It's Friday, May 18, and the world's largest social network Facebook Inc. enters the market raising a whopping $16 billion in one of the biggest initial public offerings in the history of the United States. What makes it even more eye-popping is the amount the company is now valued at - $104.2 billion.
On Thursday, Facebook raised about $16 billion by selling 421.2 million shares at $38 each. However, if an option for underwriters is exercised, the company could reap up to $18.4 billion. Facebook hired more than 30 underwriters for the sale, led by Morgan Stanley, JPMorgan Chase & Co. and Goldman Sachs, who will have the option to buy an additional 63.2 million shares from the company and its holders after the IPO, the company stated in a statement on Thursday.
According to Bloomberg, Palo Alto-based venture capital firm Accel planned to offer 49 million shares, while Goldman Sachs aimed to sell 28.7 million. Digital Sky Technologies planned to sell 45.7 million shares and Tiger Global Management planned to sell 23.4 million shares. On the other hand, Facebook executives and directors planned to sell 189.4 million shares.
The shares are expected to be released for trading under the ticker symbol FB at approximately 11 a.m. ET Friday, while the offering will be released for quotation at about 10:45 a.m. in the run-up to open trading, according to a notice issued by the Nasdaq OMX Group Inc to investors.
As per the predictions on how much the stock will rise as the first day of trading goes, there are greatly varied views across the industry. While some experts say that anything short of a 50 percent jump would be below par, others say that the first-day gains could be as little as 10 percent due to the large size of the float and a raised price range.
In a recent Bloomberg survey of 1,250 global investors, analysts and traders, 79 percent said Facebook's valuation was not justified, while only 7 percent thought that the valuation was fair.
What Will Be The Scenario After Floating $104.2 Billion?
While all these talks deal with the current situation, the days following the Facebook IPO bear no less significance in terms of the company's strategic deals and its 28-year-old CEO Mark Zuckerberg's achievement as one of the world's wealthiest persons.
The IPO will reportedly give Zuckerberg access to more than $15 billion that may maximize the pace and size of acquisitions after a $1 billion deal for Instagram.
I see them making acquisitions across the spectrum, big and small -- and they should be, Maha Ibrahim, a partner at venture capital firm Canaan Partners in Menlo Park, California, told Bloomberg. They have the heft, and now they just need to monetize even better than they're doing.
The areas in which Facebook could focus later on for acquisition to pad out its business may include mobile, advertising, payments and video-sharing. Although Zuckerberg's earlier deals mostly revolved around small takeovers, the recent Instagram deal indicated that the company is now eyeing larger purchases of recognized companies.
Facebook's website mentions three open positions in business development, meaning that the company is in the process of expanding its team that works on deals.
As per a filing with the US Securities and Exchange Commission, Facebook's treasure chest was growing even before the IPO. The company managed to accumulate $3.91 billion in cash and short-term investments on its balance sheet through the end of the first quarter. On top of that, investment banks, including Morgan Stanley and JPMorgan Chase & Co., garnered an $8 billion financing package. With more than 900 million monthly users, Facebook generated $3.7 billion in revenue in 2011.
If Arvind Bhatia, an analyst at Sterne Agee & Leach Inc. is to be believed, after the Instagram deal, Facebook may also target a social-video sharing service like Viddy Inc. or Socialcam Inc., Bloomberg reported.
Brian Wieser, analyst at Pivotal Research Group LLC in New York, thinks that Facebook's wishlist could also incorporate media companies like Spotify and Pandora Media.
Mark Zuckerberg Enters The World's Richest Club
When it comes to Zuckerberg himself, the $16 billion initial public offering would open doors for him to become the 29th richest person on Earth. Based on the 421.2 million shares sold for $38 each, the total 503.6 million shares, coupled with the options Zuckerberg has are valued at $19.1 billion, making him even richer than Google co-founders Sergey Brin and Larry Page, according to the Bloomberg Billionaires Index.
Apart from Zuckerberg, the record 104.2 billion valuation also brings the money flow to the three other co-founders of the company. With 133.7 million shares of the company's Class B stock, 27-year-old Dustin Moskovitz is now worth $5.1 billion. He will sell 7.5 million shares if the underwriters exercise their option to buy additional stock.
Eduardo Saverin's stake in Facebook is not yet disclosed. However, before the offering, the 30-year-old owned about 4 percent of the company's outstanding shares. He reportedly has a $2.7 billion estimated fortune.
On the other hand, Christopher Hughes, 28, owns about 22 million shares of Facebook, and at $38 per share, his stake is worth $836 million.