Facebook sets richest tech IPO in motion

Facebook on Thursday set in motion the richest-ever share offering for a technology firm, raising $16 billion in an operation valuing the world's biggest social network at $104 billion. Facebook stock, priced at $38 per share, the top end of its estimate, was to begin trading Friday under the symbol "FB" on the Nasdaq, the company said in a statement. The announcement comes amid keen anticipation among investors for a piece of the world's biggest social network, which grew from a Harvard dormitory project in 2004 to more than 900 million members. Facebook said 421 million shares of common stock will be offered at $38 in the initial public offering (IPO). Facebook itself is selling 180 million and holders of previous shares are selling 241 million. A so-called over-allotment of up to 63 million shares will be made available to the underwriters, a consortium of investment banks including Morgan Stanley, JP Morgan, Goldman Sachs and others. That will mean one of the biggest IPOs for a US firm, raising $16 billion, behind only that of financial giant Visa in 2008, according to Renaissance Capital. The over-allotment could boost the total to some $18.4 billion. At a market worth of $104 billion, Facebook would be among the most valuable US firms, ahead of sector giants like Amazon ($98 billion) and Cisco ($89 billion), and more than twice the value of Ford Motor Co. ($38 billion). But it remains behind Google ($203 billion) and Apple ($495 billion). Under the share plan, co-founder Mark Zuckerberg will hold 55.8 percent of the voting power, and some 18.4 percent of the value of Facebook. The 28-year-old controls the firm through a dual class stock structure and certain shares that give him a "proxy" for voting. Wall Street and investors around the globe have been girding for a frenzy with investors hungry for a piece of Facebook. In the past few days, Facebook boosted the estimated price for the shares, and added to the number of shares being offered from insiders. London bookmakers were anticipating a stampede. At the betting firm Spreadex, clients have been speculating that shares could rise above $56 after their first day. "Our market on the percentage change in the price of Facebook shares after the first day's trading has seen appetite from clients in buying on the price as the big day approaches, moving the spread up from 30-35 percent earlier in the week to 35-40 percent," Spreadex spokesman Andy MacKenzie said Thursday. Spreadex noted that among other tech IPOs, LinkedIn rose 109 percent the first day while Groupon surged 31 percent. Social game maker Zygna lost ground on its first day. But MacKenzie noted that "we have had some customers holding back based on their belief that Facebook shares may well fall in value after the furor over the initial launch has died down." Lou Kerner, founder of The Social Internet Fund, said he expects a strong response. "US institutional demand has been good, the retail and global demand has been overwhelming," he said. London-based Hargreaves Lansdown Stockbrokers said Facebook may have a hard time living up to lofty expectations but pointed out that it is "a relatively developed company which can display 'real' income and profit." "There are extremely high expectations for the company's prospects and perhaps on that basis it deserves the punchy valuation it has been given, the brokerage said in a note to clients. But the brokers said Facebook faces challenges including how to make money from the growing base of mobile users. The IPO's net proceeds to the company were estimated at $6.4 billion. The rest of the cash goes to Facebook insiders and others who made early investments in the social network, and to cover the IPO costs. The Wall Street Journal said 57 percent of shares will be from insiders, which is an unusually high percentage. Under Wall Street rules, these investors would have to wait six months to sell any shares not offered at the IPO. Some analysts predicted Facebook's stock price will jump quickly to $44 a share but the long-term outlook is less clear. At the heart of the debate about the wisdom of owning a piece of Facebook is how much revenue it takes in. Revenue vaulted to $1.06 billion in the quarter which ended March 31 -- an improvement year-over-year, but down about six percent from the previous quarter. According to Experian Hitwise, Facebook.com received nine percent of all US Internet visits in April 2012. It had 1.6 billion visits a week and averaged more than 229 million US visits a day for the year-to-date.