Facebook set for monster flotation

 

Facebook is heading for one of the biggest ever US stock flotations when it sells hundreds of millions of shares to the public.

The social networking site is expected to launch its initial public offering (IPO) on the Nasdaq Stock Market tomorrow, raising a projected 16 billion dollars (£10 billion) or more.

With the anticipated price of the stock raised to a range of 34 to 38 dollars per share (£21-£23), it is set to be the third largest US IPO in history, ahead of General Motors in 2010, according to Renaissance Capital.

It is also the most eagerly awaited IPO in years and would value Facebook overall at more than 100 billion dollars (£62.6 billion).

Trading is set to begin under the ticker symbol "FB" two days after massive interest in the sale prompted the company to boost the number of shares it plans to sell, with 84 million more - worth up to 3.2 billion dollars (£2 billion) - being added to the IPO.

But the entire increase comes from insiders and early investors, so the company will not benefit from the additional sales.

Facebook board members Peter Thiel and James Breyer are among those selling more shares, but founder Mark Zuckerberg is not increasing the number he is selling.

In a filing with the Securities and Exchange Commission, Facebook said current shareholders are now offering approximately 241 million shares, up from about 157 million shares previously.

Investors such as U2 frontman Bono stand to make huge sums, with music magazine NME predicting the singer will become the richest rock star on the planet when the company floats.

Yet despite the hype, scepticism remains in some quarters, with murmurings that the stock is overvalued.

In a recent Bloomberg survey of 1,250 global investors, analysts and traders, 79 per cent said Facebook's valuation was not justified, with only 7 per cent deeming the valuation fair.

Facebook's mobile phone platform is thought to need improvement, while its effectiveness as an advertising space has also been debated.

These doubts were brought into sharp focus on Tuesday when General Motors, the US's largest car manufacturer, said it would stop advertising on the site.

Facebook has more than 900 million users who log in at least once a month, but it makes only a few dollars per year from each one, chiefly through advertising.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, noted that in addition to concerns about the valuation and the challenge Facebook faced on the mobile front, worries had also been expressed about corporate governance at the company - especially the power still resting with the founder.

It needed to diversify and reduce its "almost pure reliance" on advertising income, and was exposed to changing social trends, he pointed out.

He said: "Around a half of Facebook users access the site from their mobile phones.

"Converting this traffic into income is perhaps one of the company's largest, and currently perplexing, challenges.

"Facebook was not conceived in the smartphone era and therefore did not have it in mind as a platform.

"It has catching up to do and, if possible, without cannibalising its own current income from the PC space."

Meanwhile the company's global reach was "massive and growing" and it was already attempting to deal with the major risks and challenges it faces, he said.

"There are extremely high expectations for the company's prospects and perhaps on that basis it deserves the punchy valuation it has been given," he added.

Social media experts were also bullish.

Ivor Kellock, a social media and digital marketing specialist, said: "Facebook is the dominant force in the western world and social networking is still in its infancy.

"That's not to say there won't be more competition and it won't get more difficult for them but I don't think they're overvalued.

"The only caveat is it depends what other new, innovative ideas come up that knock Facebook for six."

Social gaming on Facebook was a big money-spinner and there was also potential for further exploitation of data on users to enable more targeted advertising, he added.

Social media strategist Tiffany St James, founder of digital company Stimulation Ltd, agreed the site had the potential to expand its offerings still further.

"Before, it was all about connecting with family and friends but now you can go on there for all your entertainment," she said.

"It's not necessarily just the advertising that makes money, but the fact that people can build applications."

Eight years after the concept of Facebook was dreamed up in a Harvard University bedroom, Mr Zuckerberg has become one of the richest people in the US, with 55.8 per cent voting control in the company.

The site's revenue last year was 3.7 billion dollars, up from 153 million in 2007, with the majority earned through advertising.

Facebook is the latest in a series of online firms to sell shares to the public in recent months, following online voucher firm Groupon in November and online games maker Zynga in December.

PA

Start your day with The Independent, sign up for daily news emails
Voices
Barn owls are among species that could be affected
charity appeal
News
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Sport
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
cricketEoin Morgan reportedly to take over ODI captaincy
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas