Facebook to Tee Off IPO in May

Facebook will likely make its initial public offering in May and could be valued as high as US$100 billion, according to All Things D.

The social networking giant boasts 800 million users worldwide and is expected to hit 1 billion in August, according to iCrossing projections. It’s reportedly expected to raise about $10 billion in the IPO.

A May IPO would mean Facebook must file its paperwork this month to allow the proper time for an SEC review. It’s unknown which bank will finance the offering. Goldman Sachs has backed a private Facebook offering, but Morgan Stanley may also be in the running, having experience with some tech companies that went public in 2011.

Facebook did not respond to our requests for comment.

The One Everyone’s Been Waiting For

“I’m hard-pressed to think of a tech IPO that would be larger than Facebook’s in 2012. In fact, a $10 billion IPO would represent the biggest tech offering ever,” Lee Simmons, IPO expert at Dun & Bradstreet, told the E-Commerce Times

Facebook has been the subject of IPO speculation for years, but CEO Mark Zuckerberg has often stressed his preference not to rush into a public offering, instead favoring an approach that builds the business model and keeps his most valuable employees working at the site rather than cashing out and moving on to competition, a prospect that he still faces.

“At this point, May is an entirely likely scenario for a Facebook pricing. The company ostensibly faces an April 30 deadline to file its S-1, assuming it surpassed 500 outside investors in calendar year 2011. Zuckerberg should definitely be concerned about employees cashing out and moving on. One of the reasons he has delayed an IPO thus far is to continue product development. Some level of brain drain will inevitably occur once the company prices,” said Simmons.

Market volatility may have also slowed down the process for Facebook. It’s watched as tech stocks such as Zynga, LinkedIn and Groupon each took hits after going public in 2011.

Facebook, though, may be in a slightly different category. Unlike Groupon, for example, Facebook turns a profit and relies on a business model that’s much more difficult to replicate.

“A $10 billion pricing is certainly not outside the realm of possibility. Facebook has already demonstrated growing value with each round of private financing it has secured. Unlike the social media firms that had to scale back their offerings in 2011, including Groupon, I doubt Facebook will need to price conservatively,” said Simmons.

After Facebook

Questions remain, however, concerning a public Facebook’s impact on some of the sites and services it directly influences.

“One thing that will be interesting to see is the effect, if any, the IPO will have on the pricing on some of the already public companies that depend a great deal on Facebook, such as Zynga. If all goes well, then this could have some impact on the future of the tech IPOs, but Facebook is one of those unique cases,” Justin Byers, lead business intelligence analyst at VC Experts, told the E-Commerce Times.

Even if Facebook can hit the market and stay strong, it’s probably not going to make the IPO path any less rocky for tech stocks that don’t have the same kind of established place in a market niche that Facebook does.

“I’m not convinced that other tech stocks can simply ride the coattails of a Facebook IPO. We shouldn’t forget that highly touted tech stocks such as Groupon and Zynga have tanked in recent weeks. That tells me that buzzy products or millions of subscribers simply aren’t enough to convince investors to dive in whole-hog in these stocks. A strategy that includes profit potential, narrowing losses, and reasonable expenditures is one that will ultimately win the day,” said Simmons.