Facebook poised for record £65bn float

Published on Saturday 3 April 2010 14:49

FACEBOOK, the social networking site, is likely to float sooner than expected, attracting a valuation as high as £65 billion ($100bn).

The figure would dwarf the world's largest initial public offering in the last two years, recorded last week in Tokyo when Dai-ichi Life Insurance came to market for 7.35bn ($11.2bn). Google's flotation six years ago was set at 15bn ($23bn).

Speculation has grown in the last few days, among financiers and analysts around Wall Street, that Facebook's founder and chief executive Mark Zuckerberg will go to the market soon with his online phenomenon.

It follows the news that the California-based company has made enough money, for the first time since its creation in 2004, to cover the expenses of servicing a worldwide website-based "community" that now totals more than 400 million users.

Facebook's revenues are expected to top 1.3bn this year and talk of an earlier than expected flotation is further fuelled by what started as a routine sanctioned staff purchase of shares rapidly becoming a highly active secondary market.

More than 65 million in shares have been snapped up and mostly sold on at a profit by SecondMarket and Sharespost. Such exchanges provide a route for investors without having to wait for a flotation, in what is known as a dual-class stock structure.

Paul Bard, a research analyst with Renaissance Capital, claimed of the "market testing" move that "this is without a doubt in preparation for an IPO".

Justin Byers, lead business intelligence analyst with Private Equity Data Center, said speculation was mounting practically daily. "It could lead to Facebook going for as much as $100bn."

Technology analyst Michael Pytosh, of ING Investment Management, warned the 25-year-old Zuckerberg not to leave it too long.

He claimed the social media marketplace is "notorious" for swiftly changing consumer tastes "and there's no sustainable model that looks great for social networking".

Pytosh cited MySpace and Friendster, each appearing highly successful for a while and then quickly losing their allure.

Facebook appears a safer bet and an indication of its rise is that Zuckerberg turned down a 650m buyout offer from Yahoo in 2006, and a more recent bid reportedly worth at least 5.25bn from Microsoft.

It ended up by Facebook selling a 1.6 per cent stake to the software giant in October 2007 for 157m, rejecting a competing offer from Google.

Another investor expecting a big payday is Russian investment company, Digital Sky Technologies which bought 131m shares in Facebook last May.

One hurdle Zuckerberg must overcome is the threat of further litigation by fellow Harvard University students Cameron and Tyler Winkelvoss.

The duo were awarded a reported 42.5m in 2008 after claiming they had come up with the idea for Facebook at Harvard.