More Facebook shares to feed ‘feverish’ demand

FACEBOOK has increased the size of tomorrow’s share offering as early investors seek to cash in on feverish demand even as car giant General Motors pulled its advertising on the social network.

GM said it will stop advertising on Facebook, with sources saying the group had decided Facebook’s ads had little impact on consumers. The move underscores doubts about the social network’s long-term earning potential.

It follows a price hike on Tuesday which ensured the eight-year-old internet phenomenon will be valued at some $100 billion (£62bn), despite only making $1bn in profit last year.

Yesterday, some of the private shareholders who are selling part of their stakes in the flotation offered up a further 84 million shares, adding 25 per cent to the size of the initial public offering.

The additional shares will be sold by early investors including Accel Partners’ James Breyer, PayPal co-founder Peter Thiel and investment manager Tiger Global Management, all apparently tempted by the higher share price range of $34 to $38 a share. The company itself has not increased the number of shares for sale.

The move suggests Facebook’s underwriters have found more than enough subscribers for the IPO, with hopes of a debut day bounce trumping considerations over long-term value.

Max Wolff, an analyst at GreenCrest Capital, said: “This is much more a spectacle, a media event and a cultural moment than it is an IPO.”