In one of the largest initial public offerings of stock ever, Facebook said Thursday that it is raising at least $16 billion for itself and its early investors in a transaction that values the world's definitive online social network at $104 billion.
Facebook priced its IPO at $38 per share Thursday, at the top of expectations. The company is selling just a portion of its shares as part of the offering.
The $38 price means all of its shares will be worth about $104 billion, giving the company a market value higher than Amazon.com and other well-known companies such as Kraft, Disney and McDonald's – a big windfall for a company that began eight years ago with no way to make money.
Facebook's stock is expected to begin trading on the Nasdaq Stock Market sometime Friday morning under the ticker symbol "FB." That's when so-called retail investors can try to buy the stock. The $38 tag is the price at which the investment banks orchestrating the offering will sell the stock to their clients.
The offering is the culmination of a year's worth of Internet IPOs that began last May with LinkedIn Corp. Since then, a steady stream of startups focused on the social side of the Web has gone public, with varying degrees of success. It all led up to Facebook, the company that's come to define social networking by getting 900 million people around the world to share everything from photos of their pets to their deepest thoughts.
It has done so while managing to become one of the few profitable Internet companies to go public recently. It had net income of $205 million in the first three months of 2012, on revenue of $1.06 billion. In all of 2011, it earned $1 billion, up from $606 million a year earlier. That's a far cry from 2007, when it posted a net loss of $138 million and revenue of $153 million.
"They could have gone public in 2009 at a much lower price," said Nick Einhorn, research analyst at IPO investment advisory firm Renaissance Capital. "They waited as long as they could to go public, so it makes sense that it's a very large offering."
Facebook is the third-highest-valued company to ever go public, according to data from Dealogic, a financial data provider, behind only two Chinese banks. At $16 billion, the size of the IPO is the third-largest for a U.S. company, trailing only credit card giant Visa and Enel, a power company.
For the Harvard dorm-born social network that reimagined how people communicate online, the stock sale means more money to operate the data centers that hold the trove of status updates, photos and videos shared by Facebook's 900 million users. It means more money to hire the best engineers to work at its sprawling Menlo Park, Calif., headquarters, or in New York City, where the company opened an engineering office last year.
The offering values Facebook, which garnered $3.7 billion of revenue in 2011, at as much as $104 billion. The sky-high valuation has its skeptics, who worry about signs of a slowdown and Facebook's ability to grow in the mobile space when it was created with desktop computers in mind.
"There seems to be somewhat of a hype around the stock offering," said Gartner analyst Brian Blau.
That, of course, is an understatement.
First, there's Facebook's sheer size and high profile. The company grew from a college-only social network to an Internet phenomenon embraced by legions of people, from teenagers to grandmothers to pro-democracy activists in the Middle East.
"It's probably one of the first times there has been an IPO where everyone sort of has a stake in the outcome," Mr. Blau said. While most Facebook users won't see a penny from the offering, they are all intimately familiar with the company, so it resonates as something they understand.