Facebook Inc. filed for an initial public offering Wednesday that could value the social network between $75 billion and $100 billion, putting the company on track for one of the biggest U.S. stock-market debuts of all time.
The company hopes to raise as much as $10 billion when it begins selling shares this spring, said people familiar with the matter. Potential buyers got their first look at its financials Wednesday, which showed the company produced a $1 billion profit last year from $3.71 billion in revenues. The company derives 85% of those revenues from advertising, with the rest from social gaming and other fees.
Looming a few months away is Facebook's giant offering, which would top rival Google Inc.'s 2004 IPO. It holds the record for the largest U.S. Internet IPO by raising $1.9 billion at a valuation of $23 billion. Among U.S. companies, only Visa Inc., General Motors Co. and AT&T Wireless have held larger offerings than $10 billion. In the filing with the Securities and Exchange Commission, Facebook said it is seeking to raise $5 billion, but that figure is a placeholder and will likely grow.
But for all its success, the question remains just how Facebook will manage its growth into a mature, global business, keeping both advertisers and subscribers happy while balancing demands of privacy and profits. The filing left a few clues that Facebook's founder, 27-year-old Mark Zuckerberg, is worried about how wealth and public scrutiny may change the company's culture.
Still, Facebook's membership growth has been staggering. The company said in its filing that it has 845 million users globally, up 39% from a year earlier.
Overall, Facebook's annual revenue growth is slower than other tech companies who have staged IPOs recently. Groupon's revenue grew 695% for the nine months ended September 2011 from a year earlier. Zynga's revenue more than doubled for that same time period.
Unlike some other newly public Web companies, Facebook is profitable, with 2011 profit up 65% from the year earlier period. But growth has its costs. The company's research and development expenses ballooned last year to $114 million in 2011 from $9 million in 2010, primarily due to growth in employee head count and equity compensation. Facebook's costs and expenses are going up faster than revenue. It employs 3,200 as of December, up from 2,172 a year earlier.
But Kevin Landis, portfolio manager of Firsthand Technology Value Fund, Inc., which has bought Facebook shares in the secondary market, said he wasn't disappointed and hopes to buy more stock when Facebook goes public. "This is a company that has only just begun to scratch the surface of making money off those hundreds of millions of people getting on Facebook every day," he said.
More information:
Wealthy Investors Shrug at Facebook IPO
PC Magazine: The Big Picture
http://finance.yahoo.com/blogs/breakout/want-buy-facebook-know-ipos-185543383.html
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