Facebook updates its status – by $100bn

The social networking site changed the way we communicate. Now, as it floats on the stock market, all the talk is about how much it is worth. By Stephen Foley

New York

Facebook last night launched the most hotly anticipated stock market flotation since the dotcom bubble burst more than a decade ago, promising to sell its shares to the public in a deal that will make billionaires of its founders and which could value the company as much as $100bn (£64bn).

In an announcement laden with ambitious declarations and astonishing revelations about the social network's growth, Mark Zuckerberg, the 27-year-old computer whiz who created the company in his Harvard dorm room eight years ago this week, said Facebook was just at the start of "a social mission" to change the way people around the world share information.

"Facebook was not originally founded to be a company," he said, in a letter included in the 199-page share prospectus published yesterday. "We've always cared primarily about our social mission, the services we're building and the people who use them. This is a different approach for a public company to take."

It will take Wall Street and technology industry analysts days to digest all the information revealed last night, but what was immediately apparent was how potential investors are being asked to make a bet on Mr Zuckerberg himself. The Facebook chief executive owns 28 per cent of the company and he will control more than half of the votes, thanks to arrangements with his early backers and because of an unusual share structure designed to limit the power of new shareholders.

If investor demand for Facebook is as high as the excitement over yesterday's announcement suggests, the company could price at the top end of the mooted $75bn-$100bn range, making Mr Zuckerberg worth $28bn on paper.

Mr Zuckerberg's Harvard friend and co-founder Dustin Moskovitz, who stayed with the company until 2008, could be worth more than $7bn. The flotation, likely to be completed in May, could also make billionaires of Eduardo Saverin, another co-founder whose breach with Mr Zuckerberg was the subject of the film The Social Network – though his stake was below the 5 per cent that means it has to be disclosed. Jim Breyer, a veteran Silicon Valley investor, and Peter Thiel, a founder of PayPal, each have stakes in the several billions of dollars, too.

More than one-third of Facebook's 3,000 employees could be paper millionaires when the stock floats.

Interest in the Facebook prospectus was so high that its formal publication by the US Securities and Exchange Commission last night slowed the agency's website to a crawl. The document detailed how quickly Facebook's business has grown and extended its profitability. In 2007, just three years after its creation, it brought in revenues of $153m. Two years later it brought in five times that amount and turned a maiden profit of $229m. Last year it had revenues of $3.7bn, and a profit of $1bn.

But analysts say Mr Zuckerberg faces a crucial test to keep his company on an even keel despite the flotation hoopla. As well as having to ensure that his mega-rich employees keep turning up for work every day, he will have to assure the company's most important asset – its 845 million users – that he will be a responsible guardian of their privacy, despite the demands of his new shareholders to make ever more profit from the use of their personal data.

"Facebook has changed the way companies believe they should market, by making them communicate directly with their customers," said analyst Debra Aho Williams of the research firm eMarketer. "Yet it is still at a very early stage of what it could become and the business it could build from the data it has collected and will be capable of collecting, with the host of privacy questions that raises. The one thing that has not changed is that Facebook is very comfortable pushing the envelope in terms of what data it collects and what it can use for advertisers. At every turn it keeps winning. There have been privacy outcries over each change, but users soon forget – because using Facebook is fun."

The prospectus included pages of disclosures on the legal risks facing the company, including possible lawsuits over privacy issues and the threat of a clampdown on what could be done with users' personal data under new laws being proposed in Europe and the US. Nonetheless, the company also lays out the opportunities it saw for providing advertisers with the ability to closely target messages based on users' personal preferences, as revealed in their Facebook profile and online habits. Late last year, Mr Zuckerberg unveiled a raft of new features designed to encourage users to listen to music, share news stories and video chat with each other, all within the site.

Keeping the company's elite developers focused on building these kinds of new features will be a priority for Mr Zuckerberg in the weeks before and after the flotation, said Kevin Werbach, associate professor at the Wharton Business School. "To the extent that someone went to work at Facebook in its early days because of the prospect of a big pay-off on flotation, it is true that once you get that pay-off it will be harder to motivate them. That is potentially why the company waited so long to go public, essentially until they were pushed to do so. Management has indicated that they are in it for the long haul and to build a great company that will change the world, and that is something that employees look up to. The issue is whether Facebook management says the same thing the day after the flotation as they did the day before."

October 2003

Mark Zuckerberg, 19-year-old psychology and computer science student at Harvard University, sets up Facemash, a website where users can rate the attractiveness of fellow students. The site is shut down and he's threatened with expulsion.

February 2004

Zuckerberg, with Eduardo Saverin and Dustin Moskovitz, launches a new site, Thefacebook. Three fellow students, twins Cameron and Tyler Winklevoss and Divya Narenda say Zuckerberg stole their idea.

June 2004

Thefacebook, which has rapidly spread to 30 American universities, is incorporated as a company. Entrepreneur Sean Parker, who has been advising Zuckerberg, becomes the company's President. The website later drops "the" from its name.

2005

Eduardo Saverin is gradually marginalised by Zuckerberg and Parker. The falling out between old friends Zuckerberg and Saverin leads to a series of lawsuits and counter claims that are finally settled with Saverin taking a £1.6bn share in the company.

September 2006

Facebook, now used by universities, high schools and businesses worldwide, is opened to everyone over 13.

October 2007

Microsoft pays $240m (£151m) for a 1.6 per cent share in the website.

August 2008

Facebook has 100 million users worldwide. It hits 500 million less than two years later.

October 2010

'The Social Network', a film charting the feuds at the top of Facebook, written by Aaron Sorkin, is released to critical acclaim. The plot focuses on the disputes over ownership of the Facebook name and idea, between Zuckerberg, Saverin and the Winklevoss twins.

December 2010

Mark Zuckerberg is named Time Magazine's Man of the Year

June 2011

The Winkelvoss brothers finally settle their lawsuit against Facebook for $65m.

September 2011

Facebook timeline is launched

 

January 2012

Facebook, now with 800 million users, goes public on stock exchange. Zuckerberg's personal stake could be $20bn.

News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
News
i100

Other places that have held independence referendums
Sport
Jonas Gutierrez (r) competes with Yaya Toure (l)
football

Newcastle winger reveals he has testicular cancer - and is losing his trademark long hair as a result

PROMOTED VIDEO
Arts and Entertainment
Blossoming love: Colin Firth as Stanley and Emma Stone as Sophie, in 'Magic in the Moonlight'
film

Actors star in Woody Allen's 'Magic in the Moonlight'

News
peopleThe Times of India said actress should treat it as a 'compliment'
Arts and Entertainment
Maxine Peake plays Hamlet at Manchester's Royal Exchange
theatreReview: Maxine Peake brings emotional ferocity to Shakespeare's most starring part
News
news

Watch this commuter wage a one-man war against the Circle Line
News
We are phenomenally good at recognising faces; the study showed that humans have been selected to be unique and easily recognisable
science

Human faces unique 'because we don't recognise each other by smell'

Property
Home body: Badger stays safe indoors
lifeShould we feel guilty about keeping cats inside?
News
ebooksAn unforgettable anthology of contemporary reportage
News
A male driver reverses his Vauxhall Astra from a tow truck
news

Man's attempt to avoid being impounded heavily criticised

Arts and Entertainment
US pop diva Jennifer Lopez sang “Happy Birthday” to Gurbanguly Berdimuhamedow, president of Turkmenistan
musicCorporate gigs become key source of musicians' income
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skis as 007 for first time
Student
The Guildhall School of Music and Drama is to offer a BA degree in Performance and Creative Enterprise
student

Arts and Entertainment
Pulp-fiction lover: Jarvis Cocker
booksJarvis Cocker on Richard Brautigan
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

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Recruitment Consultant - Soho - IT, Pharma, Public Sector

£20000 - £25000 per annum + OTE £35,000 first year: SThree: The SThree group i...

Sales Executive

£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

Payroll & Accounts Assistant

£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week