Facebook today once again updated its filing for an initial public offering (IPO) with the U.S. Securities and Exchange Commission (SEC). This is the fifth time it has done so, and the biggest update is that Facebook has set a price range of $28 to $35 per share.
Given the sale of some 337.4 million shares, this means the company could raise between $5.04 billion and $6.30 billion for itself, as well as between $4.41 billion and $5.51 billion for its investors. The company estimates it will likely net $5.6 billion from the offering if it achieves a mid-point price of $31.50 per share.
Here's the relevant excerpt:
Facebook, Inc. is offering 180,000,000 shares of its Class A common stock and the selling stockholders are offering 157,415,352 shares of Class A common stock. We will not receive any proceeds from the sale of shares by the selling stockholders. This is our initial public offering and no public market currently exists for our shares of Class A common stock. We anticipate that the initial public offering price will be between $28.00 and $35.00 per share.
Facebook co-founder and CEO Mark Zuckerberg will personally sell 30.2 million shares for the IPO. Despite this, he will still control the majority of the company: 57.3 percent of voting shares after the IPO.
Here's the relevant excerpt:
The shares subject to this option were fully vested as of November 1, 2010. In connection with our initial public offering, Mr. Zuckerberg will exercise this stock option with respect to 60,000,000 shares of Class B common stock and will then offer 30,200,000 of those shares as Class A common stock in our initial public offering.
While 180 million of the offered shares will come from the company itself, the remainder will come from investors. The following is a list of parties that plan to unload part of their stake:
- Accel Partners: 38.19 million shares, leaving it with around 163.19 million shares.
- DST Group: 26.26 million shares, left with around 105.02 million shares
- Goldman Sachs: 13.19 million shares, left with around 52.76 million shares.
- Elevation Partners: 4.62 million shares, left with around 35.49 million shares.
- Greylock Partners: 7 million shares, left with around 29.66 million shares.
- Mail.ru Group: 11.27 million shares, left with around 45.08 million shares.
- Zynga CEO Mark Pincus: 1.00 million shares, left with around 4.30 million shares.
- Meritech Capital Partners: 7.00 million shares, left with around 29.66 million shares.
- Microsoft: Offering 6.56 million shares, left with around 26.23 million shares.
- Reid Hoffman: 942,000 shares, left with around 3.77 million shares.
- Tiger Global Management: 3.36 million shares, left with around 50.48 million shares.
All the other third parties plan to keep holding their shares. These include T. Rowe Price, Andreessen Horowitz, Sean Parker, and Dustin Moskovitz.
Let's get back to Facebook's share price. It could climb even higher in the coming days, since companies regularly tweak their pricing information after they've issued the first pricing range. Whether or not Facebook's valuation will grow will depend on demand seen by the firm's investment bankers during the company's roadshow, which the company will start preparing for tomorrow.
It could also drop. In its fourth IPO amendment, Facebook released Q1 2012 financials. Revenues followed typical trends, but profits were down:
Facebook saw revenues of $1.058 billion in Q1 2012, up from $731 million in Q1 2011 but down from $1.131 billion in Q4 2011. It’s worth noting that revenues also declined between these two quarters a year ago. Facebook typically makes more money in the calendar year’s fourth quarter than in the first quarter.
Facebook saw net income of $205 million in Q1 2012, down from $233 million in Q1 2011 and also down from $302 million during Q4 2011.
When Facebook released all its IPO numbers three months ago, Morgan Stanley received the coveted lead left role. "Lead left" refers to where the top underwriter's name appears on the IPO prospectus. Also on the initial list of bookrunners on the deal were J.P. Morgan, Goldman Sachs, Bank of America Merrill Lynch, Barclays Capital, and Allen & Company. A month later, Facebook added 25 more underwriters, bringing total to 31:
- Morgan Stanley & Co. LLC
- J.P. Morgan Securities LLC
- Goldman, Sachs & Co.
- Merrill Lynch, Pierce, Fenner & Smith Incorporated
- Barclays Capital Inc.
- Allen & Company LLC
- Citigroup Global Markets Inc.
- Credit Suisse Securities (USA) LLC
- Deutsche Bank Securities Inc.
- RBC Capital Markets, LLC
- Wells Fargo Securities, LLC
- Blaylock Robert Van LLC
- BMO Capital Markets Corp.
- C.L. King & Associates, Inc.
- Cabrera Capital Markets, LLC
- CastleOak Securities, L.P.
- Cowen and Company, LLC.
- Lazard Capital Markets LLC
- Lebenthal & Co., LLC
- Loop Capital Markets LLC
- M.R. Beal & Company
- Macquarie Capital (USA) Inc.
- Muriel Siebert & Co., Inc.
- Oppenheimer & Co. Inc.
- Pacific Crest Securities LLC
- Piper Jaffray & Co.
- Raymond James & Associates, Inc.
- Samuel A. Ramirez & Company, Inc.
- Stifel, Nicolaus & Company, Incorporated
- The Williams Capital Group, L.P.
- William Blair & Company, L.L.C.
In February 2011, Facebook set up a $1.5 billion credit agreement with five of the six leading underwriters of its $5 billion initial public offering (IPO). In September 2011, Facebook upped that number to $2.5 billion. 10 of the 31 underwriters let Facebook bump that number to $5 billion plus a $3 billion bridge loan, and go on a shopping spree.
First, Facebook bought Instagram (and its 13 employees) for $300 million and 23 million shares. Next, Facebook bought 650 AOL patents from Microsoft for $550 million, bringing its patent portfolio into triple digits. This was a necessary defense measure as the company is facing an increasingly fierce patent battle with Yahoo that is threatening its business.
Financials and patents aside, when will Facebook go public? The first rumor said Facebook will go public in the third week of May: the days of 14, 15, 16, 17, or 18. A second rumor narrowed it down to just two days: May 17 or May 24, claiming the choice will come down to how smoothly the Instagram acquisition goes. A third rumor said May 17, 2012 is the likely candidate. All three warned, however, that anything can still happen, and as I've already noted, a fourth one said everything has been pushed back to June. The most recent rumor says May 18 is the big day.
After a rumor suggested Facebook is still on track to have its roadshow start next week, another one said the company will reportedly begin pitching its stock to investors on May 7 (the coming Monday). This means the social networking giant is about to get approval from government regulators to officially distribute its S-1 public offering prospectus to investors this week. It's important to underline that nobody yet knows the plan as it mainly depends on two things: when exactly the U.S. Securities and Exchange Commission (SEC) gives the green light for Facebook's mounting stack of paperwork, and what exactly Facebook co-founder and CEO Mark Zuckerberg feels like doing with his company.
Zuckerberg is expected to appear before potential shareholders, and will be present at key meetings to help sell the company to them. Some may find this surprising given his recent behavior (Zuckerberg skips Facebook analyst meeting (rumor) and Wall Street whines as Zuckerberg skips out on Facebook investors) but as I have said before, of course "Zuckerberg will likely play some sort of role in selling the company's shares to investors."
Zuckerberg is simply too important to Facebook's business to not participate in his company's public offering. Facebook CFO David Ebersman and Facebook COO Sheryl Sandberg will also play key roles in the road show, and other Facebook executives will also be present.
Following the road show, there will be a sales process in which investors ask management questions. Facebook's bankers will then price the offering. Previously we were hearing numbers anywhere between $75 billion, $100 billion, or maybe even higher. Now that range is much smaller.
Once all that is done, Facebook will go public on the Nasdaq market under the "FB" ticker. Only then will you be able to officially buy Facebook stock.
Last but not least, here is the relevant document filed today with the SEC you may want to check out for more information: Amendment No. 5 to Form S-1 REGISTRATION STATEMENT.
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