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Facebook, the world's most popular social network and, by the end of this week, the world's newest $100-billion company, has raised the price of its initial public offering and shut down part of its investor road show early. Both moves point to a heavily oversubscribed IPO, as investor clamour for a piece of the social media pie – even though very few retail investors have a realistic chance at getting in on Facebook's IPO price.
Facebook now expects to start selling shares at between $34 and $38 (U.S.) a share. The previous range was $28 to $35. At the new price range, Facebook as a whole could be valued at as much as $104-billion. Facebook is selling about 180 million shares in the IPO, and existing stockholders, including founder and CEO Mark Zuckerberg, are selling an additional 157 million.
With a whopping 33 underwriters, including Morgan Stanley and Goldman Sachs, Facebook set off on a roadshow earlier this month to woo investors. During the roadshow, some investors criticized Mr. Zuckerberg for showing up in sweatshirts or hoodies, saying it was a sign the 28-year-old wasn't taking the process seriously.
Apparently, that didn't turn out to be much of a concern. Facebook ended its roadshow two days early on Tuesday, after massive interest from investors. Several banks have already stopped taking orders on the stock, and because many of the shares will undoubtedly be reserved for large, well-connected account-holders, average retail investors will have a very hard time getting in on the IPO price.
Facebook will likely begin trading on Friday on the Nasdaq under the symbol FB.
With 900-million active monthly members, Facebook's growth has been meteoric. The company's revenue grew from $777-million in 2009 to $3.7-billion in 2011. Although the company has several areas of weakness – including its ability to penetrate the Chinese market and to make money off its smartphone- and tablet-based apps – it is still widely regarded as the biggest and most successful social network in the world. The site itself regularly competes with Google's homepage for the title of most visited website on Earth.
The investor frenzy will only grow between now and when the stock goes public on Friday. And although most observers predict a blockbuster launch, there have been some pockets of pessimistic thought on Facebook's longer-term future.
An Associated Press-CNBC poll released this week found half of Americans think Facebook is a passing fad. The same percentage also felt the social network's expected IPO asking price is too high.
Forrester analysts Nate Elliott and Melissa Parrish also criticized the company's efforts to woo marketers in a blog post this week, saying the site was too focused on individual users.
“Somehow Facebook still hasn’t stumbled upon a model that’s proven consistently successful for marketers, or that brings in the massive revenues to match the site’s massive user base. (The company made less than $4 in ad revenue per active user in 2011.),” the analysts wrote.
“The result? One global consumer goods company told us recently that Facebook was getting worse, rather than better, at helping marketers succeed. And companies in industries from consumer electronics to financial services tell us they’re no longer sure Facebook is the best place to dedicate their social marketing budget – a shocking fact given the site’s dominance among users.”