Facebook IPO: How big will it be and what’s the significance?

The social-networking Web site is reportedly planning to file paperwork for an initial public offering with the Securities and Exchange Commission on Wednesday. Just how big would the IPO be? Hayley Tsukayama reports:

Facebook’s rumored to be filing its paperwork for its initial public offering Wednesday and is reportedly trying to raise $10 billion, which would give it a valuation of $100 billion. How do these numbers match up?

Video

Feb. 1 (Bloomberg) -- Facebook Inc., the world's largest social-networking service, chose Morgan Stanley to take the lead on its planned initial public offering, four people with knowledge of the matter said. Elliott Gotkine reports on Bloomberg Television's "Countdown" with Linzie Janis.

Gallery

The annual CES exhibition in Las Vegas is a show-and-tell of sorts for the world’s largest tech companies. Here’s a look at the scene and some of the coolest gadgets unveiled at the exhibition.

Historically speaking, if Facebook has raised that much for its initial public offering, it would:

• be the sixth-largest U.S. IPO ever, sliding between AT&T Wireless and Kraft Foods.

• be the 15th-largest IPO in global history, behind Glencore International and ahead of Japan Tobacco.

• have an initial public offering more than six times that of Google. Google currently holds the record for the largest technology IPO, according to Renaissance Capital, of $1.66 billion.

• come in with more hype than other technology companies, thanks to a per-share valuation that at least one investment firm predicts will open “north of $100,”Forbes reports. For example, when Apple went public Dec. 12, 1980, it was priced at $22 per share, climbing to $29 by the end of the trading day, according to Walter Isaacson’s biography of Steve Jobs. The Wall Street Journal reported that Apple made less than $100 million by selling stock to the public. Google, according to archives from The Washington Post, was valued at $85 per share, surging to over $100 a share by the end of the day for a market capitalization of $27.2 billion.

• have a market capitalization larger than Disney ($70 billion) or General Motors ($38 billion), if reports that its market cap is expected to be between $75 billion and $100 billion ring true. Compared with its technology peers, however, its market cap would be on the low end of the list, as compared with Google ($187 billion), Microsoft ($248 billion) or, of course, Apple ($422.47 billion). It would, however, outstrip Amazon, which has a current market capitalization of about $87 billion.

Dominic Basulto explains why the company’s valuation is estimated at $100 billion:

One way to value Facebook is to take a “comp” — comparable company — and use that company as a proxy. For now, Facebook appears to make the lion’s share of its revenue via advertising, so a comparable company might be a media company. The argument that Facebook plans to make its money by advertising is obviously not what Wall Street really wants to hear. Advertising and page views have a way of drying up over time, just ask any media mogul.

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What Wall Street wants to hear is that you have a model for “monetizing” each and every one of those 800 million users. Consider that the average person spends an average of between 7 and 8 hours on Facebook per month. The site, in Web parlance, is “sticky.” With its new Timeline Apps, Facebook has made the site even “sticker.” For bankers, the real future of Facebook is not advertising but the ability to leverage apps and gaming platforms for revenue. Just as cable companies are valued at a dollar value per subscriber, Facebook needs to convince Wall Street that it can monetize its user base through games like Farmville on a consistent basis.