As the old saying goes, where there is smoke there is often fire. It may now be safe to say that the fire is burning bright in Palo Alto regarding perhaps the biggest IPO in recent memory (sorry Google). According to a multitude of sources with inside knowledge, Facebook has set a goal IPO date of May 17, 2012. This date hinges on the SEC agreeing to the terms laid out in the paperwork submitted by the social networking giant (including that recent $1 billion acquisition everyone has been talking about).
Facebook has decided to hit NASDAQ with a potential valuation of $100 billion or 1 followed by 11 zeroes. This valuation is based on what shares are currently trading at in secondary markets with 2.51 billion fully-diluted shares outstanding, pricing the shares at $40 each (as per the New York Times). This number was determined based on the $1 billion Facebook paid for Instagram, 30 percent of which was in cash. More importantly, the 70 percent that was stock was based on a $30 a share valuation, which many industry experts as well as Facebook and Instagram executives believe to be conservative based on potential demand once shares of most people’s favourite website go public.
Although it is difficult to stick a round Facebook peg in the square hole of recent IPO’s, many believe that the social networking giant should be purchased cautiously. Recent companies that have gone public such as Groupon and Zynga are trading below their offering prices and have generally underwhelmed. It does not bode well for Facebook that their valuations were also based on secondary markets, which have not proven to represent a strong correlation to public market pricing and valuations.
Whether the May 17th date is in fact true or not, it will mark a watershed moment when what once was a site trying to get people laid has become one of the most valuable and impactful companies in the world. The future of Facebook is undoubtedly bright, and there is little denying the sway and reach of Mark Zuckerberg’s company. It will be no doubt be interesting to see what unfolds over the next month.
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