Facebook Sets IPO Value at $96B

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Facebook will be going public with its initial public offering on May 18.  It’s executives and initial investors have until then to convince the stock trading and investment world that the company has a valuation of $96 billion.

If they pull it off, then this will become a record IPO for an American company, outstripping Google at $23B in 2004.  The current record holder for an American IPO release is the United Parcel Service, which went public in 1999 at $60.2B. Facebook CEO Mark Zuckerberg plans to put $1B of his own stock into the IPO at that valuation, though that would still leave him with a controlling share of the company.

To put the $96B into perspective, that would make Facebook more valuable than Amazon.com, McDonald’s Corp, and Hewlett-Packard as they stand today.

Many in Silicon Valley believe that the public offering of Facebook will fundamentally change the tech sector, no matter how the offering goes.  If it goes well, it will justify the current valuation of many startups in tech while if it goes badly, it will justify the cries of “tech bubble” often heard in the media.

Analysts point to several things about Facebook that will drive its success or failure in gaining a $96B valuation.  First, while the site has 900 million active users, it does not necessarily advertise to or make revenue from those users and its growth curve (new users signing up) is slowing.  Current revenues at FB are good, but not that good, with a 45% year-on-year growth last quarter, but with consistent falling before then.

Further, Facebook has little presence in China, the world’s largest and fastest-growing tech and consumer market.  Finally, advertisers often don’t know what they’re getting with Facebook ads and often can’t draw many conclusions from ad response rates either.

Although Facebook was selling at private exchange for as much as $44 a share, during this IPO, the company is targeting $28 to $35 per share at launch.

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