Facebook friends Wall Street with planned $5B IPO

WASHINGTON— Investors came down with Facebook fever after the social networking titan filed to go public and seek to raise $5 billion in the largest flotation ever by an Internet company on Wall Street.

The paperwork filed on Wednesday for the initial public offering provided the first glimpse of the financial details of the Web giant launched eight years ago by Mark Zuckerberg from his Harvard University dorm room.

Zuckerberg, who was just 19 when he founded the network, penned a letter to investors outlining what he said were the core values of Facebook and said it “was not originally created to be a company.

“It was built to accomplish a social mission — to make the world more open and connected,” the Facebook chief executive said in the letter accompanying the filing with the US Securities and Exchange Commission (SEC).

“There is a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future,” he said.

Facebook said it will list on Wall Street as “FB” but did not set a date for when it would begin trading or specify whether it would be on the Nasdaq Stock Market or the New York Stock Exchange.

Gartner technology analyst Michael Gartenberg did not expect the stock market debut to have much of an impact on the average user, but said the extra cash would allow the firm to grow and give it a new edge on competitors.

“Facebook going public doesn’t have that much implication for the vast majority of Facebook users unless they plan on buying shares — when they can finally get their hands on them,” Gartenberg said.

“Google didn’t change for users for the most part when it became public,” he said. “It grew. It expanded out to other services.”

At $5 billion, Facebook’s initial public offering would be the largest ever by a technology company, eclipsing the $1.9 billion raised by Internet search giant Google when it went public in 2004 at a valuation of $23 billion.

Facebook’s $5 billion fund-raising target is only preliminary, however, and can be increased based on investor interest. Initial estimates held that Facebook would seek to raise at least $10 billion.

The Palo Alto, California-based company reported net income of $668 million last year, up from $372 million the previous year.

Revenue nearly doubled to $3.7 billion in 2011, with most of it coming from targeted advertising gleaned from personal information shared by the hundreds of millions of users of the platform.

“The company is more profitable than we had expected,” said Kathleen Smith of Renaissance Capital, an IPO investment adviser.

Facebook’s revenue of $3.7 billion last year, however, was slightly lower than estimates which had pegged it at $4.27 billion.

Facebook, the leading social network in all but six countries, notably China and Russia, said it has over 845 million users including 483 million who log in daily.

Facebook’s value has been estimated at $75 billion and $100 billion.

A market capitalization of $100 billion would put Facebook on a par with McDonald’s ($101 billion), well ahead of Boeing ($55 billion) but behind Apple ($426 billion) and Google ($189 billion).

Zuckerberg, whose net worth has been estimated at $17.5 billion by Forbes magazine, is the largest individual shareholder in Facebook and controls 57 percent of voting shares, according to the SEC filing.

But he was not the highest paid.

Sheryl Sandberg, who was lured away from Google four years ago to serve as Facebook’s chief operating officer, made more than $30.5 million last year while vice president of engineering Mark Schroepfer pulled in $24.7 million.

Zuckerberg’s total package was $1.49 million.

Gartenberg said Facebook’s IPO would be the largest by a technology company in 2012 by far, but others contemplating going public will be closely watching how it fares.

Facebook shares are not expected to begin trading for several months, but the excitement was already running high, with the announcement — along with recent manufacturing growth — sending stocks up on Wednesday.

“It’s hard to think of an IPO in recent memory — even going back to Google and before that maybe to the Netscape IPO or the Yahoo IPO — to see this type of frenzy,” Gartenberg said.

Career-oriented social network LinkedIn went public in 2011 and promptly doubled its value.

Online daily deals site Groupon and social games titan Zynga were up 7.5 percent and six percent respectively on Wednesday over their IPO price.