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Facebook frenzy in full swing ahead of stock offering

Posted May 16, 2012

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— Just two days before Facebook shares are scheduled to begin trading on the Nasdaq Stock Market, the frenzy to snatch up pieces of Mark Zuckerberg's multi-billion dollar pie is in full swing.

On Tuesday, the company made its IPO even bigger by increasing the planned price range for its stock to $34 to $38 per share in a filing with the Securities and Exchange Commission, up from the previous estimates of $28 to $35.

The move, which values Facebook as high as $104 billion, comes amid growing investor excitement about the offering.

Early Wednesday, Facebook also disclosed plans to sell more shares than originally planned. Bloomberg news reported that Facebook is increasing the offering to 421.2 million shares, up from the original 337.4 million. The increase means Facebook could raise as much as $16 billion. Existing Facebook shareholders are planning to sell 241.2 million shares rather than the 157.4 million as originally planned. 

Investors are betting that Chief Executive Officer Mark Zuckerberg can overcome slowing sales growth by expanding into areas such as mobile advertising and e-commerce, said Samuel Schwerin, managing partner at New York-based Millennium Technology Value Partners.

“An increasing number of institutional investors are looking beyond the value of the business today and looking at the future growth,” Schwerin, whose firm oversees $1 billion, including Facebook stock, said Tuesday. “Those drivers are extraordinary in size, including international and mobile and commerce.”

At $16 billion, Facebook’s debut would surpass that of General Motors Co. to be the second-largest in U.S. history, excluding so-called over-allotments, which let underwriters buy more shares at a later date, data compiled by Bloomberg show.

While many first-time investors and casual Facebook users like the idea of possibly owning a piece of the company, North Carolina State University economics professor Mike Walden says it will take friends in high places or a lot of cash to buy shares at the offer price. 

"Most of (the shares) will likely go to large institutional investors, so even if you want to invest in Facebook, it's going to be tough," Walden said. 

Shares could be easier to get once the stock begins trading under the ticker symbol "f-b" on Friday, Walden said, but those looking to get in on one of the largest IPOs in American history will likely pay more than the initial offering. Mike Walden, NCSU professor Professor: Facebook will have to prove its value over time

"There's a lot of buzz about this, a lot of excitement," Walden said. "You could very well see once the IPO is issued the price take a big bounce."

In an Associated Press-CNBC poll conducted before the company raised its expected stock price, only a third of those surveyed said they think Facebook's expected value is appropriate. Nearly half of Americans think the expected value, which would be higher than Ford and Kraft, is too much. 

"Facebook eventually is going to have to justify its share price by its revenues, its profits and there are some questions about Zuckerberg being young," Walden said. "If you're interested in Facebook, fine, that's great, but don't throw all of your investment money into it."

The IPO is is expected to raise more than 10 times as much as the $1.67 billion raised in Google eight years ago. At a value of $38 per share, the high end of Facebook's expected range, Facebook would generate $6.84 billion on its shares. Existing stockholders would collectively make $5.98 billion.

27 Comments

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  • btneast May 17, 2012

    UM facebook has been around already for 8 years

    ...a drop in the bucket for those of us that have been around for a while and seen a lot of "giants" fall by the wayside through the years.

  • Alexia.1 May 16, 2012

    Facebook's revenues have been nowhere near the level of justifying a valuation of nearly $100B. I guess we should wish them luck, as I think they're going to need it. I suspect it will just be a few years and they'll fade as all of the other social sites have.

  • southerntalent May 16, 2012

    do you self a favor and buy solid local stocks

    family dollar

    martin marieta

    they both have made me a lot of money not overnight but since 1999

  • southerntalent May 16, 2012

    facebook people are saying it is gonna cost a monthly fee to stay a member I do not believe people are gonna pay for that priveledge

  • 23tony May 16, 2012

    Many years ago, I ran a shop selling collectible comic books. There was a new series starting by a hot new artist, and when it came out, prices for one issue went as high as $200 by the end of the first day (from a $2 cover price). A few months later, it was selling at cover price again - all the people who had dropped $200 for one copy were out $198.

    I'm expecting about the same thing to happen with the FB stock.

  • TAILG8R2000 May 16, 2012

    Those that don't learn from histroy are doomed to repeat it (paraphrased).....the history I am referring to is AOL, Myspace, Yahoo. FB will likley be around in the future, but not as the "medium of the gods" like it is now. Buying into the initial IPO would be the epitome of "buying high", only to have to sell low
    btneast

    UM facebook has been around already for 8 years. AOL made it through 2-3...

  • Qwerty27807 May 16, 2012

    Tulip Mania for the 21st century.

  • btneast May 16, 2012

    Those that don't learn from histroy are doomed to repeat it (paraphrased).....the history I am referring to is AOL, Myspace, Yahoo. FB will likley be around in the future, but not as the "medium of the gods" like it is now. Buying into the initial IPO would be the epitome of "buying high", only to have to sell low

  • LuvMyLife May 16, 2012

    I personally don't think Facebook is going to be around much longer. Look at "myspace" which was basically the same thing. Heard on the radio this morning that a big sponsor of FB, is pulling out because THEY aren't making any money for advertising on FB. Just a matter of time folks and it will be history.

  • doggypoos May 16, 2012

    Here comes the next bubble......

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