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Facebook's $5bn IPO falls short of expectations

Warwick Ashford

Facebook has filed long-awaited plans for an initial public offering (IPO) of shares on the US stock market, marking a milestone in the social networking site’s eight-year timeline.

The planned IPO of $5bn worth of shares is the highest for an internet company since Google raised $1.67bn in 1994, but only half the $10bn analysts expected the Facebook IPO to raise.

However, commentators believe the final amount will change in the next four months as Facebook’s financial advisors gauge investor demand.

The social networking firm filed its intention to float with the Securities and Exchange Commission after the US stock markets closed, according to the BBC.

The documents revealed for the first time that Facebook made a profit of $1bn in 2011 from revenues of $3.71bn; that founder Mark Zuckerberg owns 28.4% of the company; and that the network now has 845 million monthly users and 443 million daily users.

This shows Facebook has been growing rapidly and profitably, with revenues increasing fivefold in the past two years. As a private company, Facebook had never before had to publish accounts showing how much profit it made.

The documents made it clear that Mark Zuckerberg will retain majority control of the business after the flotation and included a note from the company founder.

"Facebook was not originally created to be a company. It was built to accomplish a social mission - to make the world more open and connected. We think it's important that everyone who invests in Facebook understands what this mission means to us, how we make decisions and why we do the things we do,” Zuckerberg wrote.

Investment bank Morgan Stanley will act as lead underwriter, with Goldman Sachs and JP Morgan and others taking secondary positions. Shares are expected to go to market in May.


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