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TOPIC: Facebook Sets Historic IPO

Facebook Sets Historic IPO 6 years 7 months ago #2687

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Facebook Inc. filed for an initial public offering Wednesday that could value the social network between $75 billion and $100 billion, putting the eight-year-old company on track to be one of the biggest U.S. stock-market debuts of all time, even as it tries to keep up with sky-high expectations.

The company listed its offering size at $5 billion in a securities filing, but aims to raise as much as $10 billion when it goes public this spring, said people familiar with the matter.

After years of speculation, Facebook for the first time revealed its financial numbers, showing why it's one of the coveted Internet companies. Facebook said it produced $3.71 billion in revenue last year mostly from advertising on the site, with a profit of $1 billion.

Facebook's public debut is one of the most hotly anticipated IPOs in recent years and would top rival Google Inc.'s 2004 offering, which has held the record for the largest U.S. Internet IPO by raising $1.9 billion and valuing the company at $23 billion.

Among U.S. companies, only Visa Inc., General Motors Co. and AT&T Wireless have held larger offerings than $10 billion.

While Facebook is growing fast—revenue grew 88% from a year earlier—the sales figures it released were lighter than some had expected. One widely cited outside estimate from research firm eMarketer pegged Facebook's revenue for 2011 at $4.27 billion.

Still, Facebook's membership growth has staggering. The company said in its filing that it has 845 million users globally, up 39% from a year earlier.

Facebook's offering is also viewed as a defining moment for the latest Web boom, capping a recent wave of Web IPOs such as daily deals site Groupon Inc. and social gaming company Zynga Inc. Some of those offerings have since struggled amid growing Wall Street scrutiny of the new crop of Internet companies.

A Facebook IPO stands out from those recent debuts because of the cultural, social and economic impact of the company. The social network, which was started by Facebook Chief Executive Zuckerberg in 2004 out of his Harvard University dorm room, has reshaped how people share information and interact with others on the Web. In the process, Facebook has spawned new verbs such as "to friend" and a popular Hollywood movie "The Social Network" that detailed the company's origins.

The IPO is set to unleash a wave of wealth across Silicon Valley and yield potentially hundreds of millions in fees for Wall Street banks managing the offering, including Morgan Stanley, J.P. Morgan Chase and Co. and Goldman Sachs Group Inc.

At Facebook, employees went about business as usual Wednesday, enjoying a lunch of lobster bisque, braised beef, Moroccan couscous and apple, cream and honey galette for dessert, according to one person. A stack of give-away posters left in a kitchenette at Facebook headquarters read "Stay Focused & Keep Shipping," according to a photo shared by Facebook employees.

The company chose "FB" as its ticker symbol but hasn't decided whether it will trade on the New York Stock Exchange or Nasdaq Stock Market.

Mr. Zuckerberg, 27 years old, had been famously reluctant to push forward with an IPO. In early 2010, he told The Wall Street Journal that he was in "no rush" for Facebook to go public.

The CEO owns around 28% of the company and holds 57% of its voting share power, according to the filing. According to the filing, Mr. Zuckerberg will sell shares in the IPO and will use the proceeds to pay taxes. The filing doesn't say how many shares the CEO intends to sell.

People familiar with Mr. Zuckerberg's thinking said he has long been fearful of the damage an IPO could do to the company's culture. He wants employees focused on making great products, not the stock price, they said.

Mr. Zuckerberg's thinking began changing when Facebook realized in 2010 that it would have more than 500 shareholders by the end of 2011, which would trigger a regulatory requirement that the company start publicly reporting financial information. Mr. Zuckerberg decided it made more sense for Facebook to go public and reap some financial benefit from an IPO, rather than stay private but release its financial information and accept the liabilities that go along with that, said people familiar with his thinking.

Facebook also still faces questions about its commitment to its users' privacy, an issue that had dogged it since its earliest days. Despite a settlement last year with the Federal Trade Commission in which the company agreed to independent privacy audits for 20 years, privacy advocates worry about the vast trove of user data it owns. Mr. Zuckerberg has promised users he is committed to protecting their privacy.

In the IPO filing, Facebook takes pains to mention the importance of privacy, mentioning the word 35 times and even listing its "privacy and sharing settings" as one of way the company creates value for people.

In a letter to potential shareholders, Mr. Zuckerberg—who has long said he is focused on building great products and has eschewed the business side of Facebook—said he plans to continue focusing on building products, rather than sales growth. "We don't build services to make money; we make money to build better services," Mr. Zuckerberg wrote. "These days I think more and more people want to use services from companies that believe in something beyond simply maximizing profits."
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