Editor’s note: This article was first published in May 2012, with news from 15 May 2012, three days before Facebook went public. The IPO was finally priced at $38 a share and trading began on 18 May 2012; the shares fell well below the offer price in the following months.
Facebook has just announced that today it is raising the price range for its IPO to $34–38 a share, up from the previous range of $28–35.
In numbers, this new price range would give Facebook a total value of $93–104 billion. Since Facebook plans to sell 337.4 million shares (12.3% of the company), it would raise between $11.5 billion and $12.8 billion from the IPO.
The numbers don’t add up, and some see it as evidence of a bubble in tech stock prices, since Facebook’s revenue is currently ten times smaller than Google’s. Google, by contrast, raised less than $2 billion in its IPO, so there would be no explanation for the very high value being placed on Mark Zuckerberg’s company.
Even so, demand for the shares among institutional investors has soared. Facebook will make history this 18 May, the day it goes public, with the biggest IPO ever by a tech company. Anything can happen that day. Its debut could turn into a “fiasco”, as happened to Zynga. Or, going by its value and profits, if LinkedIn soared to a return of more than 140% on its IPO, Facebook could approach that figure or even exceed it, although many analysts believe the company’s valuation is far too inflated, since there is no convincing basis for giving it that value.
Featured image: LPS.1, CC0 1.0, via Wikimedia Commons.
