Initial public offering of Facebook

The social networking company Facebook held its initial public offering (IPO) on Friday, May 18, 2012.[1] The IPO was the biggest in technology and one of the biggest in Internet history, with a peak market capitalization of over $104 billion. Media pundits called it a "cultural touchstone."[2]

For years, Facebook and Zuckerberg resisted both buyouts and taking the company public. The main reason that the company decided to go public is because it crossed the threshold of 500 shareholders, according to Reuters financial blogger Felix Salmon.[3]

Facebook reportedly turned down a $75 million offer from Viacom in 2006.[4] That same year, Yahoo! attempted to buy the company for $1 billion but Zuckerberg refused.[5] Also that year, BusinessWeek reported a $2 billion valuation for the company.[6]

Facebook did accept investments from companies, and these investments suggested fluctuating valuations for the firm. In 2007 Microsoft beat out Google to purchase a 1.6% stake for $240 million, giving Facebook a notional value of $15 billion at the time.[5] Microsoft purchased preferred stock, which meant that the company's actual valuation would be considerably lower than $15 billion.[7] Meanwhile, that valuation dropped to $10 billion in 2009, when Digital Sky Technologies bought a nearly 2% stake for $200 million[8] - a larger stake than Microsoft had purchased at a lower price. An investment report in 2011 valued the company at $50 billion.[9]

Zuckerberg wanted to wait to conduct an initial public offering, saying in 2010 that "we are definitely in no rush."[10] But since by 2012 Facebook had more than 500 round lot (over 100 shares) stockholders, Facebook was subject to the SEC disclosure rules starting the next year, 2013. Zuckerberg had little choice as to whether an IPO had to be done at once.

Facebook filed for an initial public offering on February 1, 2012 by filing their S1 document with the Securities and Exchange Commission (SEC).[11] The preliminary prospectus announced that the company had 845 million active monthly users and that its website featured 2.7 billion daily likes and comments.[12] The filing noted that the company's increases in membership, as well as its incomes, were slowing and that the deceleration was likely to continue.[13]

To ensure that early investors would retain control of the company, Facebook in 2009 instituted a dual-class stock structure.[10] After the IPO, Zuckerberg was to retain a 22% ownership share in Facebook and was to own 57% of the voting shares.[14] The document also stated that the company was seeking to raise US$5 billion, which would make it one of the largest IPOs in tech history and the biggest in Internet history.[15]

The roadshow faced a "rough start" initially.[16][17] Zuckerberg raised controversy for wearing a hoodie (rather than a customary business suit) to the first meeting with investors.[18] Wedbush Securities analyst Michael Pachter called it a "mark of immaturity."[18] A half-hour-long video played during that meeting also frustrated investors who wanted to discuss more technical details,[17] and was dropped for future meetings.[19]

This page was last edited on 20 June 2018, at 11:33 (UTC).
Reference: under CC BY-SA license.

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