Facebook is set for record breaking IPO
FACEBOOK is set to become the third largest float in US history later today, after pricing its shares at $38 each – giving the social network a $104bn (£65bn) valuation and raising an eye-watering $16bn.
Only General Motors and credit card firm Visa have had bigger IPOs and the offering gives the eight-year-old company, founded in a Harvard bedroom, a valuation equivalent to Amazon.com and exceeding that of Hewlett-Packard and Dell computers combined.
The valuation means that founder Mack Zuckerberg will be worth around $19bn – before the substantial gains in share price that are expected today. The float comes at the end of a week that has seen the IPO jump in both size and price as Facebook struggled to meet demand for its shares.
On Wednesday the firm increased the size of the offering by almost 25 per cent to 421m shares, while the day before it had raised the target price range to between $34 and $38 per share, up from $28-$35.
Even that was not enough and last night analysts were speculating on how much the stock will rise on its first day of trading.
“I think anything over 50 per cent will be considered a successful offering,” said Jim Krapfel, an analyst at Morningstar. “A lot of retail investors are not concerned about valuation. That’s what is going to drive the first day pop.”
Lee Simmons at Dun & Bradstreet, was more modest: “You’ve got a large offering at an increased price, so a huge pop may be difficult to achieve. I’d think a 10 to 20 per cent pop over the offer price is expected.”