After months of increasingly frenzied speculation, social networking juggernaut Facebook filed IPO registration documents Wednesday with the Securities and Exchange Commission. Although the company said it aims $5 billion, that number could rise as high as $10 billion, depending on investor demand. Facebook’s public debut, which caps a meteoric rise to the top of the tech world, would be the largest Internet IPO in history.
Facebook is currently trading at a valuation of $89.4 billion on Sharespost, a private market, but the company could be worth as much as $100 billion or more after the IPO, once public investors get a chance to buy a piece of the company for the first time. That would make its market capitalization greater than iconic American companies like McDonald’s, Citigroup, and Kraft Foods. It would also turn founder and CEO Mark Zuckerberg into one of the richest people in the world, with an estimated net worth of well over $20 billion.
Facebook is one of the most dramatic Internet success stories of the decade since the first dot-com bubble crashed. Zuckerberg, who launched the company from his dorm room at Harvard eight years ago, has been able to synthesize two powerful trends: the network effect of millions of people connected to each other by the Internet, and the increasingly sophisticated practice of targeted advertising. It’s been years since the company had a any real competition — Friendster and MySpace have been vanquished, while Google’s social efforts are only starting to bear fruit. As a result, Facebook has become a truly massive — and quite unique — web platform that serves as the primary vehicle for an ever-increasing amount of web activity and commerce.
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Facebook’s IPO filling is the first step toward becoming a public company, which will happen once the company’s shares officially start trading sometime in the spring. The company has chosen Morgan Stanley as the lead bookrunner — occupying the highly-desirable “lead left” slot on the IPO prospectus — for the offering. Goldman Sachs, Bank of America Merrill Lynch, Barclays Capital and JP Morgan will also participate on the deal.
The “lead left” bank leads the IPO underwriting process — its name in the upper-left-hand corner of the actual prospectus — and typically receives higher fees than the other banks in the syndicate. Goldman Sachs and Morgan Stanley had reportedly battled over that status for Facebook’s IPO. Previous reports suggested that Morgan Stanley won out because Facebook was displeased with Goldman’s botched, $1.5 billion private placement in the company shares last January, in which the bank ran afoul of SEC rules and was forced to close the offering off to U.S. investors.
Facebook’s IPO filing marks the first time that public market investors have been able to scrutinize the company’s books. The social network, which has amassed over 800 million users worldwide, said it earned $1 billion in profit on revenue of $3.7 billion last year.
Facebook’s public debut would be the capstone for a series of Internet IPOs that have occurred since the beginning of 2011. The company will be hoping to avoid the less-than-successful performance of some of the other offerings. A more conservative raise isn’t such a bad idea, given that several recent Internet IPOs have underperformed. Discount sales website Groupon and web-radio service Pandora both saw their stock prices fall below their IPO levels.
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