FACEBOOK BEGAN trading on the Nasdaq stock exchange yesterday morning, in the third-biggest initial public offering (IPO) in history.
Having got off to a shaky start – the Nasdaq was delayed following a hitch in delivering trade execution messages related to its IPO – the stock initially rose by 10 per cent before falling back to the $38 (€30) level.
The $38 initial share price values the eight-year-old social network site at $104 billion (€81.5 billion). The price was at the top end of its range of $34 to $38 a share, valuing it at about 26 times sales in the 12 months through March 31st.
Facebook had increased the number of shares sold and the price in advance of the IPO.
The social media company sold 180 million shares in its IPO. In addition, 241.2 million were sold by existing shareholders. With the IPO pricing the shares at $38 per share, this generated $6.8 billion for Facebook and $9.2 billion for existing shareholders.
It was the first US company to IPO at over $100 billion, and is the third largest IPO in history, behind Visa and General Motors.
Facebook chief executive Mark Zuckerberg, chief operating officer Sheryl Sandberg, and Robert Greifeld, chief executive of Nasdaq, rang the stock exchange opening bell remotely from the Facebook campus in Menlo Park, California, yesterday morning.
Market analysts had expected the initial surge in the share price.
“All the big investors and hedge funds came in for a quick flip,” said Mohannad Aama, a managing director at Beam Capital Management LLC. “There was definitely a lot of pressure at the open.”
Whether Facebook will be able to sustain investor interest is another question, as market analysts yesterday focused on the company’s ability to attract advertising, its main revenue stream.
“We’re not convinced – at all – that the perspective growth of Facebook squares even closely with the current valuation. There have been so many comparisons between Facebook and Google but they’re different business models . . . At these valuations, Facebook has to put up big numbers. We could be wrong but I think that’s going to be a tall order,” said David Rolfe, chief investment officer with investment company Wedgewood Partners, based in St Louis, Missouri. Wedgewood decided not to participate in Facebook’s IPO
“I believe a canary in the coalmine is what transpired early this week with GM ,” he said. “It’s wonderful they’ve generated the revenue they have so far but the jury is still out on how effective advertising on Facebook is.”
General Motors pulled paid advertising from Facebook this week.
Among Facebook’s pre-flotation shareholders are a number of employees at the firm’s operations in Dublin, and Bono, who is an investor through his media investment company Elevate.
Facebook’s stock is listed on the Nasdaq under the symbol FB. It joins fellow technology giants Google and Amazon on the exchange. Facebook’s underwriters may buy an additional 63.2 million shares at the IPO price, which would enlarge the IPO to as much as $18.4 billion.
The IPO price gave Facebook a market value about half the size of Google which was worth more than $200 billion as of yesterday. The search-engine operator’s value has jumped almost ninefold in the eight years since it went public.
Facebook’s IPO coincided with intensifying US market turmoil. About $1 trillion had been erased from American equity values this month after speculation that Greece would leave the euro region reversed the biggest first-quarter rally since 1998. – (Additional Reporting: Bloomberg)
WINDFALL FOR IRISH STAFF
Some workers at Facebook's European headquarters in Dublin stood to earn tens of thousands of euro with the flotation. The company employs about 300 people in Dublin, having taken on an additional 100 staff last year. Staff mainly work in advertising, multilingual sales support, finances, human resources, user operations and development.
INSTANT GAINS
While most of the initial shareholders have held on to some of their shares leaving them with paper gains, they have also offered a proportion for sale through the IPO, which has netted them instant gains.
So who are the shareholders who have offered shares for sale through the IPO?
MARK ZUCKERBURG
The 28-year-old founder of Facebook owns 503.4 million shares and options. He offered 30.2 million shares in the IPO, generating $1.15 billion. Valuing his total shareholding at $38 per share, Zuckerberg’s total shareholding is valued at $19.1 billion.
PETER THIEL
Facebook’s first outside investor, the co-founder of PayPal invested in Facebook in 2004. He has offered 16.8 million shares, at a value of $640 million.
GOLDMAN SACHS
The investment bank invested in Facebook in 2011. Offered 28.7 million shares for sale, generating $1.09 billion.
DST GLOBAL LTD
a London-based Russian-founded investment firm offered 45.7 million, generating $1.74 billion.
Elevation Partners
Private equity firm focused on media whose shareholders include Bono. Offered 4.6 million shares for sale, at a value of $176 million.
GREYLOCK PARTNERS
Silicon Valley venture capital firm. Invested in Facebook in 2006. Offered 7.6 million shares, with a valuation of $289 million.
JAMES BREYER/ACCEL PARTNERS
James Breyer and his Palo Alto based venture capital fund invested in Facebook in 2005. Offered 49 million shares at a value of $1.86 billion.
