By Olivia Oran and Alexei Oreskovic
NEW YORK/SAN FRANCISCO May 15 Facebook Inc
increased the price range on its initial public offering
an average of 14 percent to raise more than $12 billion, giving
the world's No. 1 social network a valuation potentially
exceeding $100 billion.
The company, which began in a Harvard dorm room by Mark
Zuckerberg, raised the target range to between $34 and $38 per
share in response to strong demand, from $28 to $35, according
to a filing with the U.S. Securities and Exchange Commission on
That would value Facebook at roughly $93 billion to $104
billion, rivaling the market capitalization of Internet
powerhouses such as Amazon.com Inc, and exceeding that
of Hewlett-Packard Co and Dell Inc combined.
The price increase indicates intense market demand, which
means Facebook's shares are likely to see a big pop on their
first day of trading on Nasdaq on Friday, analysts said.
"It's confounding but the evidence is that if companies
raise the range they will pop more," said Josef Schuster,
founder of Chicago-based financial services firm IPOX Schuster
LLC. "It signals that there is such a strong demand that it will
create a momentum for other investors who want to jump on."
In the biggest-ever IPO to emerge from Silicon Valley,
Facebook will raise $12.1 billion based on the mid-point price
of $36 and the 337.4 million shares on offer, or 12.3 percent of
At this mid-point, Facebook would be valued at roughly 27
times its 2011 annual revenue, or 99 times earnings. When Google
Inc went public in 2004 at a valuation of $23 billion,
it was valued at 16 times trailing revenue and 218 times
earnings. Apple, meanwhile, went public in 1980 at a
valuation of 25 times revenue and 102 times earnings.
Wall Street had expected Facebook to increase its price
range, with investors eager to get a slice of a strong consumer
brand. The IPO roadshow began last week and has drawn crowds of
investors from coast to coast.
Facebook plans to close the books on its IPO later on
Tuesday, two days ahead of schedule, a source familiar with the
deal told Reuters on Monday. It is scheduled to price its shares
on Thursday and begin trading on Nasdaq on Friday.
The IPO is already "well oversubscribed," which is why the
company will close its books earlier than anticipated, the
Facebook's capital-raising target far outstrips other big
Internet IPOs. Google raised just shy of $2 billion in 2004,
while last year Groupon Inc tapped investors for $700
million and Zynga Inc raked in $1 billion.
The IPO comes amid concerns from some investors that
Facebook has not yet figured out a way to make money from an
increasing number of users who access the social network on
mobile devices such as smartphones.
Company executives met with prospective investors in Chicago
on Monday and were slated to travel to Kansas City, Missouri,
and Denver, before returning to Facebook's Menlo Park,
A host of Wall Street banks are underwriting Facebook's
offering, with Morgan Stanley, JPMorgan and
Goldman Sachs serving as leads. Facebook will trade on
Nasdaq under the symbol FB.