Facebook to increase size of IPO by 25pc, plans to raise US$15bn

16 May 2012

Facebook CEO Mark Zuckerberg. Friday's IPO will be historic, but it will be back to work on Monday to drive Facebook as a media platform

Facebook is increasing the size of its IPO on Friday by 25pc and plans to raise US$15bn. Investor demand for shares has spurred the company into making the decision and shares are expected to debut in the US$35 to US$45 range.

Facebook has to be the most closely watched IPO in tech industry history and could emerge as the third-highest valuation at IPO after Visa and GM. The IPO on Friday could value the company at well more than the US$100bn expected.

In its filing in February, Facebook revealed it hopes to raise US$5bn in an IPO in early May. Now that stands at between US$10bn and US$15bn.

Its SEC filing, Facebook revealed that in 2011 it achieved revenues of US$3.7bn, up from US$1.9bn a year earlier. It derived a net profit in 2011 of US$1bn, up from US$606m last year. Facebook has total assets of US$6.3bn and liabilities of US$1.4bn.

Employees of Facebook hold 30pc in the company while founder Mark Zuckerberg holds 24pc of the company’s stock. Ireland’s own rocker Bono from rock band U2 is set to enjoy a Beautiful (pay) Day when Facebook goes public. The rock star is one of the lead investors in Elevation Partners, a venture capital firm that spent more than €156m for a 1.5pc stake in the social network.

Elevation has seen its stake increase more than sevenfold in just more than two years. The shares are now worth between €1.1bn and €2bn.

Other investors include Digital Sky Technologies (10pc), Accel Partners (8pc), Dustin Moskowitz (6pc), Eduardo Saverin (5pc), Sean Parker (4pc), Goldman Sachs clients (3pc), Microsoft (1.3pc), Peter Thiel (3pc), Greylock Partners (1.4pc), Meritech Capital Partners (1.6pc), Chris Hughes (1pc), Li Ka-shing (0.75pc), Interpublic Group (0.5pc) and Goldman Sachs (0.8pc).

GM pulls paid advertising from Facebook

However, all is not rosy in Facebook’s garden. Last night it emerged that major US car manufacturer GM has decided to pull its advertising from the social network because it doesn’t believe it is getting a return on its investment.

The timing of this news, I believe, is a little suspect. It comes days before the major IPO and at a time when Facebook’s management team is working hard to convince investors that its advertising model is solid enough to warrant a valuation of in excess of US$100bn.

What is also dangerous – or fascinating from where I’m sitting – is the impact such a revelation could have on the dark science of social media marketing.

It takes the mystery away and brings everything back to the question – does this medium work? Will it deliver bang per buck?

Massive conference and consultancy businesses have emerged in recent years led by social media ninjas or experts or whatever they call themselves – they can call themselves warlocks for all I care – convincing hopelessly demoralised marketing and PR people that they know nothing about their core business, that their experience up to now no longer counts and that the clock has been reset. That’s bull. Experience does count. So too does insight. It’s called change. You have to keep learning, pick up new tools and keep moving.

That’s a fact of life in the 21st century. It’s a fact of life in business in any century. Despite its brilliance and the bar it has set for technology and how the world communicates, Facebook is a medium like any other. It too one day will be eclipsed by something new and everybody has to keep learning. Zuckerberg, too.

GM’s move does take some of the illusion away. The mystery has been exploded. Ultimately social media, be it Facebook, Twitter, Google+, like any other form of media dependant on advertising, has to deliver.

I’ve seen the IPO for Friday described in certain quarters as a “spectacle” and a “done deal”. That’s true. Facebook’s founder Mark Zuckerberg, his workers and investors will make a lot of money.

But come Monday, it will be business as usual and now a new class of investor – public shareholders – will provide a new metric for success.

And in some garage or bedroom somewhere in the world, the next Mark Zuckerberg is pacing the room, dreaming big dreams.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years