Facebook plans $5bn stock market debut

The world’s largest social network has filed to raise $5bn in a much anticipated stock market flotation that would be Silicon Valley’s largest initial public offering, though much less than some analysts had predicted.

With more than 845 million monthly active users, Facebook said in a preliminary filing on Wednesday that its net income had risen 65 per cent to $1bn in 2011 from a revenue of $3.71bn.

If its initial public offering of stock attracts enough interest from investors, Facebook will probably make its stock market debut in three or four months as one of the world’s most valuable companies. Based in Menlo Park, California, Facebook hopes to list its stock under the ticker symbol “FB”‘ on the New York Stock Exchange or Nasdaq.

The company has made it clear to outside investors that they will have little voice in its running, as Mark Zuckerberg, the site’s founder and CEO, will continue to exercise almost complete control.

The 27-year-old Harvard dropout, who launched the site while a student at Harvard University, will own 56.9 per cent of the voting shares of a company that is expected to be worth up to $100bn when it goes public.

He will have economic control of about 28 per cent of the shares, ranking him among the richest people in the world.

Zuckerberg’s 533.8 million shares are currently worth almost $16bn, based on a per-share value of $29.76 that the company assigned to its restricted stock units on December 31.

“We often talk about inventions like the printing press and the television,” Zuckerberg said in a letter accompanying the filing documents. “Today, our society has reached another tipping point.”

“There is a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future,” said Zuckerberg, whose $500,000 base salary will drop to a dollar on January 1, 2013.

“The scale of the technology and infrastructure that must be built is unprecedented.”

‘Outrageously valuable’

Catherine Tucker, a marketing professor at MIT, told Al Jazeera that Facebook’s potential for advertising revenue was still untapped.

“The main way they use friendship data is to provide ads to people’s friends … but Facebook is going to learn how to capitalise on this information … for advertising,” she said.

Patrick Tucker, deputy editor of the Futurist magazine, said Facebook was easily worth the $5bn price tag.

The vast amount of data produced on the social network was “outrageously valuable and transcends a monetary value”, he said, referring to the company’s wealth of social insights for use by other large corporations.

Al Jazeera’s Rob Reynolds, reporting from Los Angeles, said the data generated through Facebook “likes” and personal status updates was extremely useful to advertisers.

The long-awaited financial submission by Facebook will begin a months-long process that will culminate in an event not seen since the heyday of the dotcom boom in the late 1990s and the bust of the early 2000s.

Dotcom IPO

With 443 million daily users, Facebook overtook Yahoo in 2011 to become the top provider of online display ads in the US by revenue, according to industry research firm eMarketer.

Facebook, originally known as The Facebook, was launched in 2004 by Zuckerberg as a way for university students to connect with each other.

The social network has appointed Morgan Stanley, Goldman Sachs and JPMorgan as its lead underwriters. Bank of America, Merrill Lynch, Barclays Capital and Allen & Co will also have stakes as the social networking phenomenon makes its long-awaited debut as a public company.

Facebook had previously been expected to raise $10bn in what would have been the fourth-largest IPO in US history, after Visa Inc, General Motors, and AT&T Wireless, according to Thomson Reuters data.

Google raised less than $2bn for its 2004 IPO, while the more recent Groupon secured $700mn and Zynga managed $1bn.