Facebook Inc., the most popular social networking site in the world, is valuing itself at $96 billion in an initial public offering (IPO) slated for May 18. The valuation is the largest on record for an Internet company.
According to a regulatory filing on May 3, Facebook and its holders intend to sell roughly 337.4 million shares at $28 to $35 per share. Facebook would raise $11.8 billion at the high end of the range, trumping the record of 2.92 billion euro ($2.8 billion) IPO of German Internet company T-Online International AG set in 2000, shows data compiled by Bloomberg.
In the 12 months through March 31, Facebook has seen more than 900 million users and more than $4 billion in revenue, under the helm of 27-year-old founder and CEO Mark Zuckerberg and COO Sheryl Sandberg. According to Bloomberg data, the top end of the IPO range values the company at 24 times revenue on that basis, as opposed to 5 times for Google Inc. "It's still a rich valuation, and unless they are going to monetize their user base, it's going to take a whole lot of growth to justify that," said FusionIQ CEO Barry Ritholtz, as cited by Bloomberg BusinessWeek.
Market Capitalization Half as High as Google's
According to Bloomberg data, Facebook is scheduled to price the offering on May 17. People familiar with the matter have previously stated that Facebook was considering an IPO valuation of as much as $100 billion. At that amount, the social networking company would have a market capitalization nearly half as high as Google's, with one tenth the sales.
Facebook is offering 180 million shares, and existing owners Accel Partners and Digital Sky Technology are offering 157.4 million, shows the filing. Meanwhile, Zuckerberg is offering 30.2 million of his 533.8 million shares, and "the majority of his net proceedings will be used to pay taxes associated with exercising a stock option," writes Bloomberg BusinessWeek.
According to the filing, the CEO may control roughly 57 percent of the voting power of Facebook's outstanding capital stock after the offering. COO Sheryl Sandberg holds 1.9 million shares, but is not selling in the offering.
After the IPO, Facebook will have 2.14 billion Class A and B common shares outstanding, worth roughly $75 billion at the top end of the price range. The shares outstanding, including restricted stock units, options and common stock to be issued following the acquisition of Instagram, would total 2.74 billion. This indicates a market value of $96 billion at the top end.
Float
While some Internet companies resort to a "low-float" strategy to boost initial demand for their stock, Facebook is not employing this strategy. According to Bloomberg data, Facebook is making 16 percent of its class A and B common stock public in the sale. This is a higher proportion that Internet companies LinkedIn Corp., Groupon Inc. and Pandora Media Inc. sold in their initial public offerings.
Since the beginning of 2011, a total of 28 Internet companies have completed U.S. IPOs, on average floating 17 percent of their shares, according to Bloomberg data. Facebook's float would be about 12 percent.
Facebook filed for the initial public offering on February 1, using a placeholder amount of $5 billion. Filings show Zuckerberg as the company's top holder, while Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are leading Facebook's IPO. The shares will be listed under the symbol FB on the Nasdaq.
