According to recent reports, Facebook set the price range for its initial public offering at $25 to $35 a share, in a landmark deal that would raise as much as $13.5 billion for the social network and its insiders.
The preliminary price range would value the company at $75 billion to $100 billion. It puts the social network on track to become the most valuable U.S. Web company at the time of an IPO, exceeding Google's $23 billion valuation in 2004. It would also put Facebook just behind the market capitalization of Amazon and ahead of other tech giants like Hewlett Packard.
Chief Executive Mark Zuckerberg's stake in Facebook is valued as high as about $18.7 billion. Mr. Zuckerberg will also hold or have the ability to control approximately 57.3% of the voting power of our outstanding capital stock following this offering.
The social network is now about two weeks away from a final pricing and the first trading of its shares under the symbol FB. The planned price range of $25 to $35 is on the lower side of what some analysts and investors had expected. On the private-company exchange SharesPost, Facebook shares were last trading at roughly $40 per share.
Facebook CEO Mark Zuckerberg
Facebook's reach is unprecedented. The company, founded by Mark Zuckerberg and some Harvard University students, is now fast approaching an audience of one billion, and it continues to draw users from numerous demographics and international markets. It's now expected to enter the sensitive—but massive—Chinese market.
Still, some recent financial disclosures by the company put a damper on enthusiasm about its impending IPO. Unlike many other Web companies that recently went public, Facebook is profitable. But the company recently disclosed that its profit and sales dipped in the first quarter of this year, compared with the prior period.
Sales in the period fell 6% from the fourth quarter to $1.06 billion, while profit slumped 32% to $205 million. In 2011, Facebook posted a profit of $1 billion and $3.7 billion in sales, compared with a loss of $56,000 and $272 million in sales as recently as 2008.
While Facebook makes money, which can't be said for many other Internet companies like Groupon, for example; it faces the significant challenge of exponentially growing revenues and earnings over the next few years in order to fully live up to the hype and justify its lofty valuation.
