Facebook’s flotation value tops $100bn as takers form a queue

By DOMINIC JEFF
Published on 16/05/2012 00:00

FACEBOOK yesterday nudged up the price of shares in its initial public offering (IPO), potentially valuing the eight-year-old company at more than $100 billion (£62bn).

The Californian company said it now expects to sell its stock for between $34 and $38 per share, up from its previous range of $28 to $35.

Reports suggest the firm has found no shortage of takers and will complete the share placement ahead of schedule, with some underwriters already closing their books.

The shares are due to start trading publicly on New York’s technology-focused Nasdaq exchange on Friday. The top end of the IPO range would value the company founded by Mark Zuckerberg in his student dorm room in 2004 at $104bn.

At that price, Facebook would raise $6.8bn while private shareholders who are selling stock in the flotation would get just under $6bn.

Although the investment banks underwriting the IPO have clearly found enough people prepared to take a chance on Facebook, opinions on its valuation remain divided.

While some believe that the firm can use its entrepreneurial spirit and IPO billions to find ways of cashing in on its vast user base of more than 900 million people, others point to the fact that Facebook seems short of ideas on how to make its popularity pay.

The company’s rapid growth seemed to stall in the first quarter of this year, which saw profits fall to $205 million, from $233m in the previous three months.

Gerald Mehm, from the global valuation firm American Appraisal, points out that, at its current expansion rate, Facebook users will exceed the world’s population in five years time.

He said: “This reminds me of the ‘DotCom’ era, when every start-up assumed they would capture 100 per cent of potential customers and we all know how realistic that assumption was. A $100bn valuation is extremely ambitious.”