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
News
Bill Gates, founder of Microsoft and co-chair of the Bill and Melinda Gates Foundation
businessUber, Snapchat and Facebook founders among those on the 2015 Forbes Billionaire List
News
news... and what your reaction to the creatures above says about you
News
Homer’s equation, in an episode in 1998, comes close to the truth, as revealed 14 years later
science
News
news
ebooks
ebooksA special investigation by Andy McSmith
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

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003