Facebook IPO Pushing Forward, Filing Papers Next Week

Undaunted by the last few social media related IPO’s, Facebook is not only going forward with their plans but accelerating the process.  Reports are out that the paperwork will be filed as early as Wednesday February 1st.  Further, the IPO, for 10% of the company, will be in the $10 billion range putting a $100 billion valuation on Facebook.  This will be the biggest IPO in the tech sector’s history and one of the biggest in the history of U.S. markets.  All of this is happening at a time when it looks like Facebook may have peaked in popularity.  Last month Zynga’s(NASDAQ: ZNGA) IPO raised less than 1/10th of what Facebook is likely to in theirs.

The size of the IPO has set the investment banking community buzzing with reports of fierce competition for the prestige to underwrite it.  A small IPO, less than $500 million, brings with it a 7% fee and ones over $1 billion a 4-5% fee.  The average for those coming out of Silicon Valley skew higher, closer to 6%.  Facebook will be in a position to drive a very hard bargain and could likely see their fee be in the 1-2% range.

Underwriting a brand like Facebook will be an easy sell for whomever lands this deal which is why the competition for the service has been intense.  It doesn’t help matters that Facebook’s young management doesn’t think much of what Wall St. is really offering.  The big concern for Facebook, especially in light of recent IPO activity is pricing the shares properly.  That is far more important than who gets the bragging rights for brokering a slam-dunk deal.

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Tom Luongo

About Tom Luongo

Tom Luongo is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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