Facebook may raise up to US$10b in the biggest ever Internet IPO
Source: Agencies |
February 3, 2012, Friday
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Print Edition
Print Edition
Facebook unveiled plans for the biggest ever Internet IPO that could raise as much as US$10 billion, but made it clear CEO Mark Zuckerberg will exercise almost complete control over the company, leaving investors with little say.
The Harvard dropout, who launched the social networking phenomenon from his dorm room, will control 56.9 percent of the voting shares in a company expected to be valued at up to US$100 billion when it goes public. Facebook says it has 845 million active monthly users.
Wednesday's long-awaited filing starts a process that will end in Silicon Valley's biggest coming-out party since the peak of the dotcom boom and bust.
Facebook says it is seeking to raise US$5 billion, but that is a figure used to calculate registration fees among others and analysts estimate it could tap investors for US$10 billion.
That would value the company at US$100 billion, dwarfing storied tech giants such as Hewlett Packard Co, while validating the explosive growth worldwide of social media as communication and entertainment.
Zuckerberg's economic control of about 28 percent of the shares would be worth US$28 billion at a US$100 billion valuation, ranking him as the fourth-richest American.
The 27-year-old's ownership position means Facebook, a company dissected in 2010's Oscar-winning "The Social Network," will not need to appoint a majority of independent directors or set up board committees to oversee compensation and other matters.
The company's ownership structure and bylaws go against shareholder-friendly corporate governance practices put in place in the US after years of investor activism.
As Facebook states in its prospectus, Zuckerberg will "control all matters submitted to stockholders for vote, as well as the overall management and direction of our company."
Zuckerberg struck deals with several Facebook investors that granted him voting rights over their shares in all or most situations. Those included Yuri Milner's DST Global, venture capital firm The Founders Fund, and entities affiliated with Technology Crossover Ventures, the IPO filing shows.
Google Inc's Sergey Brin and Larry Page retained control of the search giant through similar arrangements and the Sulzbergers did much the same at the New York Times.
"Zuckerberg, at the time, probably had his choice of investors," said Steven Kaplan, a professor at University of Chicago's Booth School of Business, who researches venture capital and corporate governance. "He basically had the ability to say 'my way or the highway.'"
"The downside of doing this is that the value of Facebook may be slightly lower than it would be if he were not retaining control."
Facebook could make its market debut in the middle of the year based on the usual timetable of IPOs.
Its IPO prospectus shows that Facebook generated US$3.71 billion in revenue and made US$1 billion in net profit last year, up 65 percent from the US$606 million it made in 2010.
"We often talk about inventions like the printing press and the television," Zuckerberg said in a letter accompanying the documents. "Today, our society has reached another tipping point."
"The scale of the technology and infrastructure that must be built is unprecedented."
Facebook appointed Morgan Stanley, Goldman Sachs and JPMorgan as its lead underwriters. Other bookrunners include Bank of America Merrill Lynch, Barclays Capital and Allen & Co.
Zuckerberg agreed to cut his compensation from US$1.48 million last year to US$1 effective January 1, 2013, following the example of Apple founder Steve Jobs.
Facebook's chief operating officer and Zuckerberg's top lieutenant, Sheryl Sandberg, earned US$30.8 million in total compensation last year.
Facebook's growing popularity has pressured entrenched Internet companies from Yahoo to Google Inc. In 2011, the social network overtook Yahoo to become the top provider of online display ads in the US by revenue, industry research firm eMarketer says.
A US$10 billion IPO would be the fourth-largest in US history after Visa Inc, General Motors, and AT&T Wireless, Thomson Reuters data show.
CEO Zuckerberg outlines Facebook's 5 core values
Focus on Impact
If we want to have the biggest impact, the best way to do this is to make sure we always focus on solving the most important problems. It sounds simple, but we think most companies do this poorly and waste a lot of time. We expect everyone at Facebook to be good at finding the biggest problems to work on.
Move Fast
Moving fast enables us to build more things and learn faster. However, as most companies grow, they slow down too much because they're more afraid of making mistakes than they are of losing opportunities by moving too slowly. We have a saying: 'Move fast and break things.' The idea is that if you never break anything, you're probably not moving fast enough.
Be Bold
Building great things means taking risks. This can be scary and prevents most companies from doing the bold things they should. However, in a world that's changing so quickly, you're guaranteed to fail if you don't take any risks. We have another saying: 'The riskiest thing is to take no risks.' We encourage everyone to make bold decisions, even if that means being wrong some of the time.
Be Open
We believe that a more open world is a better world because people with more information can make better decisions and have a greater impact. That goes for running our company as well. We work hard to make sure everyone at Facebook has access to as much information as possible about every part of the company so they can make the best decisions and have the greatest impact.
Build Social Value
Facebook exists to make the world more open and connected, and not just to build a company. We expect everyone at Facebook to focus every day on how to build real value for the world in everything they do.
The Harvard dropout, who launched the social networking phenomenon from his dorm room, will control 56.9 percent of the voting shares in a company expected to be valued at up to US$100 billion when it goes public. Facebook says it has 845 million active monthly users.
Wednesday's long-awaited filing starts a process that will end in Silicon Valley's biggest coming-out party since the peak of the dotcom boom and bust.
Facebook says it is seeking to raise US$5 billion, but that is a figure used to calculate registration fees among others and analysts estimate it could tap investors for US$10 billion.
That would value the company at US$100 billion, dwarfing storied tech giants such as Hewlett Packard Co, while validating the explosive growth worldwide of social media as communication and entertainment.
Zuckerberg's economic control of about 28 percent of the shares would be worth US$28 billion at a US$100 billion valuation, ranking him as the fourth-richest American.
The 27-year-old's ownership position means Facebook, a company dissected in 2010's Oscar-winning "The Social Network," will not need to appoint a majority of independent directors or set up board committees to oversee compensation and other matters.
The company's ownership structure and bylaws go against shareholder-friendly corporate governance practices put in place in the US after years of investor activism.
As Facebook states in its prospectus, Zuckerberg will "control all matters submitted to stockholders for vote, as well as the overall management and direction of our company."
Zuckerberg struck deals with several Facebook investors that granted him voting rights over their shares in all or most situations. Those included Yuri Milner's DST Global, venture capital firm The Founders Fund, and entities affiliated with Technology Crossover Ventures, the IPO filing shows.
Google Inc's Sergey Brin and Larry Page retained control of the search giant through similar arrangements and the Sulzbergers did much the same at the New York Times.
"Zuckerberg, at the time, probably had his choice of investors," said Steven Kaplan, a professor at University of Chicago's Booth School of Business, who researches venture capital and corporate governance. "He basically had the ability to say 'my way or the highway.'"
"The downside of doing this is that the value of Facebook may be slightly lower than it would be if he were not retaining control."
Facebook could make its market debut in the middle of the year based on the usual timetable of IPOs.
Its IPO prospectus shows that Facebook generated US$3.71 billion in revenue and made US$1 billion in net profit last year, up 65 percent from the US$606 million it made in 2010.
"We often talk about inventions like the printing press and the television," Zuckerberg said in a letter accompanying the documents. "Today, our society has reached another tipping point."
"The scale of the technology and infrastructure that must be built is unprecedented."
Facebook appointed Morgan Stanley, Goldman Sachs and JPMorgan as its lead underwriters. Other bookrunners include Bank of America Merrill Lynch, Barclays Capital and Allen & Co.
Zuckerberg agreed to cut his compensation from US$1.48 million last year to US$1 effective January 1, 2013, following the example of Apple founder Steve Jobs.
Facebook's chief operating officer and Zuckerberg's top lieutenant, Sheryl Sandberg, earned US$30.8 million in total compensation last year.
Facebook's growing popularity has pressured entrenched Internet companies from Yahoo to Google Inc. In 2011, the social network overtook Yahoo to become the top provider of online display ads in the US by revenue, industry research firm eMarketer says.
A US$10 billion IPO would be the fourth-largest in US history after Visa Inc, General Motors, and AT&T Wireless, Thomson Reuters data show.
CEO Zuckerberg outlines Facebook's 5 core values
Focus on Impact
If we want to have the biggest impact, the best way to do this is to make sure we always focus on solving the most important problems. It sounds simple, but we think most companies do this poorly and waste a lot of time. We expect everyone at Facebook to be good at finding the biggest problems to work on.
Move Fast
Moving fast enables us to build more things and learn faster. However, as most companies grow, they slow down too much because they're more afraid of making mistakes than they are of losing opportunities by moving too slowly. We have a saying: 'Move fast and break things.' The idea is that if you never break anything, you're probably not moving fast enough.
Be Bold
Building great things means taking risks. This can be scary and prevents most companies from doing the bold things they should. However, in a world that's changing so quickly, you're guaranteed to fail if you don't take any risks. We have another saying: 'The riskiest thing is to take no risks.' We encourage everyone to make bold decisions, even if that means being wrong some of the time.
Be Open
We believe that a more open world is a better world because people with more information can make better decisions and have a greater impact. That goes for running our company as well. We work hard to make sure everyone at Facebook has access to as much information as possible about every part of the company so they can make the best decisions and have the greatest impact.
Build Social Value
Facebook exists to make the world more open and connected, and not just to build a company. We expect everyone at Facebook to focus every day on how to build real value for the world in everything they do.
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