On Friday, social network Facebook will list on Wall Street in the third largest initial public offering (IPO) in US history and the largest in the technology sector. The initial share price is set at US$38 and, with 421m shares being listed, the move will make Facebook’s key investors instant billionaires.
At that price, the IPO will raise about $16bn. The first shares made their way to hedge funds and other sizeable investors on Thursday evening and will be tradable publicly later on Friday. The market will open at 09.30am New York time (3.30pm SA time), but shares will only start being traded an hour or so later.
Facebook’s market capitalisation will be in the region of $80bn, or more than $100bn if one considers the unexercised stock options a number of the company’s employees hold. Pundits are divided on whether the stock will spike, plummet or hold steady after trading begins, with some warning the company is grossly overvalued and indicative of a bubble of the sort seen at the beginning of the last decade.
Others predict it will hold its ground based on Facebook’s recent additions to its mobile platform and its aggressive acquisition of start-ups Instagram and Glancee that are indicative of it addressing the most glaring gap in its portfolio: the fact that it doesn’t make money from mobile phones.
Although CEO Mark Zuckerberg is set for the largest single windfall, other Facebook executives and former executives are also about to leap onto lists of the world’s wealthiest people. They include chief operating officer Sheryl Sandberg, who moved to the company from Google in 2008; early investor and Napster founder Sean Parker; and co-founders Dustin Moskovitz, Chris Hughes and Eduardo Saverin, none of whom is still with the company.
Instagram founder Kevin Systrom is also set to benefit. He recently sold the photo-sharing start-up to Facebook for $1bn in cash and stock that included 23m Facebook shares now worth $874m. In addition to the $300m in cash, that means the Instagram deal was really worth closer to $1,2bn.
Even Microsoft is set to reap the benefits of the listing having acquired 1,6% equity stake in the social media company for $240m in 2007. Microsoft’s 33m shares give it a stake worth over $1,2bn – a tidy return on investment by anyone’s measure. — (c) 2012 NewsCentral Media