Surging demand for shares of Facebook (Nasdaq: FB), the No. 1 social network, prompted the company to again boost the number of shares for sale in its initial public offering by 25 percent.
Rather than 337 million shares, the IPO will be for 421.2 million, Facebook said in a filing with the U.S. Securities and Exchange Commission on Wednesday. That could raise the total value of the deal to $16 billion raised by sellers.
As a result, the Menlo Park, Calif., social network could be valued as high as $110 billion, more than the value of long established companies such as Cisco Systems Inc. (Nasdaq: CSCO), the No. 1 maker of Internet products.
Besides investor demand, another reason for the increase is sales by current investors including underwriter Goldman Sachs Group Inc. (NYSE: GS), which is co-managing the deal with Morgan Stanley (NYSE: MS) and JPMorgan Chase & Co. (NYSE: JPM).
Others such as Accel Partners, the venture capital fund, upped their sale to 49 percent of their Facebook shares from only 28, which could indicate they believe the website's revenue and earnings will keep falling.
In the first quarter, Facebook previously reported net income fell about 12 percent to $233 million as revenue fell about 7 percent, to $1.06 billion. For the 12 months ended March 31, Facebook reported net income of only $974 million on revenue of $4.04 billion, a slower pace from the prior period. Advertising is easing to only about 82 percent of revenue, Facebook reported, from 87 percent a year ago.
Indeed, major advertisers such as General Motors Co. (NYSE: GM) pulled the plug on their Facebook ads just this week because they said the money spent there was wasted.
To be sure, Facebook founder and CEO Mark Zuckerberg, 28, is not upping the number off shares he plans to sell, mainly to pay $2.6 billion in capital gains taxes. Zuckerberg still plans to sell about 126 million shares. If priced at the current $38 peak suggested by the underwriters, he would net at least $4.78 billion.
Given demand for shares of Facebook, which claims 901 million members, the IPO could become the largest ever, smashing records held for GM and Visa. When it went public again after its bankrpuptcy, GM raised $18.1 billion its 2010 IPO, including overallotment options. Visa Inc. (NYSE: V), the No. 2 credit card issuer, raised about $19.7 billion in its 2008 IPO, also including overallotment options.
Still, despite pricing Facebook shares at a range between $34 and $38 each, up from the prior $28 to $35, the website is pricing its shares below some sales that had been recorded on secondary exchanges such as SharesPost and SecondMarket earlier this year. Some shares sold as high as $46 each. Zuckerberg himself cashed some of his shares in 2010 to donate $100 million to the schools of Newark, N.J.
The Facebook SEC filing is the second in two days. It clearly reflects investor demand for the shares after last week's roadshow that saw presentations by Zuckerberg, COO Sheryl Sandberg and CFO David Ebersman. The underwriters are expected to complete allocating shares by Thursday, during which they will determine the final IPO price, conduct the actual sale and set the time for Nasdaq trading to begin on Friday.
David Zielenziger is a veteran editor and journalist who has written for newspapers including the Baltimore Sun, Asian Wall Street Journal and EETimes, as well as for...