Facebook stock logs on at $38 tag

IPO price one of largest ever

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NEW YORK — Facebook’s initial public offering of stock is shaping up to be one of the largest ever. The world’s definitive online social network is raising at least $16 billion, a big windfall for a company that began eight years ago with no way to make money.

Facebook officials said Thursday they were pricing the IPO at $38 per share, at the upper end of its expected range. If extra shares reserved to cover additional demand are sold as part of the transaction, Facebook Inc. and its early investors stand to reap as much as $18.4 billion from the IPO.

The stock sale values the company at around $104 billion, slightly more than Amazon.com, and well more than well-known corporations such as Disney and Kraft.

The $38 tag is the price at which the investment banks orchestrating the offering will sell the stock to their clients. Facebook’s stock is expected to begin trading on the Nasdaq Stock Market sometime Friday morning under the ticker symbol “FB.” That’s when retail investors can try to buy the stock.

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.

And it means early investors, who took a chance seeding the young social network with start-up funds six, seven and eight years ago, can reap big rewards. Peter Thiel, the venture capitalist who sits on Facebook’s board of directors, invested $500,000 in the company back in 2004. He’s selling nearly 17 million of his shares in the IPO, which means he’ll get some $640 million.

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. Google Inc., which earned $38 billion last year, has a market capitalization of $207 billion.

“There seems to be somewhat of a hype around the stock offering,” said Gartner analyst Brian Blau.

There are a few reasons for the exuberance. One is the IPO’s sheer size. Investor appetite for the stock will likely propel Facebook’s valuation above other well-known companies such as Kraft, Disney and even Amazon.com.

Secondly, it’s personal.

“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.

Though Facebook founder Mark Zuckerberg is selling about 30 million shares, he will remain Facebook’s largest shareholder. The offering’s dual-class ownership structure helps to ensure that he and other executives keep control as the sometimes conflicting demands of Wall Street exert new pressures on the company.

As a result, with the help of early investors who’ve promised to vote their stock his way, Mr. Zuckerberg will have the final say on how nearly 56 percent of Facebook’s stock votes.

True to form, Mr. Zuckerberg and Facebook’s engineers are ringing in the IPO on their own terms. The company staged an overnight “hackathon” Thursday, during which engineers planned to stay up writing programming code to come up with new features for the site. On Friday morning, Mr. Zuckerberg will ring the Nasdaq opening bell from Facebook’s headquarters.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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