Facebook (Nasdaq: FB), the No. 1 social network, has decided to pitch its initial public offering of 337.4 million shares at $35 apiece, which could raise as much as $13.6 billion, assuming over-allotment options.
Demand for the Menlo Park, Calif., website's shares will be huge, ginned up by a huge sales and marketing campaign starting Monday, a week before CEO Mark Zuckerberg turns 28.
How likely is it the first trade in two weeks will be at $35? If history has a vote, probably not very. The price could be as high as $70 or even $90, if past experience with hot Internet stocks is considered -- not to mention all the publicity Facebook has already ginned up through its 901 million members and movies like The Social Network, which was nominated for eight Oscars and won three, for best script, sound and vision.
Facebook's three principal underwriters, Morgan Stanley (NYSE: MS), JPMorgan Chase (NYSE: JPM) and Goldman Sachs (NYSE: GS) already have vast links to Facebook.
Goldman Sachs is a longtime investor and helped clients including Russia's Digital Sky Technology Ltd., now known as Mail.Ru Group Ltd. (Pink: MLRUY), buy into the company. The Moscow-based company plans to partially cash out, selling 157 million shares. Its $200 million investment in 2009 could now be valued as high as $5.5 billion.
Given the hype, there's little doubt that a price of $35, technically, the top of a range that could start as low as $28, will stick. After the roadshow, the underwriters, including the latest, ETrade Financial (Nasdaq: EFDC), will discuss demand for the shares and preliminary orders, then conduct the actual IPO among themselves on May 17.
Watch for announcements after the markets close that day on the pricing. In the meantime, consider some of these earlier IPOs:
Netscape Communications, the company that morphed from the Mosaic web browser created by Marc Andreessen's team, was the pioneer of hot Internet stocks.
Its IPO was scheduled at a price of $14; however, the underwriters doubled the price to $28 on Aug. 9, 1995. On Aug. 10, the first Netscape trades soared as high as $75 a share before easing to close at $58.25, valuing the company at $2.9 billion.
By the end of 1995, Netscape traded at $171. In 2003, AOL (NYSE: AOL) acquired the company for $4.2 billion.
Yahoo (Nasdaq: YHOO), the No. 3 search engine, was also red hot, coming to Nasdaq just after two other tech IPOs, for Excite and Lycos.
The Sunnyvale, Calif., company that was everybody's first search engine, decided to sell $2.6 million shares for $13 each. When Yahoo shares first traded on April 12, 1996, they debuted at $24.50, hit $43 and closed at $33.
In Friday trading, Yahoo was at $15.15, down 25 cents, valuing the company at $114.4 billion; however, activist investor Third Point Capital, which owns 5.8 percent of the company, believes Yahoo is worth far more.
Google (Nasdaq: GOOG), the No. 1 search engine, was also red hot, but its 2004 IPO had some problems. It was bisected into an auction IPO for some shareholders and then the official Nasdaq IPO for others.
After initially pricing the shares at $95, underwriters Morgan Stanley and Credit Suisse (NYSE: CS), detecting auction demand, trimmed it back to $85. The first day's activity saw a high of $100.33, as the company raised about $1.67 billion in the third-largest IPO to that date.
Google shares Friday traded at $600.20, down $10.81, giving the Mountain View, Calif., company a value of $195.7 billion.