While there will no doubt be tremendous demand for Facebook stock today, as it begins trading at 11 AM Eastern time, there should be plenty of it available. As David Angosti reported for Search Engine Journal, the social network raised its target IPO price range to $34 to $38. The move prompted a number of Facebook’s major stakeholders to increase the number of shares they plan to offer – and in some cases, that number went way up.
I am not a stock broker; I don’t even play one on the Internet. But I think even the people who crunch these kinds of numbers for a living would be amazed by the change. For example, James Breyer and Accel Partners now want to sell 49 million Facebook shares, rather than 38 million. Peter Thiel more than doubled the number of Facebook shares he wants to sell, from 7.7 million to 16.8 million. Investment bank Goldman Sachs likewise more than doubled their sale order, from 13.2 million shares to 28.7 million shares. Tiger Global Management, meanwhile, makes all of these investors look tight-fisted; they went from selling 3.4 million shares to 23.4 million shares!
Angosti noted that “If Facebook shares sell at the upper limit ($38), the social network will raise about $12.8 billion and its market value will be approximately $104 billion.” But that’s just assuming the original allotment sells. If the over allotment shares sells, figure that Facebook will raise nearly half again as much money – an astonishing $18.4 billion!
Mark Zuckerberg, who rang the NASDAQ bell this morning, will almost certainly never have to worry about money again. The Facebook founder and CEO is selling six percent of his shares, and will probably make in the neighborhood of one billion dollars from the sale. Interestingly, though, he says the proceeds will be used to cover his anticipated income tax bill. Even after the sale, he’ll still own more than 500 million Facebook shares, representing 31 percent of the company.
In total, 421.2 millions shares of common A-class stock in Facebook will be on offer today. It may be highly desirable now, but will it continue to be in such demand – and for how long? ABC News noted that of four recent technology IPOs, three have fallen below their IPO price and stayed there. Those three were Zynga, Pandora, and Groupon. But the successful one, LinkedIn, is flying very high: about a year ago, its IPO came out at $45 per share, and it recently traded at $103.
At least in the short term, I expect Facebook’s stock performance to mimic LinkedIn more than that of the other three; like LinkedIn, Facebook is a social network. Despite the cloud of recently losing General Motors as an advertising client (representing $10 million a year of business), the company is definitely riding high.