* IPO would value Facebook at $77 bln to $96 bln
* Facebook shares to be priced between $28 and $35 per share
By Alexei Oreskovic and Alistair Barr
SAN FRANCISCO, May 3 Facebook Inc aims to raise
about $10.6 billion in Silicon Valley's largest IPO, dwarfing
the coming-out parties of tech companies like Google Inc
and granting the world's largest social network a
market value close to Amazon.com's.
The eight-year-old social network that began as Mark
Zuckerberg's Harvard dorm room project indicated an initial
public offering price range of between $28 and $35 a share on
Thursday, which would value the company at $77 billion to $96
The size of the IPO reflects the company's growth and
bullish expectations about its money-making potential as a hub
for everything from advertising to commerce.
"We certainly haven't ever seen a tech IPO on this grandiose
a scale," said Lise Buyer, a principal with the IPO advisory
firm Class V Group.
Buyer, who worked on Google's 2004 IPO, said the question
about a company "that's already this big and that is raising
this much money is how many of the glory days of growth are in
the past versus how many are ahead."
Facebook stands to raise as much as $12 billion at the upper
end of its planned range. If an over-allotment or "greenshoe"
option is triggered, the company could sweep up a maximum of
$13.6 billion, according to a Thursday prospectus.
Facebook is only getting about half, or $5.6 billion, of the
estimated $10.6 billion that it would raise at the midpoint of
its planned IPO range. About $4.9 billon will go to some
Facebook's stock could begin trading as soon as May 18,
according to a road showschedule obtained by Reuters. The
offering's price range can be adjusted depending on Wall
Street's response during the road show.
Investors are expected to flock to the highly anticipated
IPO, although there have been growing concerns about the social
network's longer-term growth and Zuckerberg's majority control.
Facebook will trade at 13 to 16 times the revenue that
GreenCrest Capital analyst Max Wolff believes it will generate
this year. By comparison, Google, the world's dominant Internet
search engine, currently trades at 5.5 to 6 times expected 2012
revenue, he said.
Google's valuation was higher when it went public in 2004,
though Facebook's IPO valuation is still higher than Google's
was back then, Wolff noted.
But some observers said the rich premium was unlikely to
"People are going to be very comfortable with this
valuation," said Sam Schwerin of Millennium Technology Value
Partners, which owns Facebook shares worth roughly $200 million.
The firm is not selling in the IPO.
"A price range of $28 to $35 will be a relief to some people
who are concerned that they may try to take the highest possible
price because of high demand," he said.
"The amount being raised is noteworthy. Selling stockholders
are raising about $5 billion in the IPO, which is a lot."
Facebook executives are due to hit the road on Monday,
presenting their investment case to audiences. They will start
in New York, go to other major cities such as Chicago and
Boston, and end up on Facebook's home turf in Menlo Park,
California, according to the schedule.
Zuckerberg is expected to participate in the two-week road
show, a source has said, although Chief Operating Officer Sheryl
Sandberg and Finance Chief David Ebersman will lead the
TANTALIZING WALL STREET
Zuckerberg's involvement in the road show will be key for
investors with concerns about Facebook's long-term strategy and
money-making potential, said Brian Wieser, an analyst with
Pivotal Research Group.
Zuckerberg's control of the company -- which was underscored
when he orchestrated the $1 billion acquistion of mobile app
maker Instagram last month -- means that investors need to "get
comfortable" with the 27-year-old CEO, said Wieser.
Last week, Facebook reported its first quarter-to-quarter
revenue slide in at least two years, a sign that the social
network's sizzling growth may be cooling just as it prepares to
go public. Some observers have also flagged the company's lack
of revenue on mobile devices such as smartphones as an area of
Dressed in a gray t-shirt and jeans, the copper-haired
Zuckerberg appeared in a 31-minute road show video posted online
on Thursday. In the video, Zuckerberg predicted that in five
years almost every software app would be integrated with
Facebook generated the lion's share of its $3.7 billion in
revenue last year from online advertising. It also collects fees
when consumers use its special Credits currency to purchase
virtual goods in social games such as Zynga's Farmville. The
company has said it may expand the use of its payment business
Facebook, which plans to list its stock on the Nasdaq under
the ticker "FB", has long tantalized investors with the
prospect of a mega IPO.
As a private company, shares of Facebook have traded briskly
in secondary markets for the past couple of years, as investors
sought to get a piece of the fast-growing company ahead of its
The IPO price range indicated in Facebook's filing on
Thursday would value the company a hair below the level it has
traded at in the secondary markets in recent months, with some
trades valuing the company at slightly more than $100 billion.
But some investors think Facebook, which touts 900 million
users worldwide, is setting itself a fairly conservative target.
"The price range may be tactical. They will likely walk the
range up," Schwerin argued.
Facebook plans to sell 337.4 million shares, or 12.3 percent
of the company, in the offering. The capital-raising target far
outstrips big Internet IPOs that came before it. Google raised
just shy of $2 billion in 2004, while last year Groupon
tapped investors for $700 million and Zynga raked in $1
At the top end of the IPO range, Facebook would rival the
market value of Amazon.com and Cisco Systems Inc, which
are worth just over $100 billion, and surpass the combined
market value of older technology companies Hewlett-Packard Co
and Dell Inc.
Among existing shareholders, the largest seller in the IPO
will be venture capital firm Accel Partners, which will make
about $1.2 billion assuming the shares sell at the $31.5
mid-point. Zuckerberg is selling the next largest chunk of
shares, worth a little under $1 billion.
Facebook said that a "substantial majority" of the proceeds
from Zuckerberg's stock sale will be used to satisfy taxes he
will incur from exercising his options.
In its prospectus, Facebook said the "lock-up" period,
during which employees cannot sell shares after the IPO, would
range from 151 days to 181 days.
Facebook also added two new underwriters, including online
broker E*Trade Securities. The broker caters to retail clients
who some have speculated may try to pile into the IPO.
"No doubt Facebook doesn't want to upset the average mom and
pop out there," said Craig Huber, research analyst, at
independent research firm Huber Research Partners.