Systems Inc <CSCO.O>, which are worth just over $100 billion, and surpass the combined market value of older technology companies Hewlett-Packard Co <HPQ.N> and Dell Inc <DELL.O>.