Facebook Increases IPO Price Range to $34-$38 a Share
Facebook Inc. (FB) boosted the price range on its initial public offering to seek as much as $12.8 billion, signaling that Chief Executive Officer Mark Zuckerberg expects demand for the social network to withstand recent market turmoil.
The new range is $34 to $38 a share, a regulatory filing today shows, indicating a market value of as much as $104.2 billion. That would make Facebook, co-founded in 2004 by Zuckerberg, worth more than Citigroup Inc. (C) and McDonald’s Corp.
Facebook, which has spent more than a week pitching the IPO to investors across the U.S., raised the range even after the Standard & Poor’s 500 Index yesterday slumped to the lowest level since February. That may spell disappointment for investors if the slump persists, said Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp.
“They get more money upfront if they can make it go, but if the enthusiasm is weak out of the gate, it makes it that much more difficult for the company going forward,” said McCain, who helps oversee more than $20 billion for the Cleveland-based bank. “You would think they would be a little more cautious.”
Facebook, based in Menlo Park, California, previously proposed selling the shares at $28 to $35 each. Facebook had traded as high as $44.10 in auctions on private marketplace SharesPost Inc. At the top end of the new range, Facebook would be valued at 26 times trailing 12-month sales, more than double Google Inc.’s valuation when the search engine debuted in 2004.
Sales Growth
The social network topped $4 billion in revenue in the 12 months through March 31, with more than 900 million users. Sales are poised to rise 64 percent to $6.1 billion in 2012, according to researcher EMarketer Inc., which would be the third straight year of slowing growth.
Facebook plans to stop taking orders today for its initial public offering, two days ahead of schedule, a person with knowledge of the transaction said yesterday. The offering of 337.4 million shares is oversubscribed, according to people with knowledge of the matter, who declined to say by how much orders exceeded the amount of stock being offered.
Facebook was already in a position to surpass United Parcel Service Inc. (UPS) as the most valuable company in history to go public in the U.S., based on market capitalization, data compiled by Bloomberg and Dealogic show. Although that valuation may be higher than warranted in the long run, demand remains high, said Dan Veru, chief investment officer at Palisade Capital Management.
Gauging Markets
“Some investors are just captivated with the idea of owning Facebook,” said Veru, whose Fort Lee, New Jersey-based firm oversees $3.7 billion. “The bankers are going to do everything they can to ensure a successful offering. If this offering isn’t successful, it would not just be bad for Facebook, it would be bad for the entire market.”
Facebook’s underwriters will have the option to buy an additional 50.6 million shares from the company and its holders after the IPO, filings show.
Some institutional investors had balked at buying into Facebook over concern about the site’s growth prospects, people with knowledge of the matter said last week. In a Bloomberg Global Poll of more than 1,250 investors, analysts and traders taken before the price range increase, 79 percent said Facebook didn’t deserve such a high valuation.
‘Quite Expensive’
“Facebook’s pricing seems to be quite expensive,” said Yves Maillot, head of investments at Robeco Gestions SA in Paris, who helps oversee $6.8 billion. The IPO is also pressing ahead in a “very difficult environment for the U.S. equity market.”
The S&P 500 sank 1.1 percent to 1,338.35 yesterday as Greece struggled to form a new government amid mounting concern the nation may leave the euro. The index fell for a second session as financial companies and energy producers led losses among all 10 of its main industry groups.
Facebook’s shares are set to price May 17 and begin trading under the symbol FB on the Nasdaq Stock Market the following day. Underwriters for the sale include Morgan Stanley (MS), JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS)
Zuckerberg celebrated his 28th birthday yesterday, during the final leg of a marketing tour aimed at building demand for the IPO and convincing investors that Facebook can make money from mobile users.
Facebook today said it expected its purchase of mobile photo-sharing service Instagram to close by the end of the year. When the $1 billion deal was announced last month, Facebook said it anticipated completing the transaction in the second quarter.
To contact the reporters on this story: Lee Spears in New York at lspears3@bloomberg.net; Brian Womack in San Francisco at bwomack1@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
Facebook Said to Plan Raising IPO Price Range to $34-$38 a Share
Tony Avelar/Bloomberg
Larry Yu, spokesman for Facebook speaks with members of the media outside the Crowne Plaza hotel before a Facebook IPO meeting in Palo Alto.
Larry Yu, spokesman for Facebook speaks with members of the media outside the Crowne Plaza hotel before a Facebook IPO meeting in Palo Alto. Photographer: Tony Avelar/Bloomberg
May 15 (Bloomberg) -- Ashok Kumar, senior technology analyst at Maxim Group LLC, talks about Facebook Inc.'s decision to boost the price range on its initial public offering to seek as much as $12.8 billion and the outlook for investor reaction to the IPO. The new price range is $34 to $38 a share, a regulatory filing today shows, indicating a market value of as much as $104.2 billion. Kumar speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)
May 15 (Bloomberg) -- Jason Lilly, director of portfolio management at Rockland Trust Co., talks about Facebook Inc.'s pending initial public offering. Facebook boosted the price range on its initial public offering to seek as much as $12.8 billion. Lilly speaks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)
May 15 (Bloomberg) -- Bloomberg's Scarlet Fu reports that Facebook Inc. raised the price range for its initial public offering to $34 to $38 a share from the previous range of $28 to $35. The company can raise as much as $12.8 billion and seek a valuation as high as $104.2 billion, based on the upper end of the range. She speaks on Bloomberg Television's "Inside Track." (Source: Bloomberg)
May 14 (Bloomberg) -- Michael Cole, president of U.S. Bancorp's Ascent Private Capital Management, talks about the outlook for Facebook Inc. employees who will likely become millionaires when the social-networking company goes public. Cole speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)
May 14 (Bloomberg) -- Brian Hamilton, co-founder and chief executive officer of Sageworks Inc., talks about the outlook for Facebook Inc.'s initial public offering. He speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Facebook Said to Plan to Raise IPO Share Price Range to $34-$38
Jason Alden/Bloomberg
The Facebook Inc. logo is seen on the landing page of the company's Apple Inc. iPad application in this arranged photograph in London, U.K.
The Facebook Inc. logo is seen on the landing page of the company's Apple Inc. iPad application in this arranged photograph in London, U.K. Photographer: Jason Alden/Bloomberg
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