Facebook will file for a $5 billion IPO on Wednesday morning, according to a breaking news report from CNBC. It appears that last Friday’s reports of an expected Facebook IPO this week were indeed correct, though previous reports had expected Facebook to file an IPO for $10 billion. Also as mentioned from last Friday’s reports, investment firm Morgan Stanley will lead the IPO effort for Facebook, with assistance from Goldman Sachs, Barclays Capital, and other investment banks.
Facebook is expected to still be valued by investors at between $75 to $100 billion, despite filing for “only” $5 billion, half of the previously oft-mentioned $10 billion amount. Nevertheless, if carried through to market listing, Facebook’s $5 billion IPO will be one of the largest offerings in history. To put this amount into perspective, Google filed for a $2 billion IPO in 2004 with an initial share price of $85. Rumor has it that Facebook will set the initial share price at around $100, but details about the actual amount are still scarce.
The planned Facebook IPO will be the apex among a slate of Web 2.0 companies that have gone public over the last year, including well-known companies like Pandora, LinkedIn, and Groupon. Share prices for those companies have been quite volatile in their first year of trading, and their finances are still very tenuous (especially for Groupon, which reported losing $146.5 million in the first three months of 2011, on top of total 2010 losses of $456.3 million). However, unlike these smaller companies, Facebook is said to be currently earning profits around $1 billion for last year, which if true would mean the company is on much firmer financial ground.
For Facebook’s early employees, a successful IPO would make them instant paper-millionaires, much like many of Google’s early employees (including, reportedly, their chef) following their own IPO. It will be interesting to see how well Facebook continues to grow and find creative ways to generate revenue. Growing their user base (now at 800 million) can only continue for so long, so it will be crucial for Facebook to also keep growing their per-user value. Some analysts believe this very issue is the reason for the sudden shift to release Timeline for all Facebook users, which though already live for a few months, had been flying under the radar as an opt-in system.
No matter if Facebook is a strong investment option for the long-term, there are certain people who will be definitely cashing out in the immediate future following the official public launch. Among these group of lucky investors is Russian venture capitalist Yuri Milner, who has invested a total of $325 million into Facebook as of May 2011, the first round of funding coming way back in May 2009. Milner’s eccentric personality and investment successes were recently profiled in the November 2011 edition of Wired magazine.
What are your thoughts about a Facebook IPO? Do you feel that Facebook would be a good long-term investment, or is it better suited for a quick “get in and get out” approach? Or is Facebook a complete “stay away” for you. Let us know in the comments!