Facebook sets IPO share price at $38: $104 billion valuation

Facebook has priced its initial public offering (IPO) at $38 a share, giving itself a valuation of $104 billion, and raising $18.41 billion. Facebook will go public the morning of Friday May 18, 2012.
Written by Emil Protalinski, Contributor

As expected, Facebook on Thursday priced its initial public offering (IPO) at $38 a share. This gives the social networking giant a valuation of $104 billion, which will make it the largest U.S. company, by market value, at its IPO.

Facebook will go public Friday morning and start trading on the Nasdaq under the "FB" ticker. When that happens, the social networking giant's IPO will become the second largest U.S. listed IPO, in terms of money raised, just behind Visa (see also: The Top 10 Web IPOs of all time -- pre-Facebook, that is).

On Wednesday, Facebook increased its IPO size by 25 percent. The social networking giant is thus offering some 421.2 million shares. This means Facebook is raising $16.01 billion when it goes public ($6.84 billion billion for itself and $9.17 billion for investors).

If you include over-allotted shares, meaning a grand total of 484.4 million parts of the company, Facebook could end up raising $18.41 billion. For comparison's sake, Google saw the largest technology IPO when it raised $1.67 billion in August 2004.

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.

While 180 million of the offered shares will come from the company itself, the remainder will come from investors. Here are the parties that plan to unload part of their stake:

  • Accel Partners: 49.03 million shares, leaving it with around 152.35 million shares.
  • DST Group: 45.66 million shares, left with around 85.62 million shares
  • Goldman Sachs: 28.67 million shares, left with around 37.27 million shares.
  • Elevation Partners: 4.62 million shares, left with around 35.49 million shares.
  • Greylock Partners: 7.61 million shares, left with around 29.05 million shares.
  • Mail.ru Group: 19.60 million shares, left with around 36.75 million shares.
  • Zynga CEO Mark Pincus: 1.01 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: 23.41 million shares, left with around 60.43 million shares.

All other parties plan to keep holding their shares. These include T. Rowe Price, Andreessen Horowitz, Sean Parker, and Dustin Moskovitz.

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, and then two more this month, bringing total to 33:

  1. Morgan Stanley & Co. LLC
  2. J.P. Morgan Securities LLC
  3. Goldman, Sachs & Co.
  4. Merrill Lynch, Pierce, Fenner & Smith Incorporated
  5. Barclays Capital Inc.
  6. Allen & Company LLC
  7. Citigroup Global Markets Inc.
  8. Credit Suisse Securities (USA) LLC
  9. Deutsche Bank Securities Inc.
  10. RBC Capital Markets, LLC
  11. Wells Fargo Securities, LLC
  12. Blaylock Robert Van LLC
  13. BMO Capital Markets Corp.
  14. C.L. King & Associates, Inc.
  15. Cabrera Capital Markets, LLC
  16. CastleOak Securities, L.P.
  17. Cowen and Company, LLC.
  18. E*TRADE Securities LLC
  19. Itau BBA USA Securities
  20. Lazard Capital Markets LLC
  21. Lebenthal & Co., LLC
  22. Loop Capital Markets LLC
  23. M.R. Beal & Company
  24. Macquarie Capital (USA) Inc.
  25. Muriel Siebert & Co., Inc.
  26. Oppenheimer & Co. Inc.
  27. Pacific Crest Securities LLC
  28. Piper Jaffray & Co.
  29. Raymond James & Associates, Inc.
  30. Samuel A. Ramirez & Company, Inc.
  31. Stifel, Nicolaus & Company, Incorporated
  32. The Williams Capital Group, L.P.
  33. William Blair & Company, L.L.C.
  34. E*Trade Securities

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. There's a $200 million break-up fee and an FTC investigation.

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.

Now Facebook is going to have to take its business out into the open.

For reference, here's the full press release from Facebook:

MENLO PARK, Calif., May 17, 2012 -- Facebook (NASDAQ: FB) today announced the pricing of its initial public offering of 421,233,615 shares of its common stock at a price to the public of $38 per share. The shares are expected to begin trading on the NASDAQ Global Select Market on May 18, 2012, under the symbol "FB." Facebook is offering 180,000,000 shares of Class A common stock and selling stockholders are offering 241,233,615 shares of Class A common stock. Closing of the offering is expected to occur on May 22, 2012, subject to customary closing conditions.

In addition, Facebook and the selling stockholders have granted the underwriters a 30-day option to purchase up to 63,185,042 additional shares of Class A common stock to cover over-allotments, if any.

Morgan Stanley, J.P. Morgan, Goldman, Sachs & Co., BofA Merrill Lynch, Barclays, Allen & Company LLC, Citigroup, Credit Suisse and Deutsche Bank Securities are serving as book runners for the offering. RBC Capital Markets and Wells Fargo Securities are serving as active co-managers.

The offering will be made only by means of a prospectus. Copies of the prospectus related to the offering may be obtained from: Morgan Stanley & Co. LLC, 180 Varick Street, 2nd Floor, New York, New York 10014, Attention: Prospectus Department (Tel: +1 866 718 1649; e-mail: prospectus@morganstanley.com); J.P. Morgan Securities LLC, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, (Tel: +1 866 803 9204); or Goldman, Sachs & Co., 200 West Street, New York, NY 10282, Attention: Prospectus Department (Tel: +1 866 471 2526, e-mail: prospectus-ny@ny.email.gs.com).

A registration statement related to these securities has been filed with, and declared effective by, the U.S. Securities and Exchange Commission. This press release shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

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