Facebook Inc aims to raise about $10.6 billion in Silicon Valley's largest IPO, dwarfing the coming-out parties of tech companies like Google Inc and granting the world's largest social network a market value close to Amazon.com's.
The eight-year-old social network that began as Mark Zuckerberg's Harvard dorm room project indicated an initial public offering price range of between $28 and $35 a share on Thursday, which would value the company at $77 billion to $96 billion.
The valuation reflects the company's growth and bullish expectations about its money-making potential as a hub for everything from advertising to commerce.
"We certainly haven't ever seen a tech IPO on this grandiose a scale," said Lise Buyer, a principal with the IPO advisory firm Class V Group.
Buyer, who worked on Google's 2004 IPO, said the question about a company "that's already this big and that is raising this much money is how many of the glory days of growth are in the past versus how many are ahead."
Facebook stands to raise as much as $12 billion at the upper end of its planned range. If an over-allotment or "greenshoe" option is triggered, the company could sweep up a maximum of $13.6 billion, according to a Thursday prospectus.
Facebook is only getting about half, or $5.6 billion, of the estimated $10.6 billion that it would raise at the midpoint of its planned IPO range. About $4.9 billon will go to some existing shareholders.
The offering's price range can be adjusted depending on Wall Street's response.
Investors are expected to flock to the highly anticipated IPO, though there have been growing concerns about the social network's longer-term growth and Zuckerberg's majority control.
"People are going to be very comfortable with this valuation," said Sam Schwerin of Millennium Technology Value Partners, which owns Facebook shares worth roughly $200 million. The firm is not selling in the IPO.
"A price range of $28 to $35 will be a relief to some people who are concerned that they may try to take the highest possible price because of high demand.
"The amount being raised is noteworthy. Selling stockholders are raising about $5 billion in the IPO, which is a lot," Schwerin said.
Facebook executives are due to hit the road on Monday, presenting their investment case to audiences. They will start in New York, go to other major cities such as Chicago and Boston, and end up on Facebook's home turf in Menlo Park, California, according to a schedule obtained by Reuters.
Zuckerberg is expected to participate in the two-week road show, a source has said, though Chief Operating Officer Sheryl Sandberg and Finance Chief David Ebersman will lead the briefings.
TANTALIZING WALL STREET
Zuckerberg's involvement in the road show will be key for investors with concerns about the company's long-term strategy and money-making potential, said Brian Wieser, an analyst with Pivotal Research Group.
Last week, Facebook reported its first quarter-to-quarter revenue slide in at least two years, a sign that the social network's sizzling growth may be cooling just as it prepares to go public. Its stock should begin trading in about a week or two.
In a 31-minute road show video posted online on Thursday, Zuckerberg predicted that in five years almost every software app would be integrated with Facebook.
Facebook, which plans to list its stock on the Nasdaq under the ticker "FB", has long tantalized investors with the prospect of a mega IPO.
Its capital-raising target far outstrips big Internet IPOs that came before it. Google raised just shy of $2 billion in 2004, while last year Groupon tapped investors for $700 million and Zynga raked in $1 billion.
At the maximum end of the range, Facebook's value would be close to $100 billion. That would rival Amazon.com's and Cisco Systems Inc's market values of just over $100 billion, while surpassing the combined market value of older technology companies Hewlett-Packard Co and Dell Inc.
In its prospectus, Facebook said the "lock-up" period, during which employees cannot sell shares after the IPO, would range from 151 days to 181 days.
Among existing shareholders, the largest seller in the IPO will be venture capital firm Accel Partners, which will make about $1.2 billion assuming the shares sell at the $31.5 mid-point. Zuckerberg is selling the next largest chunk of shares, worth a little under $1 billion.
Some investors think Facebook, which touts 845 million users worldwide, is setting itself a fairly conservative target.
"The price range may be tactical. They will likely walk the range up," Schwerin argued.