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Facebook close to becoming a $100-billion company

May 17, 2012|By Walter Hamilton
  • Facebook is on the verge of becoming a $100-billion company
Facebook is on the verge of becoming a $100-billion company (Joel Saget / AFP/Getty Images )

Facebook Inc. is on the verge of becoming a $100-billion company.

The social-media goliath is expected later today to price its historic initial public stock offering at $38, which would make Facebook the second-largest IPO in U.S. history.

The offering would raise $16 billion initially, and ultimately up to $18.4 billion as the Wall Street investment banks handling the deal distribute additional "over-allotment" shares, as is common in sought-after IPOs.

Facebook's debut has dominated Silicon Valley and Wall Street in recent weeks, as the company and the financial markets geared up for the most anticipated IPO since Google Inc. in 2004.

The frenzy has been all more intense given that Facebook was launched only eight years ago in Mark Zuckerberg's college dorm room. The company earned $1 billion last year, up 65% from the prior year. Revenue climbed 88% to $3.7 billion and is projected to rise 65% to $6.1 billion this year, according to research firm EMarketer Inc.

"There's never been a company that's gone from inception to IPO with this kind of valuation," said Francis Gaskins, editor of IPOdesktop.com in Marina del Rey. "It’s a rocket ship that's taken off."

But even as the excitement has built, so has fear that individual investors rushing into the stock could be setting themselves up for a fall.

Facebook announced Wednesday that Goldman Sachs Group Inc. and other prominent insiders have significantly raised the number of shares they're unloading in the IPO, a sign that the professional investors in the best position to handicap Facebook's investment merits are taking the opportunity to lighten their holdings. Their selling pushed up the size of the IPO 25%.

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