The social networking company plans to sell shares for between $28 to $35 each under the ticker symbol FB. The initial public offering will raise $10.6 billion for the company and selling shareholders, based on the midpoint of the price range, making it the fifth largest IPO in history, says Renaissance Capital.
The price also gives Facebook a value of $86.2 billion, making it the most valuable U.S. company to ever go public, Renaissance says.
"Many people want to own this unique company and it has the momentum," says Renaissance's Kathy Smith.
As massive as the IPO is, the wide range and lower-than-expected sale price for the IPO also were a bit of a surprise. Some estimates for the deal, based on recent purchases of shares on private exchanges, pegged Facebook's total value closer to $100 billion.
"I'm surprised they took it down," says Josef Schuster of IPO tracking firm IPOX Schuster. Large institutions likely looked for a discount on the shares due to the massive size of the offering, he says.
Additionally, the company's recent first-quarter results also disappointed many analysts because of the decelerating rate of growth, says Francis Gaskins of IPOdesktop.com. "Their March quarter numbers weren't good," he says.
Facebook's revenue grew 45% in the first quarter to $1.1 billion, which was well below the 88% revenue growth during the full year of 2011. Profit fell 12% in the first quarter.
Facebook also provided detail showing just how much the selling shareholders would haul in from the IPO. Founder Mark Zuckerberg is planning to sell 71.1 million shares, or nearly 7% of his holdings, Gaskins says. The stock being sold would be worth $2.2 billion based on the midpoint of the proposed range.
Other selling shareholders include early investor Peter Thiel and Microsoft, which each plan to sell 17% of their holdings.
While investors normally don't like to see insiders selling, the levels of selling aren't concerning, Schuster says. Additionally, Zuckerberg still will be the largest shareholder of the company and control 60% of the voting power, he says.
Others are wondering how the company's rich valuation will play with investors. Facebook would have a P-E of more than 80 times its 2011 earnings. And its valuation is 19 times its revenue, Renaissance's Smith says, which is close to the 21 times revenue valuation of its faster-growing competitor, LinkedIn, Smith says.
"These are nosebleed multiples," says says. "You need good growth to support them."
