Facebook plans to increase the size of its IPO deal by 85 million shares, according to the source familiar with the matter, what could value its upcoming offering at as much as $18.5 billion, reported CNBC.
The expanded size if the IPO, together with Facebook’s recently announced plans to raise the IPO price range, would make the company the third-largest initial share sale in US history after Visa and General Motors.
“This is much more a spectacle, a media event and a cultural moment than it is an IPO,” said Max Wolff, an analyst at GreenCrest Capital. “This is not a game of models and fundamentals at this point.”
Facebook is drumming up massive demand for the offering even as slowing revenue and user growth spur questions about the long-term Facebook story, reports Reuters.
Facebook’s expected move takes the size of its new issue from roughly 340 million shares to almost about 420 million.
At the same time, according to a Tuesday filing, Facebook raised the target price range to $34-$38 per share in response to strong demand.
According to The Telegraph, that would value the company at about $93bn to $104bn, rivaling the market value of Internet powerhouses such as Amazon.com, and exceeding that of Hewlett-Packard and Dell combined.
“No rational person thought they were buying the stock for $28,” said Wedbush Securities analyst Michael Patcher. He also noted that Facebook had traded as high as $44 in the secondary markets in recent months.
According to Facebook’s latest filing? it arrived at the higher IPO price range after one week of marketing the offering – part of a cross-country roadshow in which CEO Mark Zuckerberg has taken the stage to lay out his vision for the company’s money-making potential and its top priorities.
Before the increase of the IPO size, Facebook would have raised about $12.1 billion based on the midpoint price of $36 and the 337.4 million shares on offer originally.
At this midpoint, Facebook would be valued at around 27 times its 2011 revenue, or 99 times earnings. In comparison, Google went public at a valuation of $23 billion, or 16 times its trailing revenue and 218 times earnings. Apple Inc went public at a valuation of 25 times its revenue and 102 times earnings in 1980.
However some investors worry that Facebook has not yet figured out a way to make money from a growing number of users who access the social network on mobile devices such as smartphones.
A final decision on Facebook’s IPO price, which is thought to be somewhere between $34 and $38 per share, will be made Thursday evening.
With the estimated 900m users, the company had $1bn in net income on revenue of $3.7bn in 2011.
Facebook is scheduled to begin trading on the Nasdaq on Friday. A host of Wall Street banks are underwriting the offering, with Morgan Stanley, JPMorgan and Goldman Sachs serving as leads.
Facebook has also extended the time frame for its $1 billion acquisition of mobile app maker Instagram, projecting the deal would close this year instead of the second quarter as it previously indicated.
“An increasing number of institutional investors are looking beyond the value of the business today and looking at the future growth,” said Samuel Schwerin, managing partner at New York-based Millennium Technology Value Partners.
“Those drivers are extraordinary in size, including international and mobile and commerce,” Schwerin, whose firm oversees $1 billion, including Facebook stock, said yesterday.