Facebook IPO could be filed by year’s end

November 30, 2011

Social-networking giant Facebook could be planning a record-sized initial public offering, and it may be coming soon, according to a report from Bloomberg News’s Douglas MacMillan and Brian Womack:

Facebook Inc. is considering raising about $10 billion in an initial public offering that would value the world’s largest social-networking site at more than $100 billion, a person with knowledge of the matter said.

The company may file for the IPO before the end of the year, said the person, who asked not to be identified because the deliberations are private. Exact timing for the filing hasn’t been determined, the person said.

Facebook’s $100 billion valuation would be twice as high as it was in January, when the company announced a $1.5 billion investment from Goldman Sachs Group Inc. and other backers. Facebook aims to capitalize on strong demand for social- networking IPOs, said Josef Schuster, founder of Chicago-based IPOX Schuster LLC.

“It’s obviously a very steep valuation,” said Schuster, whose firm invests in IPOs and oversees about $2.5 billion in assets. “They are realizing their window of opportunity, and they want to do it sooner rather than later.”

At $10 billion, the offering would raise more money than any other technology IPO, a sign Facebook expects investors to clamor for a piece of the social-networking company. The amount would dwarf that of the previous record holder, Infineon Technologies AG, which generated $5.23 billion in its 1999 debut. Agere Systems Inc. raised $4.14 billion in 2000, putting it second.

How would an IPO of that size match up to the valuation of other major companies? Hayley Tsukayama writes:

Visa holds the record for the largest IPO in U.S. history, having raised $19.6 billion with its market debut in 2008. A report from the Wall Street Journal notes that two other U.S. companies have debuted with more than $10 billion: General Motors, which had an $18 billion valuation in 2010, and AT&T, which raised $10.6 billion in 2000.

As ZDNet’s Larry Dignan points out, a $100 billion valuation at Facebook would make it more valuable than several big-name companies. He noted that Disney has a market cap valuation of $61 billion, Amazon is worth $88.3 billion, and Cisco is valued at $96.8 billion.

Google’s market cap is $190 billion; Apple’s is $349 billion.

Melissa Bell does some math to figure out how much of that possible $100 million any one Facebook users’ page is worth:

Figuring out your Facebook worth is not as easy as creating a hypothetical price per tweet, though I am going to borrow liberally from Esquire’s price-per-tweet equation. Compared with Twitter and it’s one platform offering, Facebook users compete with 900 million apps, games and business pages.

Since there are 800 million Facebook users, adding that to the 900 million other entities, and dividing it by the valuation, we can estimate the value of each page is on average: $58.82.

Of course, the valuation is what Facebook expects to earn in the future from advertising dollars, but one can argue that the valuation wouldn’t exist if not for all the status updates, photos and links we’ve shared. Only my hypothesis is: Facebook doesn’t care much if you post anything at all. The business model is based on selling your time on the site to advertisers. So you could spend all your time simply playing games, and Facebook would still dangle you as one of the attractive 800-million potential purchasers in front of would-be advertisers.

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