To see where Facebook’s IPO stands now, here are some questions and answers with updates as they happen.
When will the IPO take place?
Latest reports have it as May 18, with the road show taking place May 7 and starting at Morgan Stanley. The company also released video of its road show, online.
Some dates mentioned for the IPO were in late May or early June. The reason there could have been delays for the IPO was because of Facebook’s $1 billion acquisition of Instagram and its deal with Microsoft (MSFT).
The Securities and Exchange Commission has to okay the Instagram buy—as well as the Microsoft patent deal— and while both are expected to be approved, there could be some unforeseen complications.
Facebook is still waiting for the official SEC okay but people close to the matter say the company wants to get on with marketing the IPO.
For the record, Facebook filed for its IPO on Feb. 1, 2012. The company has sent and amended IPO filing to the SEC on May 3. The ticker symbol will be FB.
Why did Facebook buy Instagram before the IPO?
Many analysts believe the move was simply to increase the IPO value of Facebook.
But the deal may have been the sole brainchild of CEO Mark Zuckerberg according to some reports. He evidently informed the Facebook board of directors of the deal after he concluded the negotiations. The board’s approval of the deal was described as largely “symbolic.”
Instagram is a free photo sharing program launched in 2010 that allows users to take a photo, apply a digital filter to it, and then share it on a variety of social networking services.
Why did Facebook make a deal with Microsoft on patents?
Facebook is buying a portion of patents from Microsoft for $550 million in cash—patents which Microsoft recently acquired from AOL.
This was mostly a preemptive move, rather than an attempt to create even more IPO value. Silicon Valley patent wars are heating up and Facebook wants to protect itself against some potentially very pricey litigation after the IPO. Along with the Instagram deal, the SEC has to look into this move as well.
How much will shares of Facebook cost?
Estimates are now between $28 and $35 per share. They had been higher. Transactions on the private market in early April put estimates of the price of a single Facebook share at between $38 and $40.
Facebook will price its offering on May 17 after the markets close and open for selling on May 18.
Facebook says it plans to raise as much as $12 billion from the IPO. Current estimates are for $10.6 billion.
What exchange is Facebook going to list on?
Facebook has chosen the Nasdaq over the New York Stock Exchange. The NYSE is widely seen as the home of the traditional “blue chip” company, while the Nasdaq’s reputation is more associated with Silicon Valley — and more to Facebook’s image.
Who is handling the IPO for Facebook?
How much money is Facebook expected to raise with the IPO?
At least $5 billion, according to most analysts’ estimates. That would make it the largest Internet-related IPO on record.
When can investors jump in to buy Facebook stock?
The moment the stock debuts on the Nasdaq.
However, many market experts say that the problem with immediately jumping into an IPO is that insiders, such as hedge fund managers, are buying up shares that push up the price.
Normal traders are advised to wait for a couple of days for the stock price to settle back down.
The General Motors (GM) IPO of two years ago is cited as a recent example of seeing a stock price initially go up $6 or $7 higher than the IPO the first day, and then settle back down a day or two later.
Here’s a quick look at a couple of recent IPOs and how their stocks have fared:
Yelp-developer of online games, first day (YELP) of trading on March 2, 2012:
Pricing: $15 per share
First-day’s close: $24.58, up 64 percent from IPO price
Trading range since IPO: $19.36 to $31.96
Zynga — developer of online games, first day (ZNGA) of trading on Dec. 16, 2011:
Pricing: $10 per share
First-day close: $9.50, down 5 percent from IPO price
Trading range since IPO: $7.97 to $15.91
How big and profitable is Facebook?
It’s big and profitable.
Facebook generated $1.06 billion in revenue during the first quarter of 2012, according to an updated filing for the social network’s IPO. (The updated filing is part of the IPO process when a company goes public.) That $1 billion is up from $731 million a year earlier.
A ‘negative’ for Facebook from the filling shows that while revenue was up 45 percent from 2011, it was down 6 percent quarter over quarter and was still weak compared to analysts’ estimates of $1.3 billion.
This is the first time in at least three years that Facebook’s revenue is lower versus prior quarter. But it’s obviously still a lot of money to make.
The eight-year-old firm has more than 901 million members, and nearly half a billion people around the world log into Facebook every day, according to the latest statistics.
And more Fortune 500 companies have corporate Facebook pages than Twitter aliases, according to Facebook.
Facebook had total revenues of $3.8 billion in 2011, with an operating profit of $1.5 billion.
Who are the big financial winners from the IPO?
Facebook is only getting about half — or $5.6 billion — of the roughly $10.6 billion it plans to raise. The other half is going to some inside investors. Chief among them are co-founder and Chief Executive Mark Zuckerberg, venture firm Accel Partners, early investor and PayPal co-founder Peter Thiel, Russian tycoon Yuri Milner’s DST, and investment bank Goldman Sachs.
What happens legally when a firm like Facebook goes public?
The company falls under the guidelines of the SEC. It’s already doing so by applying for an IPO as financial filings like the one mentioned above, have to take place.
After the IPO has taken place, Facebook will have to follow disclosure rules like holdings and transactions of insiders or the officers and directors of the company. It will have to disclose its financial status on a regular basis and come under surveillance by the SEC on its trading practices. And of course — it will have to hold shareholder meetings.
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