Facebook Shares To Sell At £24 Today

Facebook Shares To Sell At £24 Today

Facebook shares are being offered to the public for 38 US dollars (£24) in one of the biggest ever US stock flotations.

The social media giant is now valued at more than 100 billion dollars (£66 billion) and stands to reap up to 18.4 billion dollars (£11.6 billion) from the sale of hundreds of millions of shares.

Founded in a Harvard dorm room eight years ago, the social networking site is expected to launch its initial public offering (IPO) on the Nasdaq Stock Market.

It was expected prices would set at between 34 and 38 US dollars, meaning demand from investors has been high.

Trading is set to begin under the ticker symbol FB two days after massive interest in the sale prompted the company to boost the number of shares it plans to sell, with 84 million more - worth up to 3.2 billion dollars (£2 billion) - being added to the IPO.

But the entire increase comes from insiders and early investors, so the company will not benefit from the additional sales.

Facebook board members Peter Thiel and James Breyer are among those selling more shares, but founder Mark Zuckerberg is not increasing the number he is selling.

In a filing with the Securities and Exchange Commission, Facebook said current shareholders are now offering approximately 241 million shares, up from about 157 million shares previously.

Investors such as U2 frontman Bono stand to make huge sums, with music magazine NME predicting the singer will become the richest rock star on the planet when the company floats.

Predictions on how much the stock will rise on the first day of trading vary greatly.

Shares of professional networking company LinkedIn Corp's doubled on their first day of trading but despite the hype, scepticism remains in some quarters, with murmurings that the stock is overvalued.

In a recent Bloomberg survey of 1,250 global investors, analysts and traders, 79% said Facebook's valuation was not justified, with only 7% deeming the valuation fair.

Facebook's mobile phone platform is thought to need improvement, while its effectiveness as an advertising space has also been debated.

These doubts were brought into sharp focus on Tuesday when General Motors, the US's largest car manufacturer, said it would stop advertising on the site.

Facebook has more than 900 million users who log in at least once a month, but it makes only a few dollars per year from each one, chiefly through advertising.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, noted that in addition to concerns about the valuation and the challenge Facebook faced on the mobile front, worries had also been expressed about corporate governance at the company - especially the power still resting with the founder.

It needed to diversify and reduce its "almost pure reliance" on advertising income, and was exposed to changing social trends, he pointed out.

He said: "Around a half of Facebook users access the site from their mobile phones.

"Converting this traffic into income is perhaps one of the company's largest, and currently perplexing, challenges.

"Facebook was not conceived in the smartphone era and therefore did not have it in mind as a platform.

"It has catching up to do and, if possible, without cannibalising its own current income from the PC space."

Meanwhile the company's global reach was "massive and growing" and it was already attempting to deal with the major risks and challenges it faces, he said.

"There are extremely high expectations for the company's prospects and perhaps on that basis it deserves the punchy valuation it has been given," he added.

Social media experts were also bullish.

Ivor Kellock, a social media and digital marketing specialist, said: "Facebook is the dominant force in the western world and social networking is still in its infancy.

"That's not to say there won't be more competition and it won't get more difficult for them but I don't think they're overvalued.

"The only caveat is it depends what other new, innovative ideas come up that knock Facebook for six."

Social gaming on Facebook was a big money-spinner and there was also potential for further exploitation of data on users to enable more targeted advertising, he added.

Social media strategist Tiffany St James, founder of digital company Stimulation Ltd, agreed the site had the potential to expand its offerings still further.

"Before, it was all about connecting with family and friends but now you can go on there for all your entertainment," she said.

"It's not necessarily just the advertising that makes money, but the fact that people can build applications."

Eight years after the concept of Facebook was dreamed up in a Harvard University bedroom, Mr Zuckerberg has become one of the richest people in the US, with 55.8% voting control in the company.

The site's revenue last year was 3.7 billion dollars, up from 153 million in 2007, with the majority earned through advertising.

Facebook is the latest in a series of online firms to sell shares to the public in recent months, following online voucher firm Groupon in November and online games maker Zynga in December.

Close

What's Hot