Facebook readies historic IPO filing

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Facebook founder Mark Zuckerberg, 27, addressing a news conference. Photo - AP

Facebook plans to file papers with the US financial watchdog on Wednesday to begin the process of becoming a publicly listed company, reports suggested.

According to the Financial Times and the Wall Street Journal, the site is being valued at around $75 and $100 billion. However, sources did not give a confirmed date of the IPO listing. The timing stems partly from federal rules that would require Facebook Inc. to begin disclosing its financial information in April because of its phenomenal growth.

The reports also suggest Morgan Stanley will be the lead underwriter for the sale, while Goldman Sachs expected to be heavily involved in the process.

Facebook is expected to raise $10 billion in the offering, giving it a market capitalisation of $100 billion. Google, by comparison, raised $1.9 billion in its IPO in 2004. According to Dealogic,?this ranks Facebook fourth among IPOs for US companies, behind Visa Inc., General Motors Co. and AT&T Wireless. It would make Facebook the biggest US Internet offering ever, replacing Google Inc., which raised $1.9 billion in 2004 at a $23 billion valuation.

At a $100 billion valuation, Facebook would be worth about the same as McDonald’s Corp. and nearly half of Google.

People familiar with the matter said?Facebook’s final valuation will be determined by a variety of factors, including investor demand for social media, the IPO market and the health of the European economy.

HOT STUFF

Shares of Google skyrocketed on their opening day, and analysts expect Facebook will also perform like-wise.

“The minute the IPO is filed, there will be pandemonium,” said IPO Boutique’s Scott Sweet, who says he has never seen anything quite like the pent-up demand for Facebook shares.

“And this is coming from someone who has seen extremely hot IPOs. I have seen pandemonium.”

A successful IPO by one of the country’s most prominent companies could also power the stock market by attracting scores of investors who have been scared off by the volatility in recent years.

“People are looking for something that’s going to give them confidence,” said David Menlow, president of IPOfinancial.com, a research firm in Millburn, N.J. “They’d like to believe the IPO is going to be a strong one.”

EXPECTATIONS

“Expectations are so high, and there have been so many rounds of investment on private exchanges, one has to wonder how much upside is left once Facebook becomes a public company,” said Anthony Valencia, media analyst at TCW Group.

Many experts said this IPO to be the biggest of the year probably the decade. “There is literally a fortune in fees, which is occurring in a slow market. There’s also bragging rights. These firms want to be able to go to their clients and offer them an allocation of the Facebook IPO” Max Wolff senior analyst at GreenCrest Capital Management.

This IPO is expected to breathe fresh life into Wall Street, claimed Mark James Freelance Tech Expert in an interview with Arabian Gazette. ?It’s full steam ahead. Adrenaline is pumping very high at the moment at Wall Street. I have seen and felt the change in atmosphere first hand. It is as if Christmas is round the corner and everyone is getting the biggest and flashiest gift from Santa. Everyone is psyched,? he said when asked about the much-awaited Facebook IPO launch. The right to manage the IPO will also generate an estimated $250 million in fees, he added.

According to the Times? Jessica Guynn and Walter Hamilton, it could turn as many as 1,000 Facebook employees into millionaires. ?Working for Facebook has become one of the most prestigious occupations. During the early 80?s working for Wall Street was prestigious, during the early 90?s Microsoft had taken the lead, now Facebook seems to be riding high,? Lura Damien, EnSync Technology, Johannesburg, South Africa told Arabian gazette.

CELEBRATIONS

The expectations are not only riding high in Wall Street but also high in Facebook?s splashy new Menlo Park campus 30 miles south of San Francisco on the edge of tidal mud flats and salt marshes. Every square foot of the 57-acre campus, still under construction, speaks of the ascendance of Facebook. 1 Hacker Way is now the premier vanity address in Silicon Valley.

According to the Los Angeles Times, the Facebook campus is a ?grown up campus? for a company that is now all grown up. Friends say Zuckerberg, who declined requests for an interview, has now embraced an IPO as a natural next step for his company and a reward for its employees. But the guy who turned down a billion-dollar offer from Yahoo when he was just 22 is unlikely to change his independent stripe even after ringing the opening bell, said David Kirkpatrick, author of “The Facebook Effect.”

It seems that not only are the investors waiting eagerly for the IPO but California officials are also counting on it. The IPO is expected to help California meet its budget crisis. Recent technology IPOs have added hundreds of million of dollars to state coffers from capital gains taxes.

PRIVACY

?Mark Zuckerberg has not always been happy about going public,? James Peterson, senior analysts at Mill Water Associates, New York told Arabian Gazette. ?He always liked his privacy and did things according to his own time and speed. It would be interesting to see how he would handle the intrusion.?

Zuckerberg had been reluctant to push forward with an IPO. People familiar with his thinking said he has been fearful of the damage an IPO could do to the company’s culture. He wants employees focused on making great products, not the stock price, they said. However, outside forces are partly pushing his hand. Facebook executives began to realise in 2010 that Facebook would have more than 500 shareholders by the end of 2011, which would trigger a regulatory requirement that it starts publicly reporting financial information.

The amount of money the company makes is a closely guarded secret. Being publicly traded company will bring it under heavy scrutiny from regulators. Facebook is believed to have raked in $4.2 billion in 2011, about what Apple generates in three weeks. Zuckerberg probably will borrow a page from Google founders Larry Page and Sergey Brin, who famously warned investors they planned to run their Internet company unconventionally. Facebook’s dual-class stock structure also ensures that Zuckerberg will retain firm control over the company and its board of directors.

“Mark thinks of himself as answering to a higher authority: the user,” Kirkpatrick said.

STAKES

Mark Zuckerberg founded the company in his Harvard dorm room at age 19. Now 27, Zuckerberg’s stake in Facebook will be worth an estimated $20 billion after the IPO ? making him one of the world’s richest men.

The company’s success lies in the hoard of information it holds about its users ? valuable information that advertisers can use to target their products and services. Its growing business has escalated competition with rival tech giants Google and Apple Inc.

Now Facebook is looking to build a war chest from the IPO to dominate the world wide web for decades. Can Facebook stake its fortune in social networking in the wildly profitable way Google did with Internet search?

Swarms of investors can’t wait to find out. Even everyday users are looking forward to poring over Facebook’s prospectus ? the first in-depth glimpse at Facebook’s financials ? as if it were the next installment of “Twilight” or “Harry Potter.”

Source: Wall Street Journal, Los Angeles Times, BBC

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