(By Mani) Facebook
(NASDAQ: FB) and its shareholders have raised $16 billion after pricing the landmark public offering at $38, the high end of its proposed range, and values the social networking giant at about $105 billion.
California-based Facebook is expected to begin trading on the NASDAQ Global Select Market on May 18, 2012, under the symbol "FB."
Facebook, which was cofounded by Mark Zuckerberg in his Harvard dorm room, is offering 180 million shares of Class A common stock and selling stockholders are offering 241.23 million shares of Class A common stock.
Additionally, the underwriters have been granted a 30-day option to buy up to 63.18 million additional shares of Class A common stock to cover over-allotments, if any.
The IPO, including over allotments, would be worth $18.4 billion, lower than $19.65 billion raised by Visa, Inc. (NYSE: V), but marginally higher than $18.14 billion raised by General Motors Co. (NYSE:GM) in November 2010, according to data from Dealogic.
Almost all the big Wall Street banks have underwritten the Facebook offering. They include Morgan Stanley, J.P. Morgan, Goldman Sachs, BofA Merrill Lynch, Barclays, Citigroup, Credit Suisse and Deutsche Bank.
Closing of the offering is expected to occur on May 22, 2012, subject to customary closing conditions. Investors hope that shares of Facebook open higher when it begins trading on Friday.
Facebook IPO, which is worth $16 billion, is the biggest ever in the Internet industry after Google, Inc. (NASDAQ:GOOG) raised $1.9 billion at a valuation of $23 billion in 2004.
In terms of market cap, Facebook competes with Amazon.com Inc. (NASDAQ:AMZN) and surpassed PC makers Hewlett-Packard Co. (NYSE:HPQ) and Dell Inc. (NASDAQ:DELL). However, it needs to go a long way before reaching rival Google's market cap of about $199 billion.
The much-awaited Facebook IPO comes after daily-deals site Groupon Inc. (NASDAQ:GRPN) and social-gaming company Zynga Inc. (NASDAQ:ZNGA) raised $700 million and $1 billion, respectively, from their IPOs. Comparatively, Facebook is bigger by its sheer size and dynamics as it has garnered 901 million users and has been the subject of an Oscar-winning film "The Social Network."
Meanwhile, the lofty valuation of Facebook comes amid concerns that Facebook's revenue and profit would hurt if users increasingly access Facebook on tablets and smartphones where it has limited presence as it currently does not show ads on mobile devices.
Facebook has 488 million monthly active users (MAUs) using the website on their tablets or smartphones in March 2012. This represents about 54 percent of its total MAUs of 901 million.
Just couple of days before, automaker General Motors Co. (NYSE:GM) pulled its ads from the social networking site, saying that its paid ads on the Facebook have little impact on consumers' car purchases. This should be a cause of concern for Facebook, which generates significant share of its revenue from third party ads.
Facebook, which generates a substantial majority of revenue from advertising, posted a profit of $1 billion on $3.7 billion in sales in 2011. In 2010, it earned $606 million on $1.97 billion in sales.
However, for the first quarter, the company's profit fell 12 percent to $205 million as a 45 percent increase in sales to $1.06 billion was offset by 97 percent surge in costs. Facebook said its ad revenue was down 7.5 percent sequentially for the first quarter.