Amid growing investor excitement about Facebook's IPO, the company raised the price range it will offer when its stock is priced on Thursday.
The world’s largest online social network on Tuesday increased the planned price range for its stock to $34 to $38 per share in a filing with the Securities and Exchange Commission. That’s up from its previous range of $28 to $35. At the upper limit of $38, the sale would raise about $12.8 billion.
The move, which values Facebook as high as $104 billion, comes amid growing investor excitement about the offering. Analysts are comparing the frenzy surrounding Facebook’s IPO to Google’s in 2004, though in sheer size the latter pales in comparison.
At the same time, half of Americans think the expected value for Facebook is too high, according to a new Associated Press-CNBC poll conducted before the company raised its expected stock price on Tuesday. Only a third of those surveyed said they think Facebook’s expected value is appropriate.
Wall Street doesn’t share that sentiment.
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“Demand is obscenely high,” said Scott Sweet the owner of advisory firm IPOBoutique about the offering. That said, he notes Facebook still has to be careful not to increase the price too much, so the stock still does well when it begins trading on the Nasdaq Stock Market, as expected, on Friday.
“This is a deal that literally must work, in that it is so high-profile,” he said. “It would really level the IPO market if Facebook flopped.”
As it stands, Facebook would be the fourth-largest U.S. IPO in history, edging out AT&T Wireless, whose 2000 IPO raised $10.6 billion according to Renaissance Capital, an IPO investment-advisory firm.
Price worries won’t necessarily stop would-be investors. Facebook raised the price range in response to strong demand for its stock, and it’s possible that the stock could price even higher Thursday.
But on Tuesday came a potential stumbling block as the company confirmed that General Motors, reportedly the third-largest advertiser in the United States, is halting its paid Facebook advertising.
“We regularly review our overall media spending and make adjustments as needed. This happens as a regular course of business and it’s not unusual for us to move our spending around various media outlets — especially with the growth of multiple social and digital media outlets,” a GM spokesman said Tuesday in an email statement.
A report from The Wall Street Journal said that GM was pulling out of the paid Facebook ad market because the company found its ads on the social network to be ineffective. The Journal, which reported that GM spent $10 million a year on paid Facebook advertising, cited unnamed sources for its information.
Analysts say GM is not the only company doubting Facebook’s ability to woo consumers with paid ads.
“Companies in industries from consumer electronics to financial services tell us they’re no longer sure Facebook is the best place to dedicate their social-marketing budget — a shocking fact given the site’s dominance among users,” Forrester analyst Nate Elliott wrote in a Monday blog post, according to the Journal.
Advertising is Facebook’s main revenue stream, and it has already admitted that it is not yet able to convert its mobile app’s growing popularity into more advertising dollars.
Separately, an acquisition announced Tuesday could help Facebook in its mobile attempts — the company agreed to acquire the team behind a London-based mobile firm called Lightbox.
The deal is solely for the employees of the small company, which produced apps and products similar to Instagram, which Facebook has agreed to acquire for $1 billion, but Lightbox has more of a focus on Android devices while offering nonmobile options.
Lightbox will stop accepting new members and close its doors in about a month.
The deal is similar to Facebook’s acquisition last week of Glancee, a San Francisco-based location-sharing mobile app.
No terms were disclosed in either deal, but both are believed to be solely for the companies’ workers, which will help Facebook boost its mobile teams with experienced employees.
Facebook is expected to execute its IPO Thursday night, with shares hitting the Nasdaq stock exchange Friday morning under the ticker symbol FB.
Compiled from The Associated Press and
San Jose Mercury News